Council Implementing Regulation (EU) No 135/2014 of 11 February 2014 repealing the anti-dumping duty on imports of dicyandiamide originating in the People’s Republic of China following an expiry review pursuant to Article 11(2) of Regulation (EC) No 1225/2009

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (1) (‘the basic Regulation’), and in particular Articles 11(2), 11(6) and 9 thereof,

Having regard to the proposal from the European Commission after consulting the Advisory Committee,

Whereas:

(1) The Council, following an anti-dumping investigation (‘the original investigation’), imposed by Regulation (EC) No 1331/2007 (2) a definitive anti-dumping duty on imports of 1-cyanoguanidine (dicyandiamide) originating in the People’s Republic of China (‘China’ or ‘the country concerned’) (‘the definitive anti-dumping measures’). The measures took the form of an ad valorem duty at the level of 49,1 %.

(2) Following the publication of a notice of impending expiry of the definitive anti-dumping measures in force (3), the Commission received on 14 August 2012 a request for the initiation of an expiry review of these measures pursuant to Article 11(2) of the basic Regulation. The request was lodged by AlzChem AG (‘the applicant’), representing 100 % of the total Union production of dicyandiamide.

(3) The application submitted was based on the grounds that the expiry of the definitive anti-dumping measures would be likely to result in continuation of dumping and recurrence of injury to the Union industry.

(4) Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of an expiry review, the Commission announced on 15 November 2012, by a notice published in the Official Journal of the European Union (4) (‘the Notice of initiation’), the initiation of an expiry review pursuant to Article 11(2) of the basic Regulation.

(5) The investigation of a continuation of dumping covered the period from 1 October 2011 to 30 September 2012 (‘the review investigation period’ or ‘RIP’). The examination of the trends relevant for the assessment of the likelihood of recurrence of injury covered the period from 1 January 2009 to the end of the review investigation period (‘the period considered’).

(6) After final disclosure, the applicant argued that the period considered should have started in 2008 because 2009 would result in unrepresentative findings. It should firstly be noted that the Commission enjoys a broad discretion when determining the period to be taken into account for the purpose of verifying injury. Secondly, the applicant has made this claim at a stage too late to change the period. The period considered was announced early in the process, but the applicant did not contest it then. The period cannot be changed at such a late stage of the process for practical reasons and because a modification on the basis of the collected evidence would be against the impartial conduct of an investigation. The claim was, therefore, rejected.

(7) The Commission officially advised the applicant, exporting producers in the country concerned, unrelated importers, users in the Union known to be concerned, and the representatives of the exporting country of the initiation of the expiry review. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set out in the Notice of initiation.

(8) In view of the apparent large number of exporting producers in the country concerned and unrelated importers, it was considered appropriate, in accordance with Article 17 of the basic Regulation, to examine whether sampling should be used. In order to enable the Commission to decide whether sampling would be necessary and, if so, to select a sample, those parties were requested, pursuant to Article 17 of the basic Regulation, to make themselves known within 15 days of the initiation of the review and to provide the Commission with the information requested in the Notice of initiation.

(9) Twelve known exporting producers in Chinawere contacted. As only one exporting producer from Chinacame forward with the requested information it was not necessary to select a sample of exporting producers.

(10) With regard to importers, some 10 unrelated importers of dicyandiamide in the Union were identified and invited to provide sampling information. Only two of them came forward and were willing to cooperate in the current review. Consequently, no sampling was necessary for unrelated importers.

(11) The Commission sent questionnaires to all parties known to be concerned and to those who made themselves known within the deadlines set in the Notice of initiation. Replies were received from the Union producer, the cooperating exporting producer in China, two unrelated importers and one user in the Union.

(12) Additional representations were received from two unrelated importers/traders and three users in the Union.

(14) The product concerned by this review is the same as the one in the original investigation, i.e. 1-cyanoguanidine (dicyandiamide) (‘DCD’) originating in the People’s Republic of China (‘the product concerned’), currently falling within CN code 2926 20 00 . It is produced from quick lime and carbon black, and appears after several production steps. It is a solid substance in the form of a fine, white, crystalline powder, usually odourless.

(15) DCD is usually used as an intermediate to produce a broad range of other chemical intermediates, such as pharmaceuticals, various industrial applications — water, pulp and paper, textile, leather — and diverse fields of epoxy applications. It is a key element of the nitrogen — carbon — nitrogen (NCN) chain, with niche end-products such as guanidine nitrate and other NCN derivatives.

(16) Most of the DCD sold on the Union market is standard. Only a limited amount is of a smaller particle size (the so-called micro DCD). The cooperating Chinese exporting producer provided data for the standard type only.

(17) One user questioned whether Union DCD and Chinese DCD were unlike products on the basis that the standard type of DCD produced by the Union industry is, allegedly, of higher quality than that produced by the Chinese exporting producers. In particular, this user claimed that the water content of the Chinese DCD would be significantly higher and more volatile compared to the water content of the DCD produced in the Union. Moreover, Chinese DCD would also have a higher content of impurities.

(18) As in the original investigation, the investigation showed, however, that while there may be certain quality differences, these cannot be quantified and moreover, they do not affect the basic chemical, physical and technical characteristics of DCD produced and sold by the Union industry in the Union and the product concerned, which were found to be the same and to have the same end-uses.

(19) Another user argued that micro DCD should be excluded from the product scope of the anti-dumping measures due to the alleged differences in physical characteristics, end-uses and prices from standard DCD.

(20) The investigation showed, however, that both types share the basic chemical, physical and technical characteristics. The further processing of standard DCD to produce micro DCD involves a straightforward physical process (milling), but no chemical processing. In addition, even though the prices of micro DCD are higher than those of standard DCD, both types have the same basic end-uses and can normally be interchanged.

(21) The investigation confirmed that, as in the original investigation, the product concerned and the products manufactured and sold on the domestic market in China, as well as those manufactured and sold in the Union by the Union producer, have the same basic physical and technical characteristics as well as the same uses and are, therefore, considered to be like products within the meaning of Article 1(4) of the basic Regulation.

(22) In accordance with Article 11(2) of the basic Regulation, it was examined whether the expiry of the existing measures would be likely to lead to a continuation of dumping.

(23) As mentioned in recital 9, due to the fact that only one company cooperated, it was not necessary to select a sample of exporting producers in China. This company covered more than 35 % of the imports of product concerned from China to the Union during the RIP. This company did not export during the IP of the original investigation and therefore did not cooperate in the original investigation.

(24) In accordance with Article 2(7)(a) of the basic Regulation, normal value had to be determined on the basis of the prices or constructed value in an appropriate market economy third country (the ‘analogue country’), or the price from such a third country to other countries, including the Union, or, where those are not possible, on any other reasonable basis, including the price actually paid or payable in the Union for the like product, duly adjusted if necessary to include a reasonable profit margin.

(25) In the absence of production of the product concerned outside the Union and China, the Commission indicated in the Notice of initiation its intention to base the normal value on the prices actually paid or payable in the Union for the like product, as had also been done in the original investigation.

(26) The like product was sold by the Union industry in representative quantities. However, the Union industry’s domestic sales were loss-making, albeit close to break even. Therefore, the normal value was based on the Union industry’s manufacturing costs plus a reasonable amount for selling, general and administrative costs (SGA) and profit. SGA and profit were determined using the same method as in the original investigation. Pursuant to Article 11(9), adjustments were made on the Union industry’s manufacturing costs so as to offset the additional transport costs due to the physical separation between production units, no direct access to raw materials, which must be transported from remote production sites and disposal of the by-product (black lime). These adjustments were also made in the original investigation.

(27) All export sales of the cooperating exporting producer to the Union were made directly to independent customers established in the Union. In accordance with Article 2(8) of the basic Regulation the export price was established on the basis of the prices actually paid or payable.

(28) The comparison between normal value and export price was made on an ex-works basis.

(29) For the purpose of ensuring a fair comparison between the normal value and the export price of the cooperating exporting producer, and in accordance with Article 2(10) of the basic Regulation, due allowance in the form of adjustments was made with regard to differences in transport, insurance, taxes and credit costs which affected prices and price comparability.

(30) As provided for under Article 2(11) of the basic Regulation, the dumping margin was established on the basis of a comparison of the weighted average normal value with the weighted average export price.

(31) For the cooperating exporting producer that comparison showed the existence of dumping although significantly lower than the level of dumping established in the original investigation.

(32) Further to the finding of the existence of dumping during the RIP, the likelihood of continuation of dumping should measures be repealed was investigated and the following elements were analysed: production capacity and spare capacity in China; volume and prices of dumped imports from China; the attractiveness of the Union market in relation to imports from China.

(33) In this regard, it should be noted that the cooperating exporting producer represented more than 30 % of the total production of Chinaduring the RIP.

(34) Since little public information is available about the Chinese DCD industry, conclusions in relation to spare capacity relied mainly on the information contained in the request for review and on information obtained from the single cooperating producer, cross-checked where possible against publicly available information.

(35) On this basis, it is assumed that total installed capacity in Chinaincreased between 2007 and 2012. Actual production during the RIP was however limited to 80 000 tonnes, indicating that some spare capacity may be available. The Chinese installed capacity during the RIP represents more than the global demand for DCD and spare capacity may represent more than the total Union consumption during the RIP while the domestic Chinese consumption during the RIP amounted only to 40 000 tonnes, i.e. half of actual Chinese production.

(36) In relation to spare capacity, the information gathered on spot during the investigation shows that the single cooperating producer, representing more than 20 % of the total installed capacity of Chinain 2012, has been granted approval to expand its capacity by 50 % in 2014. It is expected that this new capacity will, inter alia, further serve this producer’s own production processes (captive use of DCD) and the Chinese domestic market, which during the RIP absorbed around half of the DCD production of the single cooperating producer. Information obtained from the single cooperating producer showed that future investments in capacity will be used to supply, inter alia, the Chinese domestic market which is large and rapidly growing.

(37) Chinais thus in a position to produce large quantities for export, in particular because there are no indications that the domestic market could absorb all the spare capacity.

(38) According to Eurostat and verified import data, the volume of imports from China sharply decreased when the measures were introduced in 2007 and started increasing again slightly between 2009 and the end of the RIP, but never reached the level of 2007. This is also reflected in the market share of the Chinese imports which dropped from 40-45 % in 2007 to 10-15 % in 2009 and reached again a level of 15-20 % at the end of the RIP, despite the increase in Chinese prices by 73 %.

(39) The Union market is a relatively large market accounting for around 18 % of the world consumption of DCD, but it is not necessarily the most attractive or the only attractive market in terms of sale segments and prices (see recital 74). Indeed, the information available suggests that Chinese producers anticipate a growing demand from the pharmaceutical industry, e.g. in India, that uses DCD for instance as an input for the production of a diabetes medicine (metformin). Therefore, this new demand will potentially be able to absorb a large part of Chinese spare capacity. Based on the above, it is considered that the Union market is not the only attractive market for Chinese exporters.

(40) The investigation has confirmed that Chinese imports continued to enter the Union market at dumped prices during the RIP. Given the continued dumping, the fact that the Union market is a large market which was quite attractive for the Chinese exporters in the past, as well as the spare capacities available in China, going beyond the total Union consumption, it can be concluded there is a likelihood of continuation of dumping should measures be removed. It should however be noted that the current level of dumping is significantly lower than that established in the original investigation.

(41) As the analysis concerns only one company, for reasons of confidentiality most indicators are given in indexed form or ranges.

(42) The production of the Union producer AlzChem AG represents 100 % of the DCD produced in the Union. It is therefore considered that AlzChem AG constitutes the Union industry within the meaning of Articles 4(1) and 5(4) of the basic Regulation.

(45) Bearing in mind that only one exporter cooperated with the investigation, it was found that the Eurostat data were the best information source for import volumes and prices. The Eurostat data refers to EU27 and was cross-checked to other sources such as Chinese exports statistics, Article 14(6) database and cooperating importer/user data.

(46) Deliveries of DCD from Chinawere imported under two customs regimes. Under the normal regime both the normal customs tariff and the anti-dumping duty were payable. Under the inward processing regime none of these duties were payable because the material was used in the production of downstream products that were exported outside the Union. As shown in the table below, the inward processing regime covered around two thirds of imports in the RIP.

(48) As reflected in the table above, over the period considered the prices of Chinese imports increased substantially.

(49) The Union industry claimed that the price development cannot be explained by the development of prices of the main cost drivers, i.e. raw materials and energy costs. However, it did not provide any alternative explanation or conclusive evidence to support the claim.

(50) For the purpose of analysing price undercutting, the weighted average sales prices of the Union industry to unrelated customers on the Union market were compared to the corresponding weighted average CIF prices of imports from China (standard DCD only). The sales prices of the Union industry were adjusted in particular for delivery costs and commissions to an ex-works level. The CIF prices of the exports from Chinawere obtained from Eurostat and cross-checked with the Article 14(6) database and they excluded those imports which were subject to inward processing. These CIF prices were adjusted to cover costs related to customs clearance, namely customs tariff and post-importation costs. Undercutting in respect of imports which were subject to inward processing is analysed in recital 83.

(51) The comparison showed that during the RIP the imports of the product concerned did not undercut the Union industry’s prices.

(52) There were no major imports from other third countries.

(54) Pursuant to Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic factors and indices having a bearing on the state of the Union industry during the period considered.

(57) The sales by the Union industry on the Union market to unrelated customers increased by 26 % during the period considered, whereas its sales prices went up by 7 %.

(60) The profitability of the captive transactions was comparatively good.

(64) The Union industry did not claim to have encountered any difficulty to raise capital during the period considered.

(65) The investments made during the period considered contributed to increase the number of qualified employees. The average wage levels increased by 15 % over the period considered.

(67) Dumping continued during the RIP, as explained under the point 3.2 above.

(68) The impact of the magnitude of the actual dumping margin on the Union industry, given the volume of the dumped imports from China, cannot be regarded as very great. As compared to the original investigation, the situation of the Union industry improved significantly — it was well on track to recovery from past dumping, in particular in terms of profitability, sales and market share.