Commission Regulation (EU) No 473/2010 of 31 May 2010 imposing a provisional countervailing duty on imports of certain polyethylene terephthalate originating in Iran, Pakistan and the United Arab Emirates

(287) Converters and the cooperating import agent argued that measures would result in some bigger pre-form makers moving their standardised production lines to the countries neighbouring EU. Given that the cost of transportation of pre-forms over a limited distance is relatively low, this process is already happening to some extent. Still, for the moment, considerations like proximity to the client or flexibility of deliveries appear to compensate for the advantages the neighbouring countries may offer. Given that the proposed level of measures is moderate, it is provisionally considered that the advantages of producing the pre-forms outside the EU should not outweigh the current drawbacks. Moreover, given the transportation cost, the delocalisation is expected to be an alternative only for companies whose clients are located close to the EU borders, but not for converters that have their clients in other parts of the EU.

(288) Converters and the cooperating import agent also argued that measures could only bring a short term relief to the PET producers. They claimed that in the medium to long term, once the pre-form makers move out of the EU, there would be insufficient demand on the EU market for PET producers and the falling prices would ultimately force the PET producers to closures or relocation out of the EU. Given the considerations in the preceding recital and given that it is provisionally considered not yet economically mandatory for the pre-form makers to move out of the EU, this scenario is unlikely to happen.

(289) It can, thus, provisionally not be excluded that the imposition of measures will have a significant impact on the production cost of converters. However, given the uncertainties as to the possibilities for the pre-form and/or bottle makers to pass on the increased costs to their customers, the impact on the profitability of converters and their overall performance cannot be clearly stated at this provisional stage.

(290) Six bottling companies including branches of Coca-Cola Co., Nestle Waters, Danone and Orangina cooperated with the investigation, i.e. submitted full questionnaire replies within the time limits. They represent around 11 % of the Union consumption of PET in the IP. The format of the information provided does not allow identifying easily the number of staff directly involved in the production that uses PET. However, it is provisionally estimated at around 6 000 people. Based on the information available, it is estimated that the total bottling industry in the Union employs between 40 000 and 60 000 employees directly involved in the production using PET.

(291) On the basis of the information available, the cost of PET in the total cost of the cooperating bottlers vary between 1 % and 14 %, depending on the cost of other components used in the production of their respective products. The information available indicates that PET tends to be a more important cost item for the mineral water producers (especially not branded), while for some soft drink bottling companies it would be marginal. The information on the file shows that in some cases the PET cost may represent up to 20 % of the final price of the mineral water for the customers. It is estimated that on average the cost of PET can constitute up to 10 % of the total cost of the bottling companies.

(292) Given the above, it is considered that any increase in prices for PET following the imposition of the proposed measures will only have a limited (less than 2 % cost increase) impact on the overall situation of the bottling companies, even if, as claimed, they would have difficulties in passing on the increased cost to their customers, which in any case is unlikely at least in the mid-term perspective.

(293) Several interested parties argued that imposition of measures would result in a shortage of PET on the EU market and that the Union producers do not have sufficient capacities to meet the existing demand.

(294) It is noted in this respect that Union producers operated only at 69 % of their capacity in the IP and have sufficient spare capacity to replace the imports from the countries concerned, should this become necessary. However, the purpose of the duty should not be to discourage any imports but only to restore fair competition on the market. Moreover, other sources of supply are also available.

(295) In addition, it is expected that the PET recycling industry would increase production if the price of virgin PET in the EU is maintained at a reasonable level and not allowed to drop because of unfair competition.

(296) The Iranian exporter argued that the imposition of measures against Iranian PET would have a disproportionate negative effect in view of the country’s status as developing country and the fact that Iranian exporters already face serious disadvantages due to international sanctions. It is the Commission’s constant practice to take anti-subsidy actions against developing and developed countries alike whenever the legal requirements warrant such action. Moreover, the fact that there are sanctions in place against Iran is an irrelevant consideration under the existing anti-subsidy rules.

(297) To conclude, it is expected that the imposition of measures on imports from the countries concerned would provide an opportunity for the Union industry, as well as the other Union producers, to improve their situation through increased sales volumes, sales prices and market share. While some negative effects may occur in the form of cost increases for users (mainly converters), they are likely to be outweighed by the expected benefits for the producers and their suppliers.

(298) Restoring fair competition and maintaining a reasonable price level in the EU will encourage PET recycling, thus, assisting in the protection of the environment. In light of the above, it is provisionally concluded that on balance, no compelling reasons exist for not imposing measures in the present case. This preliminary assessment may need to be revised at final stage, after the verification of the user questionnaire replies and further investigation.

(299) In view of the provisional conclusions reached with regard to subsidisation, resulting injury and Union interest, provisional measures on imports of the product concerned from Iran, Pakistan and the United Arab Emirates should be imposed in order to prevent further injury being caused to the Union industry by the subsidised imports.

(300) The provisional measures on imports originating in the countries concerned should be imposed at a level sufficient to eliminate the injury caused to the Union industry by the subsidised imports, without exceeding the subsidy margin found. When calculating the amount of duty necessary to remove the effects of the injurious subsidisation, it is considered that any measures should allow the Union industry to cover its costs of production and obtain overall a profit before tax that could be reasonably achieved under normal conditions of competition, i.e. in the absence of subsidised imports.

(301) The Union claimed a 7,5 % target profit, as was used in the proceeding against the People’s Republic of China. However, during the period considered the Union industry never achieved such a profit (in fact it was never profitable) and it generally commented that it usually operates on rather low margins. The highest profit achieved by two sampled companies during one year of the period considered was 3 %. In these circumstances, a 5 % was provisionally considered as the most appropriate target profit.

(302) On this basis, a non-injurious price was calculated for the Union industry of the like product. The non-injurious price has been established by deducting the actual profit margin from the ex-works price and adding to the so calculated break even price the above-mentioned target profit margin.

(304) In the light of the foregoing and pursuant to Article 12(1) of the basic Regulation, it is considered that a provisional countervailing duty should be imposed on imports of the product concerned originating in Iran, Pakistan and the United Arab Emirates at the level of the lowest of the subsidisation and injury elimination level found, in accordance with the lesser duty rule.

(305) In the light of the foregoing, and in accordance with Article 12(1) of the basic Regulation, it is considered that the provisional countervailing duty rate should be imposed on imports originating in Iran at the level of the injury margin found while for imports originating in Pakistan and the United Arab Emirates, the provisional countervailing duty rate should be imposed at the level of the subsidy margin found.

(306) It is noted that costs and prices of PET are subject to considerable fluctuations in relative short periods of time. It was therefore considered appropriate to impose duties in the form of a specific amount per tonne. This amount results from the application of the countervailing rate to the CIF export prices used for the calculations in the parallel anti-dumping proceeding.

(308) In the interest of sound administration, a period should be fixed within which the interested parties which made themselves known within the time limit specified in the notice of initiation may make their views known in writing and request a hearing. Furthermore, it should be stated that the findings concerning the imposition of duties made for the purposes of this Regulation are provisional and may have to be reconsidered for the purpose of any definitive measures,

HAS ADOPTED THIS REGULATION:

Article 1

Article 2

Without prejudice to Article 30 of Regulation (EC) No 597/2009, interested parties may request disclosure of the essential facts and considerations on the basis of which this Regulation was adopted, make their views known in writing and apply to be heard orally by the Commission within one month of the date of entry into force of this Regulation.

Pursuant to Article 31(4) of Regulation (EC) No 597/2009, the parties concerned may comment on the application of this Regulation within one month of the date of its entry into force.

Article 3

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

Article 1 of this Regulation shall apply for a period of four months.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 31 May 2010.

For the Commission The President José Manuel BARROSO

(1) OJ L 188, 18.7.2009, p. 93.

(2) OJ C 208, 3.9.2009, p. 7.

(3) OJ C 208, 3.9.2009, p. 12.

(4) OJ L 253, 11.10.1993, p. 1.