CELEX: 51993PC0413
Language: en
Date: 1993-08-13
Title: Proposal for a COUNCIL REGULATION (EEC) imposing a definitive anti-dumping duty on imports of deadburned magnesite originating in the People' s Republic of China

COMMISSION OF THE EUROPEAN COMMUNITIES
                                          C0M<93) 413 final
                                          Brussels, 13 August 1993
                            Proposal for a
                       rnUMCAL REGULATION fEEC)
          imposing a definitive anti-dumping duty on imports of
   deedburned magnasit* originating in tha People's Republic of China
                     (presented by the Commission)
 ---pagebreak---                                   >l-
                         Explanatory Memorandum
1.  Commission Regulation (EEC) No 2799/92f1) imposed a provisional
    anti-dumping duty on imports of deadburned magnesite originating in
    the People•s Republic of China
2.  Council Regulation (EEC) No 104/93(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
    accordingly.
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 80.7%.
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) 0J No L 282, 26.09.1992, p. 15
(2) 0J No L 15, 23.01.1993, p. 1
 ---pagebreak---                                  *^CL —
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 deadburned 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 Community market has
    been established. This minimum price is 133 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---                                           -Mb^
                                 Proposal for a
                         COUNCIL REGULATION (EEC) No
                                       of
           imposing a definitive anti-dumping duty on imports of
   deadburned magnesite 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 1988
on protection against dumped or subsidised imports from countries not
members    of  the   European   Economic   Community(x)  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  2799/92< 2 ), (hereafter
      referred to as the Provisional Regulation) imposed a provisional
      anti-dumping     duty     on   imports    of    deadburned    magnesite
      originating in the People's Republic of China and falling within
      the CN Code    2519 90 30.
 (1) OJ No L 209, 02.08.1988, p. 1
 (2) OJ No L 282, 26.09.1992, p. 15
 ---pagebreak---                                   - 2 -
                         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. 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 deadburned        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
    deadburned  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 deadburned 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,
    11 and 12 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 1990 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 costs 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
    deadburned 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 must be
    stated that the decision to locate the kilns near to the mines,
    and to move them as the mines move, is one which is influenced by
    the  non   market   cost  structure   in   China   and  that  to  make
    adjustments   on  this   account  would   be   incompatible  with  the
    purposes of Article 2(5) of the Basic Regulation.
 ---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   18 of   the Provisional Regulation   as no
     substantiated 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 19 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 60 per tonne.
(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 to exports from a
     non-market  economy,  individual   treatment   must    remain  a   strict
     exception  to  be  applied   solely   in  cases    where   the  producer
     concerned  has  provided  evidence   that   it  is   free to   establish
     export prices without the influence of the state 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 21 of the Provisional Regulation,
     these exporters which are state controlled enterprises           are not
     independent of any state influence       and are not 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                                        Ï"
                                                                                ! I
                                                                               i!
                                                                               '• !
(14) The commission concluded in its Provisional Regulation (see               !j
                                                                               \i
     recitals 22-32) that the Community industry had suffered material         |}
     injury as a result of the dumped imports of deadburned magnesite
     originating  in the People's Republic of China. Imports of the
     product concerned from the People's Republic of China increased
     from  117.000 tonnes in 1988 to over       176.000 tonnes during the       f
     investigation period of 1 July 1990 to 30 June 1991, the market
     share of the community producers decreased in a growing market and
     their prices were significantly depressed. All sales by Community
     producers were   loss making or at a low profit          level. In this
     respect no new arguments were put forward by interested parties.
     The  Council,  therefore,   confirms   the   Commission    findings   and
     conclusions as in recital 32 of the Provisional Regulation.
 ---pagebreak---                                         - 8 -
(15) The Chinese     exporters    argued    that   there can be no      injury   for
     grades above 92% MgO as the community producers of these grades
     have, allegedly, continually          increased sales, production volume
     and capacity utilisation.
     As established in recital 34 of the Provisional Regulation, the
     Commission did not find, during its investigation, that Community
     producers   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 33 and 34 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 deadburned
     magnesite into the Community. North    Korea accounted for 15% of
     imports of deadburned magnesite into the Community during the
     reference period, whereas China accounted for 46% 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 refractory 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 deadburned magnesite
     with the appropriate chemical profile.
 ---pagebreak---                                  -lo-
     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 44 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   deadburned
     magnesite   as established    in recital 9 and as adjusted          to CIF
     Community frontier    value. This minimum price is 133 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 need for the measures, two basic elements were
     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 deadburned magnesite industry since the Community
     industry is at present unable to generate the profits necessary to
     continue   trading.   The  community   deadburned    magnesite     industry
     would cease to be a source of technical expertise, employment and
     investment (see recital 40 of the Provisional Regulation).
(22) Certain importers and end users argued that any increase in costs
      for refractory producers would seriously affect their ability to
     compete with other producers outside the Community.
 ---pagebreak---                                  - 12 -
     The Commission accepts that this    industry is currently facing a
     difficult trading situation both within and outside the Community
     which could be exacerbated by increases in the price of deadburned
     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        users of the
     higher grades to buy deadburned 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 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 deadburned magnesite
     which it cannot deliver.
 ---pagebreak---                                    - 13 -
   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   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. There are also
    many other non Community suppliers of deadburned 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 deadburned magnesite would
     result in a large increase in low priced imports from North Korea.
     As indicated in recital 41 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.
 ---pagebreak---                                  - 14 -
(25) For the reasons given above and in recitals 40 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,
HAS ADOPTED THIS REGULATION
                               Article 1
1. A definitive anti-dumping duty is hereby imposed on imports of
   deadburned magnesite falling within CN Code    2519 90 30 originating
   in the People's Republic of China.
2. The amount of the duty, shall be the difference between ECU 133 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) 413 final
                                                      DOCUMENTS
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                                 Catalogue number : CB-CO-93-452-EN-C
                                                             ISBN 92-77-59022-X
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