CELEX: 51991PC0538
Language: en
Date: 1991-12-06
Title: Proposal for a COUNCIL REGULATION ( EEC ) imposing a definitive anti-dumping duty on imports of dihydrostreptomycin originating in the People' s Republic of China and definitively collecting the provisional anti­dumping duty

COMMISSION OF THE EUROPEAN COMMUNITIES
                                        C0M(91) 538 final
                                        Brussels, 6 December 1991
                           Proposal for a
                      COUNCIL REGULATION (EECÏ
      imposing a definitive anti-dumping duty on imports of
              dihydrostreptomycin originating in the
     People's Republic of China and   definitively collecting
                the provisional anti-dumping duty
                   (presented by the Commission)
 ---pagebreak---  ---pagebreak---                                          A-
                              Proposal for a
                    COUNCIL REGULATION (EEC) N* .../...
                                Of
           imposing a definitive anti-dumping duty on imports of
                   dihydrostreptomycin originating in the
          People's Republic of China and   definitively collecting
                     the provisional anti-dumping duty
THE COUNCIL OF THE EUROPEAN COMMUNITIES
Having regard to the Treaty establishing the European Economic Community,
Having regard to Council Regulation (EEC) N* 2423/88 of 11 July 1988 on
protection against dumped or subsidized imports from countries not
members of the European Economic Community^1), and in particular
Articles 9 and 12 thereof,
Having regard to the proposal from the Commission, submitted after
consultation within the Advisory Committee as provided under the above
Régulât ion,
Whereas :
(1) OJ No L 209, 2.8.1988, p. 1
 ---pagebreak---                                      2 -
                         A.  PROVISIONAL MEASURES
(1)  The Commission, by Regulation (EEC) No 2054/91 (2) (hereafter
     referred to as the provisional Regulation) imposed a provisional
     anti-dumping duty on imports of dihydrostreptomycin (hererin
     referred to as DHS) originating in the People's Republic of China.
     The Council, by Regulation (EEC) No 3090/91^3^ extended this duty
     for a period not exceeding two months.
(2)  The Commission did not impose measures concerning Japan, since it
     found that dumped Japanese imports did not cause any injury to the
     Community industry.   In this respect the proceeding concerning Japan
     has been terminated by a Commission decision^4).
                         B.   SUBSEQUENT PROCEDURE
(3)  Following the imposition of the provisional anti-dumping duty, the
     Chinese exporters as well as the complainants, requested, and were
     granted an opportunity to be heard by the Commission.   They also
     made written submissions making known their views on the findings.
(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.
(5) Owing to the complexity of the proceeding, in particular to the
     detailed verification of the data involved and the numerous
(2) 0J L 187, 13.07.1991, p. 23
(3) 0J L 293, 24.10.1991 , p.1
(4) 0J L ....
 ---pagebreak---                                   - 3 -
    arguments put forward, the investigation could not be concluded
    within the time limit provided for in Article 7 (9)(a) of Counci
    Regulation (EEC) No 2423/88 (hereafter referred to as the basic
    Régulât ion).
                               C.  DUMPING
(a) Normal value
(6) For the purpose of definitive findings, normal value was, in
    general, established on the basis of the same method as that used in
    the provisional findings.
(7) As explained in recitals 10 to 15 of the provisional Regulation,
    normal value for the the Chinese exporters was established on the
    basis of the   constructed normal value in Japan.
(8) DHS is only produced in two countries apart from the Community, one
    of which is the People's Republic of China and the other, Japan,
    which has a particular market situation.   According to Article 2 (5)
    of the basic Regulation, the normal value has to be established in
    an appropriate and not unreasonable manner on the basis of the
    prices or the constructed value in a third market economy country by
     adding cost of production and a reasonable margin of profit.
    As explained in recital 11 to 15 of the provisional Regulation, the
     prices in Japan were not fairly comparable with the export prices of
     the Chinese exporters.  Normal value had, therefore, to be
     constructed on the basis of the Japanese costs of production and a
     reasonable profit margin.  The result was then adjusted to render it
     reasonable and appropriate by taking account of the fact that one of
     the raw materials was sourced in the People's Republic of China and
     the use of its cost price would have reintroduced the distortions
    which Article 2(5) of the basic Regulation was intended to
     eIiminate.
 ---pagebreak---                                    - 4 -
     Since Rhône Poulenc is the only other known producer of
     dihydrostreptomycin in the world, its costs, exclusive of selling,
     general, and administrative expenses and profit, pertaining to the
     relevant raw material were, utilized, as there is no established
     world market price for this raw material, which could be used as an
     alternative.   The constructed normal value for Japan was therefore
     adjusted by the difference between the cost of production of the raw
     material of the only known market economy producer and the cost
     price of the Chinese raw material to the Japanese producer of
     d i hydrostreptomyc i n.
(9)  The Chinese exporters contested this method, arguing that the
     Commission had confused different methods of determining normal
     value as set out in Article 2 (5) of the basic Regulation.
     The Commission cannot accept this argument.   The method used is
     fully in accordance with the second indent to Article 2(5), the
     normal value being adjusted as explained above to make it reasonable
     and appropriate as is required.   Thus, the fact that this adjustment
     was made by reference to the cost of a raw material in the Community
     does not mean that the Commission mixed the methods.
(10) As far as a reasonable profit margin is concerned, it is recalled
     that, due to the predominant market position enjoyed by the Japanese
     producer on its domestic market, the profit margin found for this
     Japanese producer was exceptional and therefore it was not
     considered appropriate to include it in the calculation of the
     constructed value for the Chinese exporters.   For this reason, a
     profit margin of 5%, as requested by the Chinese exporters,   was
     used in the calculation of the normal value, as this was thought to
     be reasonable for a mature generic pharmaceutical product used in
     the agricultural sector.
 ---pagebreak---                                      5 -
     The Council confirms these findings and conclusions of the
     Commission as well as those set out in Recital 9 to 15 of the
     provisional Regulation.
(b)  Export Price
(11) The export price of DHS exported by the Chinese producers was
     determined as explained in recital 16 of the provisional Regulation
     No comments from any party have been made on this course of action.
     Therefore the Council confirms the Commission's findings.
(c)  Compar ison
(12) The comparison between normal value and the export prices was made
     on a transaction-by-transaction basis at the ex-works level and at
     the same level of trade.   For the purposes of ensuring a fair
     comparison the Commission took account, where appropriate, of
     differences concerning price comparability, such as differences in
     physical characteristics and selling expenses.   The Chinese
     exporters claimed, and the Commission after examination agreed that
     a 9% downward adjustment of the normal value was justified in the
      light of the differences in the physicial characteristics, namely
     the lower potency of DHS produced in China.
(13) In addition, the Chinese exporters claimed that the differences in
     the manufacturing process between DHS produced in Japan and China
     Justify a further adjustment.   However, no material evidence was put
     forward by the exporters as provided for by Art. 2(9)(b) of the
     basic Regulation.   Therefore the Council confirms the Commission's
     posit ion.
(14) The Chinese exporters also argued that the Commission had neglected
     other factors of adjustement such as differences in end-use, in
     customer perception due to lower potency and colouration of Chinese
 ---pagebreak---                                    - 6
     DHS.  These differences were already taken into account by the
     abovementioned 9% allowance, because they are a consequence of the
     lower potency. It is considered that these claims are not justified
     and this is confirmed by the Council.
(d") Dumping margin
(15) The final examination revealed that exports of DHS by the Chinese
     exporters were dumped.   The dumping margin is equal to the
     difference between the normal value and the export prices.   The
     Commission has taken into account the fact that the Chinese
     exporters are controlled and represented by a single state
     organization which is also able to influence the export prices.
     Consequently, a uniform dumping margin has been determined for the
     Chinese exporters who cooperated.
(16) The two Chinese exporters which cooperated claimed, however, that
     they acted independently and were therefore entitled to individual
     dumping margins.   In this respect, the Commission noted that these
     Chinese exporters were represented by a single Chamber of Commerce
     on behalf of which identical arguments and considerations for the
     two exporters, without any evidence of differences in circumstances
     except for differences in potencies of DHS were submitted.   In
     addition, these exporters were unable to show that they enjoyed a
     high degree of independence, that they are not state controlled in
     their commercial behaviour, especially in the setting of export
     prices and that they had the possibility to transfer any part of
     their profit outside China.   For these reasons, the exporters'claim,
     in this respect, has to be rejected.
(17) As far as other Chinese exports to the Community are concerned, an
     analysis of Eurostat figures for imports of DHS and a comparison
     with the declared export volumes by the Chinese exporters which
     cooperated shows that it is highly probable that other Chinese
     producers export DHS to the Community with a similar purity as the
 ---pagebreak---                                     - 7
     Japanese producer.    No evidence was available on the individual
     circumstances of these exporters for which, therefore, a dumping
    margin had to be calculated on the basis of the facts available as
     provided for in Article 7(7)(b) of the basic Regulation.    Since it
     has to be assumed that these non-cooperating exporters export higher
     potency DHS, no allowance can be made for differences in potency
     levels.    Therefore, it was considered reasonable that the dumping
     margin calculated for all other exporters from the People's Republic
     of China should not take account of any allowances claimed by the
     Chinese exporters which cooperated.
     On this basis, the dumping margins expressed as a percentage of CI F
     frontier prices were found to be for :
     Long March Pharmaceutical PI ant,and
     Shanghai Fourth Pharmaceutical Plant              37.46%
     For all other Chinese exporters                   50.65%
     These margins are equivalent to 14.9 Ecu per kilogram of base DHS
     for Long March Pharmaceutical and Shanghai Fourth Pharmaceutical
     Plant and 20.16 Ecu for all other Chinese exporters.
     The Council confirms these findings.
                                  E.   INJURY
(18) The Commission concluded in its provisional findings that the
     Community industry had suffered material injury.     While further
      investigation revealed that the capacity utilization was not as low
      as indicated in the provisional Regulation but dropped from an index
     of   100 in 1985 to 84 during the investigation period, all other
      injury factors remained unchanged even after the submission by the
      interested part ies.
(19) Given the above and for the reasons explained in recitals 21 to 26
     of the provisional Regulation, the Council confirms that the
      Community Industry has suffered material   injury.
 ---pagebreak---                                     - 8 -
                          G.  CAUSATION OF INJURY
(20) in recital 29 to 34 of the provisional Regulation, the Commission
     found that the increase in the volume of DHS imports from the
     People's Republic of China, at low prices which undercut the prices
     of the EC industry, coincided with the reduction in the Community
     industry's profit margin, reduction In market share and price
     erosion,   in this respect, the Chinese exporters themselves have
     indicated that the DHS market is U g h l y price sensitive,  it is,
     therefore, clear that the lower prices charged by the Chinese
     exporters was an important factor in the realignment of market
     shares amongst the Chinese exporters and the Community industry, and
     also in the price erosion and the consequent losses suffered by the
     Community industry.
(21) It was also found that the Japanese exporters'sales of DHS in the
     Community had declined considerably, and had not undercut the
     Community industry prices.    It was considered, therefore, that these
     exports did not contribute to the injury to the Community industry.
     As regards any other factors which had an impact on the situation of
     the Community industry, the Council is aware that demand for the
     product concerned has contracted in recent years.     However, this
     factor has not been imputed to the injury caused by the Chinese
     exporters.   Furthermore, the Commission considers that the large
      increase in dumped imports from China at very low prices into a
     contracting market has only served to aggravate the injurious effect
     of the dumping.
(22) For these reasons and for those explained in Recitals 29 to 34 of
     the provisional Regulation, the Council confirms that the dumped
     Chinese imports taken in isolation, have caused material injury to
     the Community industry.
 ---pagebreak---                                     - 9
                                  H.   DUTY
(23) As regards the duty, the Commission has recalculated what is
     necessary to remove the injury using the method as explained in
     recitals 35 and 36 of the provisional Regulation.     Given the low
     prices of the Chinese DHS in the Community and the high losses
     suffered by the Community industry, the difference between these
     Chinese prices and a price which would allow the Community industry
     to achieve a reasonable return on sales on the basis of a reasonable
     sales volume is still considerably higher than the dumping margins
     now calculated.    Therefore, in accordance with Article 13(3) of the
     basic Regulation, the dumping margins should be imposed as definitve
     duties, since only these two amounts would be adequate to remove the
      injury caused by the dumping.
(24) In addition, 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.     This concern of
     the Commission has been confirmed by the considerable price
     undercutting which has taken place in the Chinese export
     transactions.    In such a situation, a fixed duty amount or an ad
     valorem duty by itself would not guarantee the elimination of the
      injurious effect of the dumping.    Therefore, it is considered that a
     minimum price has to be established in order to deter further
      injurious dumping after the imposition of the definitive anti-
     dumping measures.
(25) The Commission also had to take account of the fact that an increase
     of the export prices of the Chinese exporters may be caused by other
     factors than the elimination of dumping.     Indeed, the production of
     DHS is an energy intensive process so that changes in the energy
     costs may provoke an increase in overall costs which will lead to an
      increase of the export price.   However, this increase would not
     necessarily result in a reduction in the dumping by the Chinese
 ---pagebreak---                                   - 10
     exporters, as the normal value could also increase by a
     corresponding amount.   Therefore, it is considered appropriate that
      in such a case the form of the duty should be that of a set amount
     per kilo of the imported DHS. The dumping amounts are 14.9 ECU per
     kilo of base DHS for the cooperating organisations and 20*16 ECU for
     the other Chinese exporters.   Consequently, given the potential for
     absorption of any duty in the market concerned, it is necessary that
     the imposition of a minimum price is combined with the imposition of
     a set amount of duty.
(26) While this combination of two forms >f duty is necessary to
     guarantee the elimination of the injury caused by dumping and its
      recurrence, the Commission is ready to investigate, in due course,
     refund or review applications of importers or the Chinese exporters,
     should a change in price lead to a reduction in dumping margins or
     for any other reasons should any change in circumstances be
     considered sufficient justification,
(27) The Community industry requested that the definitive anti-dumping
     duty be imposed retroactively in accordance with Article
     13(4)(b)(ii) of Regulation (E£C) No 2423/88.   No evidence of the
      legal requirements as set out in the relevant provision has been
     provided and therefore the claim was rejected.
(28) The Council confirms these views and the conclusions as set out in
     recital 23 to 27 of the present Regulation.
                           1. COMMUNITY INTEREST
(29) No further facts or arguments concerning Community interest were
     submitted to the commission by any of the parties.   The Council
     therefore confirms the Commission's conclusions, set out in recitals
     40 to 46 of the provisional Regulation, that it is in the
     Community's interest to eliminate, by anti-dumping measures, the
     injurious effects of the dumping by the Chinese exporters and thus,
     to prevent the further decline of the Community industry.
 ---pagebreak---                                   - 11 -
                              J.  UNDERTAKING
(30) A price undertaking has been offered on behalf of two Chinese
     producers.  However, the price level proposed would not eliminate
     the dumping as established nor, Its Injurious effect, as provided
     for In Article 10(2)(b) of the basic Regulation.   The Commission
     has considered that the price undertaking is not acceptable and has
     informed the exporters concerned of this decision and the reasons
     therefor.
                   K.  COLLECTION OF PROVISIONAL DUTIES
(31) In view of the dumping margins established, and the seriousness of
     the Injury caused to the Community industry, the Council considers
     it necessary that amounts collected by way of provisional anti-
     dumping duties should be definitively collected to the extent of the
     amount of the duty definitively imposed, which is equivalent to an
     ad-valorem rate of duty of 37.4 % of the net free at Community
     frontier price prior to customs clearance, as far as imports from
     Shanghai Fourth Pharmaceutical Plant and Long March Pharmaceutical
     Plant, Sichuan are concerned.   For all other Chinese exporters an ad
     valorem rate of 47.6% of the net free-at-Community frontier price to
     customs clearance should apply.
 ---pagebreak---                                   - 12
HAS ADOPTED THIS REGULATION
                                 Article 1
1. A definitive duty is hereby Imposed on Imports of dihydrostreptomycin
   falling within CN code 2941 20 10 and originating In the People's
   RepublIc of China.
2. The amount of duty shall be 20.16 Ecu per kilogram of base DHS or the
   difference between the CI F price and 58.4 Ecu per kilogram of base DHS
   whichever Is the higher (Additional Tarlc Code 8604).
   For Long March Pharmaceutical Plant, Sichuan and for Shanghai Fourth
   Pharmaceutical Plant (Additional Taric Code 8603), the duty shall be
   14.9 Ecu per kilogram of base DHS or the difference between the CIF
   price and 53.16 Ecu per kilogram of base DHS whichever Is the higher.
3. The provisions In force concerning customs duties shall apply.
                                 Article 2
The amounts collected or secured by way of provisional anti-dumping duty
pursuant to Regulation (EEC) No 2054/91 shall be definitively collected
to the extent of the amounts resulting from the application of the
definitive duty as Imposed In Article 1(2).    However, the extent of the
provisional amounts definitively collected shall be limited as follows:
-  for Long March Pharmaceutical Plant, Sichuan and for Shanghai Fourth
Pharmaceutical Plant, an ad-valorem duty rate of 37.4% will be applied
subject to a maximum of the definitive duty as Imposed In Article 1(2)
for imports from these firms, and
 ---pagebreak---                                      13 -
-   for all other Chinese exporters, an ad-valorem rate of duty of 47.6%
will be applied subject to a maximum of the definitive duty as Imposed in
Article 1(2).
                                 Article 3
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 a 11 Member States.
Done at Brussels,
                                           For the CounclI
                                           The President
 ---pagebreak---                                                                     ISSN 0254-1475
                                                              COM (91) 538 final
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