CELEX: 51994PC0045
Language: en
Date: 1994-02-17
Title: Proposal for a COUNCIL REGULATION (EC) amending Regulation (EEC) No 3068/92 in respect of definitive anti-dumping duties on imports of potassium chloride originating in Belarus, Russia and Ukraine

COMVIISSION OF THE EUROPEAN COMMUNITIES
                                        C0M(94) 45 final
                                        Brussels, 17.02.1994
                           Proposal for a
                      COUNCIL REGULATION (EC)
      amending Regulation (BEC) No 3068/92 in respect of definitive
           anti-dumping duties on imports of potassium chloride
                originating in Belarus, Russia and Ukraine
                   (presented by the Commission)
 ---pagebreak---                          COUNCIL REGULATION (EC) No
                              Of
       amending Regulation (EEC) No 3068/92 in respect of definitive
            anti-dumping duties on imports of potassium chloride
                 originating in Belarus, Russia and Ukraine
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EEC) No 2423/88 of 11 July 1988 on
protection against dumped or subsidized imports from countries not
members of the European Community (hereafter referred to as the basic
Regulation) ^',   and in particular Article 14 thereof,
Having regard to the proposal submitted by the Commission after
consultation within the Advisory Committee as provided for under the
above-mentioned Regulation,
Whereas :
I.       PREVIOUS PROCEDURE
 (1)   By Regulation (EEC) No 3068(92) <2>, the Council imposed a
       definitive anti-dumping duty on imports of potassium chloride
       originating in Belarus, Russia and Ukraine, falling within CN Codes
       3104 20 10, 3104 20 50 and 3104 2090 and consisting of the
       difference between a set minimum price and the net price free-at-
       Community-frontier of the product concerned.
 (1) OJ No L 209, 2.8.1988, p.l.
 (2) OJ No L 308, 24.10.1992, p.41
 ---pagebreak--- II.     REVIEW
(2)   By a notice published on 26 June 1993^ 3 ^, the Commission, after
      consultation with the Advisory Committee and in accordance with
      Article 14 of the Basic Regulation, initiated a review of
      Regulation (EEC) No 3068/92 (hereafter the Regulation subject to
      review).  Information made available to the Commission indicated
      that, since the imposition of definitive measures in this case,
      important developments have taken place in Belarus, the Russian
      Federation and Ukraine, following decentralisation from the former
      Soviet Union.  These developments had apparently led, inter alia,
      to the introduction of autonomous marketing arrangements for
      potash, and the establishment of new export channels.
      At the same time, the Commission had in its possession, conflicting
      data on the appropriateness of anti-dumping measures in the form of
      a variable duty.
(3)   The Commission officially advised the producers, exporters and
      importers known to be concerned, the representatives of the
      exporting countries, and the complainants, and gave the parties
      directly concerned the opportunity to make their views known in
      writing and to request a hearing.  The representatives of the
      exporting countries, the Community industry and two importers in
      the Community made their views known.    All parties who so requested
      were granted a hearing.
      The representative of Ukraine submitted that there was no
      production of potash in Ukraine and that the anti-dumping duty
      imposed should be repealed in respect of imports of potash
      originating in Ukraine.  However,                          .. ,. . .
      based on the customs declarations at the Community frontier, showed
      that, in the period of investigation, a substantial quantity of
      potash originating in Ukraine was imported in the Community.    In
(3) OJ No C 175, 26.6.1993, p. 10
 ---pagebreak---        these circumstances and in order to avoid any potential
       discrimination or circumvention, imports of potash originating in
       Ukraine should not be excluded from the scope of the present view.
(4)    The Commission sent questionnaires to parties known to be concerned
       and received detailed information only from the Community industry
       and a number of importers in the Community.  It should be noted
       that none of the producers or exporters in the countries concerned
       cooperated in the Commission's investigation and that a related
       importer, Ferchimex, and an exporter and several producers in
       Russia and Belarus, informed the Commission that they would not
       participate in the Commission's investigation.
(5)    The Commission sought and verified all information it considered
       necessary for the determination of dumping and injury.    It
       inspected the information submitted in the premises of the
       following companies:
    i. Community producers
       - Société Commerciale des Potasses et de l'Azote  (SCPA) , France
       - Mines des Potasses d'Alsace (MDPA), France
       - Kali und S a l z 4 ) , Germany
       - Mitteldeutsche Kali4), Germany
       - Comercial de Potasas (Coposa), Spain
       - Potasas del Llobregat, Spain
       - Suria K, Spain
       - Potasas de Subiza, Spain
       - Cleveland Potash Limited, United Kingdom
   ii. Importers and traders
       Unrelated importers
       FESA, Spain
       Related importers
4)   The Commission notes that these companies merged after the
     investigation period and now trade as Kali und Salz GmbH, Germany,
 ---pagebreak---      Soquimes, Spain
     Traders
     Potash Limited, United Kingdom
     Potash Continental, United Kingdom
     Ameropa, France
(6)  Upon request, parties were informed in writing 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 provisional duty.   They
     were also granted a reasonable period within which to make
     representations subsequent to the disclosure.
     The oral and written comments presented by the parties were
     considered and, where appropriate, the Commission's findings were
     modified to take account of them.
(7)  The investigation of dumping covered the period 1 June 1992 to 31
     May 1993 (investigation period).
III.   PRODUCT UNDER CONSIDERATION, LIKE PRODUCT AND COMMUNITY INDUSTRY
a)   Product description
(8)  The product under consideration is the same as that described in
     the Regulation subject to review.
     The product is potassium chloride (hereafter potash) and is
     generally used as an agricultural fertiliser.  The potassium
     content is variable and is expressed as the percentage of the
     weight of the dry anhydrous product represented by K20.  There are
     three basic specifications:
     potash with a K20 content of 40% or less, falling within CN Code
     3104 20 10;
 ---pagebreak---    -   potash with a K20 content of over 40% K20 but less than or equal to
       62%, falling within CN Code 3104 20 50;
    -  potash with a K20 content of over 62% falling within CN code
       3104 20 90.
       The above specifications cover three grades of a single product
       which is available either as a powder or in a granulated form, with
       no significant difference in basic physical characteristics,
       application or use.
   b) Like product
(9)    The Commission found that the conclusions of the Regulation subject
       to review are still valid and that potash produced in the Community
       and Canada is a like product to that exported from Belarus, Russia
       and Ukraine to the Community.
IV.      DUMPING
   a) Normal value
    1. Analogue country
(10)   Since Belarus, Russia and Ukraine are non-market economy countries,
       normal value had to be determined on the basis of information
       obtained in a market economy third country, i.e. an analogue
       country, in accordance with Article 2 (5) of the basic Regulation.
       For this purpose, the complaining Community industry suggested
       establishing normal value on the basis of information obtained in
       Canada.
(11)   After examination of the suggestion made by the complainant, the
       Commission concluded that Canada was an appropriate and reasonable
       choice for the following reasons:
 ---pagebreak---                                     6 -
      Canada is known to be the largest producer world-wide of this
      product and there is, to a large extent, similarity of the
      manufacturing process and access to raw materials between Canada
      and the non-market economy countries considered.
      Domestic prices in Canada are governed by normal market forces
      given the level of demand in the market and the number of producers
      in competition.
      A comparison between the volumes exported to the Community by
      Canada and the volume on which normal value was based showed that
      potash was sold in sufficient quantities on the domestic market to
      allow an adequate calculation of normal value.
   2. Normal value
(12)  Only one producer finally agreed to cooperate, the Toronto-based
      Potash Company of Canada Limited.  The Commission carried out
      checks on the data supplied by this producer and its mining
      subsidiary.
(13)  In order to determine whether normal value could be based, in
      accordance with Article 2.5(a)(i) of the Basic Regulation, on the
      prices at which potash was sold for consumption in Canada, the
      Commission compared them with production costs to ensure that these
      prices generated a reasonable profit in normal trading.  When
      examining the costs of production of the producer concerned, the
      Commission found that they were increased by notional amounts
      corresponding to exceptional depreciation resulting from its recent
      change of ownership and financial expenses which should have been
      borne by this producer.  However, since these additional costs were
      not incurred in the ordinary course of trade, it was concluded that
      it would not be appropriate to make the Belarus, Russian and
      Ukraine producers bear the burden of such exceptional costs without
      any adjustment being made and that they should be deducted to
      establish the actual costs of production of Canadian potash sold on
      the domestic market.  After such deduction it was found that prices
 ---pagebreak---                                    - 7
      practised by this producer for sales on the domestic market in the
      ordinary course of trade permitted the recovery of all costs
      reasonably allocated in the ordinary course of trade and the
      generation of a normal profit margin.
(14)  In these circumstances, normal value was established on the basis
      of the net weighted average price for the like product sold for
      consumption in Canada since, for the types considered, domestic
      sales were made in sufficient quantities as compared with export
      sales to be considered representative.
   b) Export price
(15)  In spite of the Commission's attempts to obtain information, the
      exporters thought to be concerned in Belarus, Russia and Ukraine
      refused to cooperate in the investigation.   Further, the
       information received from importers was inadequate to establish a
      reliable export price since, either the quantities invoiced were
      too small to be regarded as representative, or the product was
      purchased through traders who failed to cooperate, or the importer
      was related to a non-cooperating producer in the countries
      concerned.
       In addition, when seeking the information necessary to establish
       the export price, the Commission received strong indications from
       several sources that discrepancies existed between the prices
      practised on the Community market and the minimum price imposed by
       the Regulation subject to review.  The possibility of circumvention
      of the minimum prices could not be overlooked.   For these reasons,
       the Commission could not rely on the statistical information
       available on either the values or the quantities of imports of the
      product concerned.
(16)  However, in view of the nature of this review, which is, inter
      alia, to examine the appropriateness of the level and type of anti-
      dumping duty for the purpose of preventing dumped imports from
      causing injury, and the fact that the duty which applies at present
 ---pagebreak---                                     8 -
      is a minimum price duty, it was not necessary to establish the
      current level of export prices.   It was merely necessary to
      estimate what the level of export prices would be if there were no
      protective duties.  For this purpose, it was considered in the
      absence of cooperation on the part of producers in the exporting
      countries concerned, that export prices would bear the same
      relationship to other prices on the Community market as found
      during the original investigation.   Since prices on the Community
      market would not be lower in the absence of the measures now in
      force, this method cannot lead to an underestimate of the export
      prices which would prevail in the absence of duties.   It has to be
      noted that, since the information available did not allow a
      differentiation of the export price according to the countries
      concerned, the export price has been established on the same basis,
      at the ex-national frontier level for Belarus, Russia and Ukraine.
   c. Comparison
(17)  Normal value was compared with export prices at the ex-national
      frontier stage, transaction by transaction.   For the purpose of
      ensuring a fair comparison, due allowances in the form of
      adjustments were made for the differences affecting price
      comparability, such as differences in selling expenses, in
      particular in respect of credit terms, transport, insurance and
      handling costs and packing.
   d. Dumping margin
(18)  The comparison showed the existence of dumping, the dumping margins
      being equal to the amount by which the normal value, as established
      above, exceeded the price for export to the Community.   For the
      reasons stated in recitals 10 and 16, the information available to
      the Commission to establish the export price did not allow a
      differentiation according to the countries concerned.   Therefore, a
      single dumping margin was established for each of the three
      countries in question.
      The weighted average dumping margin for the countries concerned
      expressed as a percentage of the CIF-Community-frontier prices,
 ---pagebreak---                                       9 -
       customs duty unpaid is 46%.   The Council confirms this conclusion
       and the findings of the Commission underlying the establishment of
       this dumping margin.
V.     INJURY
(19)   In accordance with Article 14 of the Basic Regulation, the
       investigation sought to determine the extent of any changes in the
       circumstances established by the Regulation subject to review
        (1986-1990) with regard to the behaviour of the exporters on the
       Community market or the situation of the Community industry during
       the subsequent period, independently of the anti-dumping measures
       in force.
    a) Community industry
 (20)  In examining whether the complainant Community producers
       constituted a major proportion of the total Community production of
       the like product, the Commission noted that a German producer
       located in the eastern part of Germany has become a party to the
       complaint following the unification of Germany.   As a result, the
       complaining Community producers represent the totality of the
       Community production of the like product.
 (21)  It was also found that two of the Community producers had, through
       affiliated companies, imported the dumped product.   The Commission
       had, therefore, to decide whether these producers should be
       excluded form the term Community industry, as provided for in
       Article 4 (5) of Regulation (EEC) No 2423/88.
(22)   In this respect, the consistent practice of the Community
       Institutions has been that the exclusion of such producers must be
       decided on a case-by-case basis, on reasonable and equitable
       grounds and by taking into consideration all the legal and economic
       aspects involved.   The Institutions have, on several occasions,
       concluded that an exclusion is justified where the producers in the
 ---pagebreak---                                     10
      Community either participated in the dumping practices, are
      shielded from their effects, or where they benefit unduly from
      them.
(23)  In the present case, the Commission considered that, since these
      importing producers were independent of the exporters concerned,
      they did not participate in the dumping practices.  Moreover, the
      level of imports in the investigation period by these producers did
      not, on an individual basis, represent a significant part of their
      total sales in the Community in the same period.  Such a low level
      of imports cannot, therefore, have shielded the producers concerned
      from the effects of dumping nor have substantially benefited them.
      Indeed, the small advantages which these producers may have
      obtained from these imports are by far offset by the disadvantages
      from the dumping.
(24)  In the light of the above circumstances, it is considered that
      there are no reasons for the exclusion of any of the complainant
      producers from the definition of the Community industry.
   b) Cumulation
(25)  To measure the impact of dumped imports on the Community industry,
      it must first be ascertained whether the approach adopted in
      determining the measures under review, namely cumulation of all
      imports originating in the countries covered by the investigation
      should be continued.
      In analysing whether cumulation of the imports from the three
      countries concerned is appropriate, it was found that potassium
      chloride imported from each of them was alike in all respects, and
      interchangeable.  These imports compete with each other and with
      the like product manufactured by the Community industry.  In
      addition, the pricing in the Community of the products from each of
 ---pagebreak---                                     11
      the countries concerned could not be distinguished and the volume
      of the dumped imports from each of them could not be considered
      negligible.
      It is thus considered that there are sufficient grounds to cumulate
      the dumped imports from the countries concerned.
   c. Injury
(26)  The Commission's findings, based on an examination of the facts
      between 1990, which is the latest year taken into account in the
      Regulation subject to review and May 1993, are as follows:
   1. Community consumption, volume and price of the dumped imports.
(27)  Community consumption declined from 4.5 million tonnes to 3.9
      million tonnes, i.e. by 14%, and the dumped imports showed a
      similar decrease, thus maintaining their market share at almost the
      same level, i.e. approximately 12%.
(28)  In the absence of any cooperation on the part of the exporters and,
      given the inadequate and non-representative information provided by
      importers, the Commission was unable to make an appropriate price
      undercutting determination.  However, it received strong
      indications from several reliable sources that the selling prices
      of the dumped imports in the Community were significantly below the
      prices of potash sold by the Community industry, and actually far
      below the minimum price set by the Regulation subject to review.
   2. Situation of the Community industry
(i)   Production, capacity, utilization rate
(29)  Community production fell from 5.5 million tonnes to 4.5 million
      tonnes, i.e. a decrease of 18%.  Production capacity remained
      almost stable at approximately 6.5 million tonnes, the utilization
      rate therefore decreased from 84% to 70%.
 ---pagebreak---                                     12 -
(ii)  Sales and market share
(30)  The quantity of potash sold in the Community by the Community
      industry fell from 3.4 million tonnes to 2.8 million tonnes, i.e. a
      decrease of 18%, while its market share declined from 74.9% to
      73.5%.
(iii) Prices
(31)  The Community industry has been unable to raise its prices, even
      after the imposition of protective measures by the Regulation
      subject to review, and has sustained, on the contrary, a further
      decline of its selling prices.
(iv.) Profitability
(32)  The Community industry could not recover from the losses it
      incurred previously.  These losses, which are clearly related to
      the above decline of its selling price and the negative impact of
      the decreasing utilization rate on the allocation of fixed costs,
      remained at a high level and attained 26% at the end of the period
      examined.
(v.)  Employment
(33)  It should be noted that the potash industry involved underground
      mining and is thus labour intensive.  A sharp and steady
      curtailment of the workforce has been observed over the period
      examined.
   3. Conclusion
(34)  In the light of the above, it is apparent that, while material
      injury has been established by the Regulation subject to review for
      the period 1986 to 1990, the examination of the facts demonstrates
      that material injury has persisted in the subsequent period from
 ---pagebreak---                                   - 13 -
      1990 to May 1993.  In fact, the situation of the Community industry
      has further deteriorated in spite of the imposition of the
      protective measures in 1992.  This is indicated in particular by
      the further decrease of its prices and recent aggravation of its
      losses.
      The Council confirms these views and concludes that the level of
      injury established by the Regulation subject to review has not been
      removed but merely been aggravated.
   e. Causality
(35)  When determining whether any changes had occurred in the causal
      link established by the Regulation subject to review between the
      dumped imports from Belarus, Russia and Ukraine and the material
      injury, the Commission has examined the developments since the
      prior period of investigation which ended in 1990.  Since the
      latter year, the situation has remained the same as that described
      in the Regulation subject to review, insofar as the poor
      performance of the Community industry has continued to coincide
      with the dumped imports maintaining the same level of market share
      and the persistence of price undercutting behaviour on their part.
   f. Effect of other factors
(36)  It has also been examined whether the existence and subsequent
      aggravation of the material injury could be attributed to the
      effect of other factors, such as the effect of other imports,
      contraction in demand or internal management problems in the
      Community industry.
      As to the effect of other imports, it was found that their market
      share remained relatively stable over the period examined, while no
      conclusion could be drawn from the information available to the
      Commission about the level of their prices.  Concerning contraction
      in demand, and the management of the Community industry, the
 ---pagebreak---                                   - 14
      Commission found no evidence to suggest that the material injury
      suffered by the Community industry could be attributed to any of
      these factors.
      The Commission therefore concludes that, although it cannot be
      ruled out that some of the above factors might have had an adverse
      effect on the situation of the Community industry, the dumped
      imports from Belarus, Russia and Ukraine have, taken in isolation,
      caused material injury to the Community industry.
(37)  The Council confirms this conclusion.
VI.     COMMUNITY INTEREST
 (38) The Commission found that the conclusion on Community interest set
      out in the Regulation subject to review should remain unchanged,
      since the development of the facts underlying these conclusions in
      the subsequent period have only strengthened the case for the
      imposition of protective measures.
(39)  Indeed, not only it is in the fundamental interest of the Community
      to put an end to distortions of commercial practices, but, in this
      specific case, the endangering of thousands of jobs in an ailing
      sector and the precarity of the financial situation of the
      Community industry have recently become even more acute.
(40)  In these circumstances, it is in the Community interest that
      protective measures are maintained and adapted to the findings made
      in the present review.  Since these findings show increased dumping
      and a further aggravation of injury, the Community interest calls
      for an amendment of the measures in force.
VII.    DUTY
(41)  In order to adapt the existing measures to the changed
      circumstances and to prevent the recurrence of further injury, the
      Commission took account of the fact that injury consisted, in
 ---pagebreak---                                                       15
         particular, of price depression and suppression, lack of
         profitability and losses.                 The removal of such injury requires
         therefore that the industry should be put in the position where
         prices can be increased to profitable levels without loss of sales
         volume.        In order to calculate the necessary price increase, the
         Commission considered that the prices of the dumped imports, as
         determined in recital 16, should be compared to the selling prices
         that reflect the costs of production of the Community industry plus
         a reasonable amount of profit.
         To this end, the Commission has used the actual average cost of
         production of the Community industry and a profit margin of 9%
         necessary to ensure the viability of this industry.
         The difference between these two prices expressed on a weighted
          average basis and as a percentage of the free-at-Community-frontier
          price represent the injury threshold, which was found to exceed the
          margin of dumping established.                  In these circumstances, the duty to
         be imposed should be limited to the margin of dumping.
42. In view of the strong indications that circumvention of the previous minimum price duty occurred
    and the potential which exists for compensatory arrangements in this sector, it is necessary to
    impose a duty in the form of a fixed amount per ton of imported potash corresponding to the
    dumping margin calculated as described above. Further, it is considered that in view, on the one
    hand, of high overcapacity for the production of potash in the exporting countries concerned, the
    lack of domestic purchasers and the corresponding availability of large quantities for export and, on
    the other hand, the relative attractiveness of the Community market compared with other export
    markets due to the high level of prices and spending power of users, its proximity and the
    availability of a high developed transport infrastructure, there is a possibility that the exporters will
    respond to the imposition of this duty by further lowering their export prices. This danger is further
    exaceibated by the fact that exports could be made available at very low prices due to currency
    problems in the exporting countries concerned and the fact that the prevalence of long term supply
    contracts in the Community can make the offering of potash to users in the Community at very low
    prices attractive to exporters. To guard against such an increase in dumping, it is considered
    necessary to also provide that if the price of the imported product should fall below a minimum price
    established on the basis of the normal value, the duty to be imposed should be the difference between
    the import price and the minimum price. Such a system is justified in view of the clear risk of an
    increase in the dumping margin.
 ---pagebreak---                                        16 -
HAS ADOPTED THIS REGULATION::
Article 1 of Regulation (EEC) No 3068/92 is hereby replaced by the
following:
                                   Article 1
1.      A definitive anti-dumping duty is hereby imposed on imports of
potassium chloride (KCl) falling within CN Codes 3104 20 10, 3104 20 50,
3104 20 90, originating in Belarus, Russia and Ukraine.
2.      The amount of duty shall be equal to the fixed amount per tonne of
KCL shown below per type and grade, or the difference between the prices
shown below and the net, free-at-Community-frontier paid price per tonne
KCL before customs clearance for the corresponding type and grade,
whichever is the higher:
     Potassium         Fixed amount           Price              Taric code
 chloride with a       of duty per            CIF Community
 K 2 0 content of    tonne KCl              border
40% or less
standard grade         24.19 ECU               76.79 ECU      3104 2010'10
granular grade         27.37 ECU               86.91 ECU      3104 2010'20
  Over 40% but
  less than or
  equal to 62%
standard grade         36.28 ECU               115.19 ECU     3104 2050*10
granular grade         41.06 ECU               130.36 ECU     3104 2050'20
over 62%
standard grade         44.13 ECU               137.28 ECU
 ---pagebreak---                                     17
3.   The provisions in force with regard to 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---                                            •n                        ISSN 0254-1475
                                                               COM (94) 45 final
EN                                                                         11 02
                                Catalogue number : CB-CO-94-052-EN-C
                                                             ISBN 92-77-65425-2
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