CELEX: 51997PC0468
Language: en
Date: 1997-09-25
Title: Proposal for a Council Regulation (EC) amending Regulation (EEC) No 2552/93, imposing a definitive anti- dumping duty on imports of artificial corundum originating in the People's Republic of China

COMMISSION OF THE EUROPEAN COMMUNITIES
                                      Brussels, 25.09.1997
                                      COM(97)468 final
                       Proposal for a
              COUNCIL REGULATION ŒC)
         AMENDING REGULATION (EEC) N° 2552/93,
                IMPOSING A DEFINITIVE
ANTI-DUMPING DUTY ON IMPORTS OF ARTIFICIAL CORUNDUM
    ORIGINATING IN THE PEOPLE'S REPUBLIC OF CHINA
              (presented by the Commission)
 ---pagebreak---  ---pagebreak---                         EXPLANATORY MEMORANDUM
 1.  In September 1993, by Regulation (EEC) N° 2552/93, the Council imposed a
    residual anti-dumping duty on imports of artificial corundum originating in the
    People's Republic of China.
2.  The definitive anti-dumping duty was subsequently extended to all imports of
    artificial corundum originating in the People's Republic of China by Council
    Regulation (EC) N° 2556/94.
3.  In July 1995, a request for a review pursuant to Article 12 of Council Regulation
    (EC) N° 3283/94 was lodged by CEFIC on behalf of Community producers
    representing a major proportion of the Community production of artificial
    corundum. This request for a review was made on the grounds that the existing
    definitive anti-dumping duty on imports of artificial corundum originating in the
    People's Republic of China was no longer sufficient to counteract the dumping.
    However, as a period of more than four years had elapsed since the adoption of
    measures following the last review in 1991, the Commission considered it
    appropriate to initiate an interim review covering dumping and injury pursuant
    Article 11(3) of Regulation (EC) N° 384/96 which replaced Regulation (EC)
    N°3283/94.
4.  On 12 January 1996, by a notice published in the Official Journal of the European
    Communities, the Commission announced the review of Regulation (EEC) N°
    2552/93 amended by Regulation (EC) N° 2556/94.
                                         A
 ---pagebreak--- 5. The investigation showed that artificial corundum from China was exported to the
   Community with a dumping margin of 88.7% and that, as measures were not
   adhered to, further material injury was suffered by the Community industry
   because of the increased volumes and low prices of the product in question.
   Furthermore it was established that an expiry of the measures would be likely to
   increase the injurious effects of dumping and, consequently, further weaken the
   situation of the Community industry.
   After having consulted the Community user industry, it was concluded that there
   were no compelling reasons not to maintain the measures in the present case and
   that it was in the Community interest to impose amended anti-dumping measures.
   After examining the arguments put forward by the interested parties, the
   Commission has definitively established the facts.
6. A continuation of the measures appears therefore warranted, but they have to be
   adapted in the light of findings on dumping and injury based on the results of the
   investigation.
7. It is therefore proposed, after consultation of the Advisory Committee, that the
   Council adopts the draft Regulation annexed, amending Regulation (EEC) N°
   2552/93, imposing a definitive anti-dumping duty on imports of artificial corundum
   originating in the People's Republic of China.
                                          •)  CU
 ---pagebreak---    Proposal for a
                            COUNCIL REGULATION (EC) N°.../97
                                                 OF...
                       AMENDING REGULATION (EEC) N° 2552/93,
                                   IMPOSING A DEFINITIVE
         ANTI-DUMPING DUTY ON IMPORTS OF ARTIFICIAL CORUNDUM
                ORIGINATING IN THE PEOPLE'S REPUBLIC OF CHINA
  THE COUNCIL OF THE EUROPEAN UNION,
  Having regard to the Treaty establishing the European Community,
  Having regard to Council Regulation (EC) N°3 84/96 of 22 December 1995 on protection
  against dumped imports from countries not members of the European Community1, and
  in particular Article 11(6) thereof,
 Having regard to the proposal submitted by the Commission after consulting the
 Advisory Committee,
 Whereas:
                                 A. PREVIOUS PROCEDURE
 (1)     Following a complaint lodged by the European Chemical Industry Council
         (CEFIC), the Commission, by Regulation (EEC) No 2690/842 imposed provisional
         anti-dumping duties on imports of artificial corundum originating inter alia in the
         People's Republic of China.           Subsequently, by Decision 84/650/EEC3, the
         Commission accepted an undertaking given by the China National Import and
         Export Corporation and repealed the provisional duties previously imposed.
1
      OJ N° L 56, 6.3.1996, p.l. Regulation as amended by Regulation (EC) N° 2331/96 (OJ N° L 317,
      6.12.1996, p. 1)
2
      OJ No L 255 of 25.09.1984, p. 9
3
     OJ No L 340 of 28.12.1984, p. 82
                                                A  &
 ---pagebreak---  (2)     Following a request by CEFIC, a review of the afore mentioned measures was
        carried out which led to Decision 91/512/EEC4 by which the Commission accepted
        undertakings given by six Chinese companies authorised by the Chinese Chamber
         of Commerce to export artificial corundum to the Community.
 (3)    It was subsequently found that other exports were being made from China by other
        exporters and trade organisations previously unknown to the Commission which
        led to the imposition, by Council Regulation (EEC) No 2552/935, of a definitive
        residual anti-dumping duty of 30.8% on imports of artificial corundum originating
        in the People's Republic of China, with the exception of imports sold for export to
        the Community by the six Chinese companies from which price undertakings had
        been accepted.
 (4)    Subsequently, the Commission established that the above mentioned undertakings
        had been violated. The anti-dumping duty was consequently extended to the six
        Chinese companies concerned by Council Regulation (EC) No 2556/946 with the
        result that an anti-dumping duty of 30.8% was applied as from 22.10.1994 to all
        imports of artificial corundum originating in the People's Republic of China.
4
     O J N o L 275-of 02.10.1991, p. 27
5
     OJ No L 235 of 18.9.1993, p. 1
6
     OJ No L 270 of 21.10.1994, p. 24
 ---pagebreak---                                     B. REVIEW INVESTIGATION
 (5)    On 27 July 1995, a request for a review was lodged by CEFIC on behalf of
        Community producers representing a major proportion of the Community
        production of artificial corundum. This request for a review was made pursuant to
        Article 12 of Council Regulation (EC) No 3283/94 as replaced by Regulation (EC)
        No 384/96 (the "Basic Regulation") on the grounds that the existing definitive anti-
        dumping duty on imports of artificial corundum originating in the People's
        Republic of China had not resulted in sufficient movement in resale prices in the
        Community, the duty having been compensated by a further decrease in the
        Chinese export prices. Consequently the Community industry was allegedly
        suffering further injury from the Chinese dumped imports.
(6)     As a period of more than four years had elapsed since the adoption of measures
        following the last review in 1991 and in the light of evidence that indicated
        changed circumstances regarding both dumping and injury, the Commission
        considered it appropriate to initiate an interim review covering dumping and injury
        pursuant to Article 11(3) of the Basic Regulation.
(7)     On 12 January 1996, by a notice published in the Official Journal of the European
        Communities1, the Commission announced the review of Regulation (EEC)
       No 2552/93, as amended by Regulation (EC) No 2556/94, pursuant to Article 11(3)
        of the Basic Regulation.
7
     O J N o C 7 o f 12.1.1996, p. 5
 ---pagebreak--- (8)  The Chinese producers claimed that the request for review contained evidence
     relating exclusively to the evolution of resale prices in the Community market,
     while no meaningful information was provided about the complainants' current
     market situation, as would normally be the case in a complaint giving rise to full
     investigation of dumping and injury.
     In this respect, it should be noted that the complaint contained sufficient evidence
     of both a sharp increase in the volume and market share of the Chinese imports of
     artificial corundum combined with a decrease in the Chinese export prices and of a
     corresponding decline of the Community producers' market share.
(9)  The Commission officially advised the producers, exporters and importers known
     to be concerned, and gave the parties directly concerned the opportunity to make
     their views known in writing and to request a hearing.
(10) The Commission sent questionnaires to parties known to be concerned and received
     replies to its questionnaires from the complainant producers and two other
     producers in the Community, eight Chinese exporters and three importers in the
     Community. Concerning the market economy country, to be used as analogue
     country for the purpose of establishing normal value for the People's Republic of
     China, the Commission received replies from three producers in Brazil and one
     producer in the USA.
 ---pagebreak--- (11) The Commission sought and verified all information it deemed necessary for the
     purposes of a determination and carried out investigations at the premises of the
     following companies:
       (a)    Community producers:
              - Péchiney Electrométallurgie, France
              - Universal Abrasives, United Kingdom
              - H. C. Starck, Germany
       (b)     Importers in the Community:
              (i) related importer
              - Sinabrasive Import-Export GmbH., Ratingen, Germany
              (ii) unrelated importers
              - Smyris Abrasive s.r.L, Pero, Italy
              - Mineralien-Werke Kuppenheim GmbH., Kuppenheim, Germany
(12) The following Chinese exporters fully replied to the questionnaire.
              - China Abrasives import and Export Corporation, Zhengzhou, PRC
              - CMEC Guizhou Corporation Ltd., Guizhou, PRC
 ---pagebreak---                - Guangdong Machinery & Equipment Import & Export, Guangzhou,
               PRC
               - Guiyang Xinsheng Abrasives & Abrasive Tools Factory, Guiyang, PRC
               - Mount Tai Abrasives Company, Shandong, PRC
               - Shandong Machinery & Equipment Import & Export Corp., Qingdao,
               PRC
               - The 7th Grinding Wheel Factory Import & Export Corp., Guizhou, PRC
               - White Dove (Group) Corporation Ltd., Zhengzhou, PRC
(13)  As Brazil has been used as the analogue country for the purpose of establishing
     normal value, as explained in recitals (25) to (28), the Commission conducted an
     investigation at the premises of three Brazilian producers of artificial corundum.
     Their names are not mentioned in this Regulation for reasons of confidentiality.
(14) The investigation of dumping covered the period from 1 January 1995 to 31
     December 1995 (hereinafter referred to as the "investigation period"). The period
     for the determination of injury covered the years 1992 to 1995. The geographical
     scope of the investigation was the Community as constituted at the time of the
     initiation, thus including all 15 Member States.
(15) All parties concerned were informed of the essential facts and considerations on the
     basis of which it was intended to recommend the amendment of the existing
     measures. They were also granted a period within which to make representations
     subsequent to these disclosures.
 ---pagebreak--- (16) Since the interim review in respect of imports from China was not concluded
      before the end of the five-year period of application of the measures concerned
      (that is to say on 26 July 1996), the interim review has also covered, in accordance
      with Article 11(7) of the Basic Regulation, the circumstances set out in Article
      11(2) of the said Regulation (the circumstances to be examined in the context of an
      expiry review, i.e. likelihood of continuation or recurrence of dumping and injury).
     This is why the investigation has exceeded the normal period of one year as
     provided for in Article 6(9) of the Basic Regulation.
         C. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT
                    I. Description of the product under consideration
(17) The product concerned by this review is fused aluminium oxide, also known as
     artificial corundum falling from 1 January 1997 onwards within CN codes 2818 10
     10 and 2818 10 90. It is principally produced in two basic varieties, for which the
     chemical formula is identical (A1203):
     - brown artificial corundum, consisting of 94 to 97% aluminium oxide
     - white artificial corundum, consisting of 97.5 to 99.5% aluminium oxide
     Small quantities of pink artificial corundum which has a content of aluminium
     oxide similar to the white artificial corundum are also produced and sold in the
     Community. Hence the term white corundum will be intended hereafter to include
     pink corundum as well.
 ---pagebreak--- (18) The raw material for the production of brown artificial corundum is bauxite in
     natural or calcined form, while for the production of white artificial corundum,
     calcined alumina is used, which is a processed form of bauxite. Artificial corundum
     is manufactured by melting the raw material in electric-arc furnaces at temperatures
     higher than 2000° C.
     Artificial corundum, due to its specific characteristics, notably hardness, is mainly
     used, in the production of abrasive materials such as grinding wheels, cutting
     wheels, sandpaper and in the production of refractory materials.
     The production process generates a certain amount of lower quality artificial"
     corundum containing less than 94% of aluminium oxide. Its use is limited to the
     production of resin-bonded grinding wheels and to sand-blasting purposes.
(19) In the Community, the product is sold mainly in the form of grains for mixture (less
     than 10 mm) and in grains for grit size (crystalline powder). These latter are
     normally classified following international standards (FEPA in the Community).
     However, artificial corundum is also sold in the form of lumps of variable sizes of
     more than 100 mm.
     These different forms in which the product in question is sold correspond to
     different steps of the final stage of the production process. For the purpose of the
     investigation, both white and brown artificial corundum have been classified in the
     following four categories, according to the form in which the product is sold:
 ---pagebreak---       - lumps
      - grains for mixture (size range: 0 to 10 mm)
      - grains for grit size macro (FEPA standard: 8 to 220)
      - grains for grit size micro (FEPA standard: 240 to 1200).
(20) The Chinese producers submitted that brown and white artificial corundum are two
      distinct products, with different qualities and characteristics which make them not
      interchangeable for the production of specific abrasive end-products. Accordingly,
      these producers claimed that brown and white artificial corundum should be treated
      separately for the purpose of the anti-dumping investigation.
      It should be noted, however, that the arguments put forward by the Chinese
      producers refer exclusively to the use of artificial corundum for manufacturing
      abrasive end-products, and not to the production of refractory masses which
      constitutes the other main end use of artificial corundum and for which the
      interchangeability of white and brown corundum was not put into question.
    ' Furthermore, it has been found that brown and white artificial corundum are made
      from the same raw material, i.e. the bauxite, and through the same basic production
      process. Moreover, they both have the same basic chemical and physical
      characteristics and final applications. They are both used for the production of
      abrasives and refractory materials, are to a certain degree interchangeable as
      regards both these uses, hence no clear dividing line can be established between
      basic varieties as far as their use is concerned. Therefore, for the purpose of this
      investigation, the various forms of artificial corundum have been considered as a
      single product.       This approach confirms the one adopted in the previous
      investigation.
 ---pagebreak---                                       2. Like product
 (21) The Commission found that the artificial corundum produced and sold in the
       Community and in Brazil, which was chosen as the analogue country, on the one
       hand, and that imported from China on the other, were made from the same raw
       material and were manufactured by using the same basic technology. Moreover, it
       was found that Community and Brazilian artificial corundum were comparable in
       their essential physical and chemical characteristics, applications and uses to that
       imported from the People's Republic of China.
 (22) In this context, the Chinese producers argued that the artificial corundum imported
       from China in lump form is not in any sense comparable with the artificial
      corundum in grain form marketed by the Community producers.
      In this respect, it was found however, that lumps and grains correspond to two
      subsequent final steps of the production process of artificial corundum. Indeed,
      lumps can be easily processed into grains and this operation is often carried out by
      the importers/traders with little effect on the market price of the product.
      Furthermore, Chinese exports of artificial corundum in the form of lumps
      represented only 25% of total exports of the product in question to the Community,
      the rest being exported in the form of grains. This mix of sales was similar to that
      of the Community producers.
(23) On the basis of all the above, it is considered that artificial corundum produced and
      sold in the Community and Brazil, as well as that imported from the People's
      Republic of China, are like products within the meaning of Article 1(4) of the Basic
      Regulation.
                                                10
 ---pagebreak---                                     D. DUMPING
(24) The continued existence of dumping was verified, to ascertain firstly whether there
     were still grounds for continuation of measures against artificial corundum
     originating from the People's Republic of China and, if so, whether the alleged
     changed circumstances with regard to the dumping margin required the existing
     measures to be adapted accordingly.
                                   1. Normal Value
(25) In establishing normal value, account was taken of the fact that the People's.
     Republic of China is considered to be a non market economy country. Therefore,
     in accordance with Article 2 (7) of the Basic Regulation, the determination of
     normal value had to be based on a market economy third country. In this respect,
     the United States of America (USA) and Brazil were envisaged in the notice of
     initiation of the review as appropriate market economy countries for the
     determination of normal value. The Chinese producers submitted that Brazil was
     inappropriate because only one major producer operates in that market and
     alumina, the raw material for the production of white artificial corundum, is
     allegedly purchased at inflated prices from its major competitor in the domestic
     market or sourced from Australia. Consequently, it was argued that prices of
     artificial corundum in Brazil are abnormally high, and therefore exports to the
     Community from this country have ceased.
                                              11
 ---pagebreak--- (26) The Commission requested the two known USA producers of artificial corundum
     to co-operate in this review, but only one of them accepted to answer to the
     questionnaire.    A request for co-operation was also made to the three known
     producers in Brazil which all accepted to provide the information requested in the
     questionnaire.
(27) The domestic sales of the product concerned by the three Brazilian producers
     during the investigation period have been found to represent about 80% of the total
     exports from China to the Community. The relative size-of these three producers
     was such that none of them appeared to have a dominant position on the Brazilian
     market. Furthermore, imports into Brazil from third countries have been estimated
     to represent about 20% of the domestic market. Hence, Brazil is considered to be a
     sufficiently open and competitive market for artificial corundum. Bauxite, the
     main raw material, is easily available in an area close to the plants and no relevant
     supply from Australia has been recorded. No evidence was found of alumina being
     sold at inflated prices by any of the three producers to the others. Finally, Brazilian
     exports of artificial corundum to the Community during 1995 were almost 3000
     tonnes, which is a significant volume. In the light of the above, and taking into
     account of the number of co-operating producers in USA and Brazil, this latter
     country is considered to be an appropriate market economy country for the purpose
     of establishing normal value for the Chinese exports to the Community.
                                                12
 ---pagebreak--- (28) Normal value has been determined for each product type of artificial corundum
     exported from China to the Community during the investigation period. Normal
     value per product type was generally established on the basis of the prices paid or
     payable by independent customers in Brazil for sales of the like product made in
     sufficient quantities and in the ordinary course of trade. In cases where it was
     found that no or insufficient sales of a given product type were made in Brazil by
     any of the producers investigated, normal value for this type was constructed on the
     basis of its cost of production in Brazil, plus a reasonable amount for selling,
     general and administrative expenses and for profits, in accordance with Article 2(3)
     of the basic Regulation. The amounts of these expenses and profit have been
     determined on the basis of the actual amounts applicable to production and sales, in
     the ordinary course of trade, of the like product for the producer in question in the
     Brazilian market, in conformity with Article 2(6) of the Basic Regulation.
                                    2. Export Price
(29) Exports of the product concerned to the Community by the Chinese producers
     which replied to the Commission's questionnaire represented about 76% of total
     imports from China during the investigation period as recorded in Eurostat
     statistics The export price was generally established on the basis of the price
     actually paid or payable for the product sold for export from the People's Republic
     of China to independent customers in the Community, in conformity with Article
     2(8) of the Basic Regulation.
                                               13
 ---pagebreak--- (30) One Chinese producer provided information about the export price which was
      found to be false. This information has been disregarded and, in conformity with
      Article 18 of the Basic Regulation, the export prices of the producer in question
      were determined on the basis of the information provided by its unrelated importers
      in the Commumty.
(31) Two other Chinese producers sold for export to a related importer in the
      Community, but only in one case did the importer co-operate and it was possible to
      construct the export price on the basis of the resale price at which the imported
        product was first resold to an independent buyer. From the resale price all cost,
      between importation and resale incurred by the importer, as well as a reasonable
     amount for profit, were deducted, so as to establish a reliable export price, in
     conformity with Article 2 (9) of the Basic Regulation. The amount for profit has
     been calculated by reference to those realised by the co-operating independent
     importers. As to the other Chinese producer it was considered non co-operating.
(32) With regard to exports made by either the aforementioned non co-operating
     Chinese producer or those who did not manifest themselves, the export price had to
     be established pursuant to Article 18 of the Basic Regulation on the basis of the
     facts available. It was considered that the figures reported by Eurostat, duly
     adjusted to deduct the volume and value of the imports into the Community from
     the co-operating Chinese producers, provided the most appropriate basis and the
     export price has been determined accordingly.
                                                14
 ---pagebreak---                                      3. Comparison
(33) Normal value and export price have been compared for each product type at FOB
     level. For the purpose of ensuring a fair comparison between normal value and
     export price, account was taken and, where appropriate, adjustments made in
     accordance with Article 2 (10) of the Basic Regulation, for differences affecting
     price comparability»
(34) While a considerable proportion of domestic sales in Brazil was made to end-users,
     i.e. grinding wheel producers and refractory producers, the major part of the
     Chinese exports to the Community were made to traders. However, no clear price
     difference has been found in Brazil between sales to traders and sales to end-users.
     Hence, no adjustment has been made with regard to differences in levels of trade.
(35) Adjustments for other factors affecting price comparability have been made. Ocean
     freight, insurance costs for transport and credit costs were deducted, where
     appropriate, from the export price in order to express it at a Chinese border FOB
     level.
(36) In the case of normal value, adjustments for inland transport to harbour and loading
     costs have been made in order to bring the normal value, initially established at an
     ex-factory level, to a FOB Brazilian border level. Adjustments for credit costs have
     also been made where appropriate.
                                              15
 ---pagebreak--- (37) The Chinese producers submitted that artificial corundum in grain form originating
     in China must undergo further processing by the importer in order to be made fit
     for sale in the Community market. The Commission found that the Chinese product
     actually underwent a number of processes including reseiving, removal of iron and
     finally packing before being sold to the end-users. Moreover, sometimes the
     product needed to be dried and/or made more cubic (block shaped). The costs
     relating to these operations have been deducted from normal value for the purpose
     of comparability with the export price of the Chinese product.
(38) Regarding other alleged physical differences which are claimed to result in a lower
     quality of the Chinese product, no evidence has been provided to substantiate such
     allegations. Hence, no further adjustment was granted in this respect.
                                   4. Dumping margin
(39) In accordance with Article 2(11) of the Basic Regulation, the weighted average
     normal value per product type of artificial corundum was compared to the weighted
     average export price of the corresponding type. This comparison showed the
     existence of dumping, the dumping margins per type being equal to the amount by
     which the normal value exceeded the export price.
(40) Seven Chinese exporters asked that individual dumping margins should be
     determined for them. However, some exporters did not provide any documentary
     evidence to support their claim, some others only provided the business licence.
     This document was not considered sufficient to support the claim of these exporters
     to be independent from the State. Consequently their request could not be accepted.
     It is therefore considered appropriate, in accordance with previous Community
     practice, to establish one country-wide dumping margin.
                                               i6
 ---pagebreak--- (41) This margin has been calculated by comparing the overall weighted average normal
     value to the overall weighted average export price. The amount of this dumping
     margin, expressed as a percentage of the CIF Community frontier export price duty
     unpaid, has been established to be 88.7%.
                            E. COMMUNITY INDUSTRY
(42) The complaining Commumty producers which took part in the investigation
     account for almost 50% of the total Community production of artificial corundum.
     The other known producers did not fully co-operate in the investigation, but
     expressed their support for the review of the measures in force.
     Given the above, the complaining Community producers which cooperated with the
     investigation are considered to constitute the Community industry within the
     meaning of Article 4(1) of the Basic Regulation for the purpose of the
     investigation.
                                       F. INJURY
                              1. Community consumption
(43) The consumption of artificial corundum in the Community increased by 70,000
     tonnes from 1992 (272,913 tonnes) to the end of the investigation period (343,185
     tonnes). This represents an overall increase of 25%. This increase was constant as
     from 1993, after a slight decrease in 1992-1993 by 2.4%.
                                               17
 ---pagebreak---                     2. Volume and prices of the dumped imports
                        2. J. Volume and market shares of imports
(44) The volume of imports from China increased continuously and more than
     quadrupled during the period examined, from 13,403 tonnes in 1992 to 54,836
     tonnes in 1995. The market share of these imports followed a similar progressive
     trend: 4.9% in 1992, 6.6% in 1993,k 9.7% in 1994 and 16% in 1995, gaining a
     further 11% of market share since 1992.
                             2.2. Prices of the dumped imports
(45) For the investigation period, the undercutting calculations were made separately for
     brown and white corundum and each type was classified in four categories
     according to the grain mix. For the purposes of comparison, an adjustment was
     made to the exporters' prices of grain (ex-Community frontier) to take account of
     customs duty and anti-dumping duty plus an allowance in respect of processing
     costs incurred by importers in the Community (based on information collected
     during the investigation). The Community producers' prices were considered at ex-
     works level. Comparisons were made at comparable levels of trade. The comparison
     showed a weighted average undercutting margin of 21.7% for all types of artificial
     corundum during the investigation period.
                                                18
 ---pagebreak---        For the period between 1991 and 1994, while undertakings were in force, the
       investigation confirmed that the Chinese prices (Eurostat basis) were on average
       below the Community industry's prices and, indeed, below the undertaking prices.
       Moreover, the ad valorem duty of 30.8% imposed in June 1994 was largely
       absorbed by a subsequent 24% decrease in the export price between 1994 and 1995.
                                        2.3. Conclusion
 (46) The allegation made in the request for review was fully confirmed. The volume and
       market share of the Chinese imports have substantially increased in the period
       examined and the replacement of the undertakings by a duty has resulted in a further-
       fall in export prices.
                           3. Situation of the Community industry
                     3. J. Production, production capacity, utilisation rate
(47) The production of the Community industry increased regularly, with the exception
      of 1993, from 91,056 tonnes in 1992 to 102,821 tonnes in 1995. However, this
      increase in production of 11,500 tonnes (12.9%) should be seen in relation to an
      increase in consumption of 70,000 tonnes (25%) during the same period.
(48) The production capacity of the Community industry remained stable, at 140,700
      tonnes for the period examined.
                                                 19
 ---pagebreak--- (49) The capacity utilisation rate on average for the Community industry decreased "from
     66% in 1992 to 60% in 1993 and increased thereafter up to 73% in 1995, since the
     production increased and the production capacity did not significantly change.
            3.2. Sales volume and market share of the Commumty industry
(50) The sales of the complaining Community producers increased constantly in the
     period considered (with the exception of 1993) from 87,488 tonnes in 1992 to
     93,531 tonnes in 1995 (increase by 6.9%). However, this development of sales
     volume compared to the much more significant increase of the apparent Community
     consumption led to a decrease in the market share held by the Community industry
     from 32,1% in 1992 to 27,3% in 1995.
                                        3.3. Stocks
(51) Stocks of artificial corundum held by the Community industry increased regularly
     from 11,842 tonnes in 1992 to 17,160 in 1995 (increase by 45%).
                                   3.4. Price evolution.
(52) The prices of the Community industry have been depressed over the past years. The
     Community producers had to adapt their prices to the downward pressure exerted
     by the Chinese dumped imports. Prices decreased on average by 8% from 1992 to
     1994, albeit there was a slight recovery (less than 2% on average ) after 1994.
                                                20
 ---pagebreak---                                       3.5. Profitability
(53) The Commission found that during the period considered, the artificial corundum
      Community industry has recorded poor financial results. The worstfinancialresults
     were recorded in 1994 (-23.6% on a weighted average basis) where prices were at
      their lowest. In 1995, (investigation period) losses decreased on a weighted average
     basis to -13.9%, partly as a consequence of an increase in this period of the
      Community industry's production of special types of the product designed for
      specific applications. However, on average, losses were prevalent throughout the
     period.
                                      3.6. Employment
(54) The employment levels of the Community industry fluctuated during the period
     under consideration, representing in 1995 similar levels to 1992 (around 750
     persons).
                                 4. Conclusion on injury
(55) In spite of the measures in force, an overall assessment of the main economic
     indicators leads to the conclusion that the artificial corundum Community industry
     continues to show clear signs of economic difficulties. The production and sales of
     the complainants increased in the examined period, however, this increase did not
     reflect the increase in consumption with a consequent loss in market share of 4.8
     percentage points between 1992 and 1995. Financial losses were prevalent
     throughout the period examined and indeed the Community industry was unable to
     recover from the price pressure and financial difficulties encountered when the
     proceeding was reviewed in 1991. It is therefore concluded that the Community
     industry continued to suffer material injury during the period examined.
                                                21
 ---pagebreak---                                 5. Causation of injury                               - -
                                  5.1. Dumped imports
(56) The extent to which the injury suffered by the Community industry had continued to
     be caused by the dumped imports was examined. It was found that the injury
     consisted mainly infinanciallosses resulting from depressed prices together with a
     loss in market share in an expanding market. In this context, it is noted that the
     market share of the Chinese imports substantially increased at the same time as the
     Community industry's market share decreased. Moreover^ the Chinese prices
     significantly undercut those of the Community industry. It was therefore concluded
     that the Chinese imports largely contributed to the continued injury sustained by the
     Community industry.
                                   5.2. Other imports
(57) The effect of importsfromother third countries in determining the injury suffered by
     the Commumty industry were analysed.
     Measures on artificial corundum were in force until 26 July 1996 for a number of
     countries namely Hungary, Poland, the Czech Republic, Brazil, the Republic of
     Slovenia, the Russian Federation and Ukraine. No expiry review of these measures
     was requested by the Community industry which considered that the imports from
     the above-mentioned countries no longer constituted a threat to this industry.
                                               22
 ---pagebreak---       On the basis of Eurostat data, the investigation confirmed that during the period
      examined, imports from the above countries remained relatively stable in terms of
      market share (slight increase for Russia and Ukraine). Moreover, the prices of
      imports originating in these countries were in all cases consistently higher than the
      Chinese prices and indeed there were no indications that such imports were being
      dumped.
                               5.3. Structure of the industry
(58) The Commission examined whether the difficulties faced by the industry could be
     attributed to structural problems. It was found that considerable efforts of.
     rationalisation have been made by the Community industry allowing this industry to
     develop the production of a significant range of types of artificial corundum,
     including special types, and to be competitive with regard to the product concerned.
     Moreover, this industry has made significant investments in particular to comply
     with environmental requirements and is overall modernized.
                                                                  **
                              5.4. Conclusion on causation
(59) No other factors were found which could have had a particular impact on the
     situation of the Community industry. It is therefore concluded that the imports from
     China, because of their increased volumes and low prices have, in isolation,
     continued to cause material injury to the Community industry.
                                               23
 ---pagebreak---                 ^6. Likelihood of continuation of dumping and injury
(60) In the light of the above analysis and in order to assess the effect of the expiry of
     the measures in force, the following was considered:
(61) - Since measures were first imposed in 1984, the Community industry of artificial
     corundum has undergone considerable restructuring, with some companies closing
     down and others merging. Furthermore, the industry has tended to develop the
     production of more specialized types of artificial corundum, in particular that of
     white corundum. In spite of these restructuring efforts, the present review has
     shown that continued dumping and price undercutting has jeopardized the
     possibility of the industry's recovery, with low financial results incurred by all
     producers.     Should measures be allowed to lapse, this could only worsen the
     difficulties faced by this industry.
(62) - As regards the issue of dumping, it is noted that the measures in force have, in
     recent times, generally been insufficient to prevent dumping from continuing with a
     consequent substantial increase in the volume of the imports concerned.          The
     market share of the Chinese imports increased from 5% in 1992 to 16% in 1996.
     Moreover, it is noted that the undertakings in force between 1991 and 1994 were
     not adhered to and the ad valorem duty subsequently imposed in 1994 as a result,
     has been largely absorbed by a significant decrease in the export price. In the light
     of the behaviour of the exporters concerned and the rate of increase of the Chinese
     imports, the indications are that dumping is likely to continue, causing further
     injury in the absence of effective measures.
                                                24
 ---pagebreak--- (63) It follows from the foregoing that an expiry of the measures would t>e likely to
     increase the injurious effects of dumping and, consequently, further weaken the
     situation of the Community industry. A continuation of the measures appears
     therefore warranted, but they have to be adapted in the light offindingson dumping
     and injury based on the results of the present investigation, in order to ensure that
     the measures are appropriate in the circumstances found.
                             G. COMMUNITY INTEREST
                    1. The Community artificial corundum industry
(64) The Community artificial corundum industry was in the investigation period
     composed of large companies located in different Member States. Artificial
     corundum represents an important branch of their activities for which constant
     investment has been made in the recent years in order, in particular, to ensure
     compliance of production methods with environmental requirements. Furthermore,
     this industry is able to supply a wide range of types tif artificial corundum,
     including a number of specialities which are designed for specific applications, in
     particular in the steel and car manufacturing industries. The maintenance of this
     industry is therefore, from the viewpoint of variety and capacity for specialisation,
     in the interest of users in the Community. In this context, it is noted that although
     not all types of the product have been imported from China, the investigation has
     shown that the continued imports at low prices of certain types of corundum are
     putting at risk the viability of the Community industry as a whole and that a further
     deterioration could be expected in the absence of effective measures.
                                              25
 ---pagebreak--- (65) One association of abrasive producers pointed out that the anti-dumping_ measures
       have been in force for a considerable period. This association claimed that in the
       recent past a number of producers had closed down and others merged with the
       result that the number of suppliers on the side of the Community industry had been
       considerably reduced and might therefore no longer justify the continued
       imposition of the measures.
       In this respect, it is noted that the present producers of artificial corundum account
       for a significant production capacity, which would allow the supply of
       approximately 90% of the artificial corundum consumption in the investigation
      period. Furthermore, the industry has undergone considerable restructuring over the
      past years in a attempt to rationalise production; however these efforts have been
      largely undermined by the continuous and increasing presence of the dumped
      imports. In particular, it is noted that the duty imposed in 1994 was almost entirely
      absorbed, thus, undermining any useful effects of the measures to the industry.
(66) It was also claimed that the Community producers had a dominant position due to
      recent consolidations in the market and that this position would jeopardise the
      conditions of competition on the Community market. It should be noted that the
      merger referred to, which concerned one complainant producer and another
     producer in Austria was authorised pursuant to the Community competition
     legislation. Furthermore, given the existence of other Community producers in the
     market (a total of four producers following the said merger) and the presence of
     imports from a number of countries, this claim does not appear to be justified.
                                                 26
 ---pagebreak---                                    2. The user industry
(67) It is recalled that the Community users of artificial corundum are mainly the
      manufacturers of abrasives (such as grinding and cutting wheels and disks,
      sandpaper and abrasive paper) and the industry of refractory products (refractory
      masses for furnaces and safes).
      The abrasive applications account for 70 % of the Community consumption and
      refractory applications for 30 %.
(68) No users contacted the Commission following the publication of the notice of
      initiation. The Commission has nonetheless sent questionnaires to a number of
      known major users of artificial corundum in the Community which represented a
      variety of possible uses of the product either imported from China or Community
     produced. Several replies were received from companies and from one association
     of users
(69) The information provided was mostly of a general nature and to a large extent
     incomplete and contained insufficient indications on the impact of measures. On
     the basis of all the information provided for both abrasive and refractory uses, it
     appears that the potential impact of the anti-dumping measures would vary
     considerably according to the content of artificial corundum in the end products
     which, in turn, depends on the applications in both the abrasive and refractory
     industries. Indeed, the cost of artificial corundum in the final production cost of the
     end products was estimated to range in the abrasive industry from 5% to 25% and
     in the refractory industry from 8% to 40%. However, any potential effect of a duty
     would be minimised by the fact that all users provide themselves with artificial
     corundum from a large number of countries as well as from the Community
     industry.                                                                    \
                                                 27
 ---pagebreak---       Considering that users purchase artificial corundum from different sources and
      taking into account the level of consumption of Chinese artificial corundum in the
      Community in the investigation period, it was estimated that the average impact of
      an increase in the rate of duty on the costs of these industries' products would be
      for the abrasive industry 1.2% and for the refractory industry 3%.
(70) Furthermore, there appear to be users for whose specific applications artificial
      corundum from China could not be used. These users reported that they were
      dependent on the Community industry supplies.
(71) One manufacturer of abrasive products commented that the duty could result in an
      encouragement to the Chinese producers to no longer trade artificial corundum but
      manufacture and export finished products instead. However, no evidence was
      provided that this would be a probable consequence of maintaining the anti-
      dumping duties and would in any event not be a sufficient reason in itself for not
      imposing duties.
(72) It was also submitted that some users of artificial corundum were suffering from
      the adverse effects of competition both on the Community market and the third
      country markets from third country competitors which could purchase raw
      materials not subject to anti-dumping measures. Given the wide diversity of
      applications of the product concerned , the general nature of these allegations,
      which were not sustained by substantiated evidence, were too imprecise to show to
      what extent such negative effects would affect the users concerned. In any event, it
      is to be recalled that the investigation has proven that the existing anti-dumping
      duty has been absorbed by the Chinese exporters and that the measures in force
     .previous to ad valorem duties were not adhered to. As a consequence, any alleged
      decrease in fair competition cannot be attributed to the anti-dumping duties in
      force. That argument has therefore to be rejected.
                                               28
 ---pagebreak---  (73) It was also claimed by two abrasive users of artificial corundum that anti-dumping
       duties on artificial corundum from China would lead to relocation of production
       and job losses.
       In the present case, one of the two companies which claimed that relocation could
       take place because of anti-dumping measures has already relocated part of its
       production to a third country, justifying this notably by the lower labour costs
       outside the Community ; the other user admitted that relocation was an alternative
       to high costs of production and expenses related to importation and was a common
      trend among its competitors, irrespective of anti-dumping measures.
      Given, in addition, that anti-dumping duties can hardly be blamed for being
      responsible for relocation decisions taken previously, since it was clearly
      established during the investigation that the anti-dumping duty has been absorbed
      completely by the Chinese exporters and has not had the expected effect on prices,
      this argument has to be rejected.
(74) A shortage of supply of certain types of artificial corundum was also alleged by one
      user which had contacted one Community producer which could not at that time
      deliver all the requested quantities. Another user, on the contrary, wrote that no
      shortage of supply took place to his knowledge. No other user raised this argument,
      which has consequently to be rejected.
(75) One user claimed that, in the context of trade globalisation, no anti-dumping duties
      should be imposed.
                                               29
 ---pagebreak---       It is recalled that anti-dumping measures are imposed in order to maintain fair
      conditions of trade and competition in accordance with Community legislation
      adopted in conformity with the World Trade Organisation rules. Given that this is
     not contested by the user in question, the allegation was not considered to be valid.
(76) It must also be noted that some users expressly indicated that anti-dumping
     measures would have a favourable effect on them since, quality and proximity
     being reported to be the decisive factors for the choice of the supplier of artificial
     corundum by certain types of user, the defence of the situation of the Commumty
     industry would provide such advantages in the future and therefore be in these
     users' interest.
(77) Finally, it is considered that, although anti-dumping duties should allow the prices
     of the Community industry to increase, any increase would be limited by the high
     level of competition in the Community market and the number of alternative
     sources. Overall, the amended measures should therefore not result in any
     significant adverse effect on users.
                         3. Conclusion on Community interest
(78) In the light of the above, it is considered that there are no compelling reasons for
     not maintaining the measures in the present case. Furthermore, it should be noted
     that the Community industry has made considerable investments and that this
     restructuring has led to improved efficiency. It is therefore concluded that the
     Community interest calls for anti-dumping measures to be maintained in order to
     eliminate the injurious effects of dumped imports and that the measures should be
     amended in accordance with the present findings.
                                               30
 ---pagebreak---                                     H. MEASURES
(79) When calculating the adequate amount of duty, the Council has noted that the
     injury caused to the Community industry consists mainly of substantial financial
     losses due to depressed prices resultingfromprice undercutting. It is thus necessary
     that the measures taken allow the Community industry to improve its financial
     situation in the future.
(80) In this respect, an injury elimination level has been calculated, based on the
     weighted average cost of production per product type of the Community producers
     plus a profit of 5% considered reasonable for this type of industry. This injury
     elimination level was then compared to the weighted average import prices on a
     CIF basis, duties paid, for the same product types as used for the undercutting
     calculations and adjusted to take account of import and processing costs incurred
     by the importers.
     Since the result of this comparison showed a higher injure level than the dumping
     margin established, the duty should be based on the dumping margin found i.e.
     88.7% in accordance with Article 7(2) of the Basic Regulation.
(81) In order to ensure the effectiveness of the measures and minimise the risk that the
     duty be evaded by price manipulation, it is considered appropriate to express the
     duty as afixedamount of ECU per tonne.
     The amount of the duty has been calculated on the basis of the dumping level
     mentioned above and amounts to 204 ECU per tonne.
                                               31
 ---pagebreak--- HAS ADOPTED THIS REGULATION:
                                        Article 1
    Article 1 of Regulation (EEC) No 2552/93 shall be replaced by the following:
     'Article 1
    1. A definitive anti-dumping duty is hereby imposed on imports of artificial
    corundum, falling within CN codes 2818 10 10 and 2818 10 90 originating in the
    People's Republic of China.
    2. The rate of the duty applicable to the netfree-at-Community-frontierprice,
    before customs clearance, shall be 204 ECU per tonne.
    3. Unless otherwise specified, 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,
                                               32
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---                                                                   ISSN 0254-1475
                                                            COM(97) 468 final
                                              DOCUMENTS
EN                                                             02 05 08 11
                                    Catalogue number : CB-CO-97-482-EN-C
                                                             ISBN 92-78-24963-7
Office for Official Publications of the European Communities
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