Commission Implementing Regulation (EU) No 1195/2014 of 29 October 2014 imposing a provisional countervailing duty on imports of certain rainbow trout originating in Turkey

• (152) The investigation clearly showed at this stage that the Union industry suffered material injury. The injury translated in a loss of market share and decline in profitability, in particular. In the same time, imports of the product concerned gained market share and they were found to undercut the Union industry prices on the Union market.

• (153) Certain injury indicators, such as unit sales price, average labour cost per employee, productivity and investments, developed positively. As regards the unit sales prices the increase was due to increased production cost. However, this increase did not compensate the full increase of unit cost, thus turning profitability to negative in 2012. As explained in the recital 144 the Union industry's increase in average labour cost per employee was below the general increase in labour cost and the inflation rate in the Union. The Union industry had to reduce its number of employees which resulted in an increase in productivity per employee. The increase of investments was mainly linked to the acquisition of production facilities from discontinued companies and consolidation and not to replacement of existing assets or the acquisition of new equipment.

• (154) Most injury indicators showed negative trends. The Union industry suffered a decline in profitability, cash flow and return on investments. The profitability and return on investments, which were merely over the break-even point during 2010 and 2011, became negative in 2012 and declined further during the investigation period. At the same time, the production volume, production capacity, employment and market shares were reduced under the pressure of the subsidised imports.

• (155) On the basis of the above, the Commission concluded at this stage that the Union industry suffered material injury within the meaning of Article 8(4) of the basic Regulation.

E. CAUSATION

• (156) In accordance with Article 8(5) of the basic Regulation, the Commission examined whether the subsidised imports from the country concerned caused material injury to the Union industry. In accordance with Article 8(6) of the basic Regulation, the Commission also examined whether other known factors could at the same time have injured the Union industry. The Commission ensured that any possible injury caused by factors other than the subsidised imports from the country concerned was not attributed to the subsidised imports. These factors are:

• (a) Imports of other third countries

• (b) Export performance of the Union industry

• (c) Development of consumption

• (d) Competition with other fish species

• (e) Administrative and regulatory burdens, geographical limitations

• (f) Price pressure exerted by large retailers

• (g) Over-investments, financial expenses, exchange rate fluctuations and extra-ordinary losses linked to litigations

1. Effects of the subsidised imports

• (157) To establish the existence of a causal link between the subsidised imports of the product concerned from Turkey and the injury suffered by the Union industry, the Commission analysed the volume and price levels of the subsidised imports and the extent to which these could have caused the material injury suffered by the Union industry.

• (158) The investigation showed that subsidised imports from the country concerned nearly doubled during the period considered. This resulted in a gain of market share of 8 percentage points, from 9 % in 2010 to 17 % in the investigation period. This happened despite a decreasing trend of consumption. At the same time the Union industry lost 8 percentage points of its market share.

• (159) The average prices of the subsidised imports increased by 5 % between 2010 and the investigation period. This increase was due to the overall increase in cost of production. However, import prices remained at significantly lower levels than those of the Union industry. The subsidised imports undercut Union industry prices with an average undercutting margin of 9 % during the investigation period. At the same time given the increased subsidised imports of the product concerned which exerted a significant price pressure on the Union market, the Union industry could not raise its sales prices sufficiently so that they could cover for its increased cost of production and in any case not above the Turkish subsidised imports' prices.

• (160) It was found that the increase of subsidised imports from Turkey and their market share gain clearly coincided with the loss of market share of the Union industry, the decrease in production volumes, production capacity and employment, the downward trend of profitability, cash flow, and return of investments. Thus, the subsidised imports were considered as exercising pressure on the Union industry which subsequently contributed to its inability to increase its sales prices in line with the cost, to loss of market share and to overall economic and financial deterioration,

• (161) Based on the above, the Commission concluded at this stage that the Union industry's deteriorating state had to be attributed to the increase in imports at subsidised prices from Turkey and that these imports had a determining role in the material injury suffered by the Union industry.

2. Effects of other factors

2.1.   Imports from third countries

• (162) The volume of imports from other third countries (Chile, Norway, Bosnia and Herzegovina and others) developed over the period considered as follows:

Table 11

Imports from third countries

• (163) The import volume from all other third countries was at a low level and even decreased slightly during the period considered. It increased between 2010 and 2011, but decreased subsequently and reached slightly lower volumes during the investigation period than at the beginning of the period considered in 2010. Market share followed a similar trend. It increased between 2010 and 2011, but decreased again in 2012 and the investigation period. Overall, their market share increased slightly from 2,4 % to 2,7 % during the period considered. At the same time the imports from Turkey were at much higher level both in terms of volume and market shares and showed a constant increasing trend.

• (164) Average import prices were increasing over the period considered. In total average import prices increased by 12 % over the period considered. Import prices from other third countries were lower than the average unit sales prices of the sampled Union producers but higher than the Turkish import prices, except in 2012 where they were slightly lower.

• (165) In view of the low and stable import volumes as well as the low and rather stable market shares from all other third countries and their price levels that followed overall price levels in the Union, the Commission concluded at this stage that the other third country imports did not contribute to the injury suffered by the Union industry.

2.2.   Export performance of the Union industry

• (166) The volume of exports of the Union industry developed over the period considered as follows:

Table 12

Export performance of the Union producers

• (167) Export sales of the Union industry increased by 25 % during the period considered. However, the Union market is the main market for the Union industry and its exports constituted only around 3 % of its production in 2010-2011 and around 5 % in the investigation period. Export sales prices of the Union industry were by around 30 % higher than their average sales price in the Union, generating higher profits than sales on the Union market.

• (168) On these grounds, the Commission concluded at this stage that the export performance of the Union industry did not break the causal link between the subsidised imports and the injury suffered by the Union industry.

2.3.   Development of consumption

• (169) Union consumption remained stable from 2010 to 2011 and decreased by 12 % between 2011 and the investigation period, overall it decreased by 12 %. In the context of decreasing consumption however the subsidised Turkish imports managed to increase their market share by 8 percentage points or 95 % while the Union industry lost a market share of as well 8 percentage points. Therefore, the loss in sales volume and market share from the Union industry could not be solely explained by the overall decrease in consumption. Therefore, the steady increase of subsidised imports in a shrinking market at prices undercutting the Union industry's sales prices on the Union market independently caused injury and as concluded in recital 160 they had a determinative role.

• (170) On these grounds, the Commission concluded at this stage that the decreasing consumption, whilst it might have contributed to the injury suffered by the Union industry, could not, by itself, explain the injury suffered by the Union industry and therefore could not break the causal link between the subsidised imports and the injury suffered by the Union industry.

2.4.   Competition with other fish species

• (171) The Aegean Exporters Association claimed that the material injury suffered by the Union industry was caused by competition with other fish species such as pangasius, large trout and salmon.

• (172) As far as pangasius is concerned, imports declined by around 24 % during the period considered. This is in contrast with the increase in imports of the product concerned over the same period.

• (173) As regards other fish species, it is noted that according to information available, namely a publicly available study from the Fødevareøkonomisk Institut of the University Copenhagen ¹¹, large trout and salmon are substitutes competing in the same market segment. In contrast, trout subject to current investigation is sold in different market segments and there is no direct correlation between the price of large trout or salmon and the price of trout subject to current investigation.

• (174) On this basis these claims should be rejected.

• (175) On these grounds, the Commission concluded at this stage that the competition with other fish species did not contribute to the injury suffered by the Union industry.

2.5.   Administrative and regulatory burdens, geographical limitations

• (176) The Aegean Exporters Association further claimed that the material injury suffered by the Union industry was caused by administrative and regulatory burdens as well as limitations to use certain geographical areas for aquaculture purposes.

• (177) The alleged causality between the named administrative and regulatory requirements and the injury was not substantiated. In particular, it was not demonstrated that the administrative and regulatory framework including the geographical limitations as regards areas available for aquaculture purposes would have changed during the period considered in such a way that it could have caused the injury. In fact, these named elements merely characterize the overall economic and regulatory environment of the aquaculture sector in the Union and cannot explain the degradation of the Union industry's situation during the period considered. This claim should therefore be rejected.

• (178) On these grounds, the Commission at this stage concluded that the alleged administrative and regulatory burdens and geographical limitations did not break the causal link between the subsidised imports and the injury suffered by the Union industry.

2.6.   Price pressure exerted by the large retailers

• (179) The Agean Exporters' Association and one of the sampled exporting producers claimed that large retailers in the Union have a strong bargaining power and that any injury suffered by the Union producers was due to the price pressure exerted by such retailers and not due to imports from Turkey.

• (180) None of the large retailers came forward and cooperated in the present investigation. In any event, Turkish imports prices were subsidised and below the prices of the Union industry throughout the period considered. During the investigation period, the undercutting margins were between 5 % and 18 %. Under such a scenario, the alleged price pressure exerted by large retailers could not possibly explain the overall economic and financial deterioration and especially the loss of market share but it could have only marginally contributed to the injury suffered, if at all.

• (181) On these grounds, the Commission concluded at this stage that any possible price pressure exerted by the large retailers could not break the causal link between the subsidised imports and the injury suffered by the Union industry.

2.7.   Over-investments, financial expenses, exchange rate fluctuations and extra-ordinary losses linked to litigations

• (182) The Aegean Exporters' Association claimed that the declining performance of at least certain Union producers was due to over-investments rather than the Turkish imports. The same party further claimed that the decline of the profitability of the Union industry was partly due to increased finance expenses, exchange rate fluctuations and cost incurred as a consequence of litigation.

• (183) The claims regarding alleged over-investments and cost incurred as a consequence of litigation were not substantiated. Neither did the findings of the investigation support the claim that these factors would have had any material impact on the profitability of the sampled Union producers.

• (184) Claims regarding the increase of finance expenses and exchange rate fluctuations were not specified or substantiated in any way. Neither did the findings of the investigation support the claim that these factors would have had any impact on the profitability of the sampled Union producers.

• (185) These claims should therefore be disregarded.

• (186) On these grounds, the Commission at this stage concluded that the alleged over-investments, financial expenses, exchange rate fluctuations and extra-ordinary losses linked to litigations did not contribute to the injury suffered and thus they could not break the causal link between the subsidised imports and the injury suffered by the Union industry.

3. Conclusion on causation

• (187) The above analysis has demonstrated that there was a substantial increase in the volume and market share of the subsidised imports from the country concerned. The increase of these imports at prices undercutting the Union sales prices led to the deterioration of the situation of the Union industry. On this basis, it was concluded that imports from Turkey had a determining role in the material injury suffered by the Union industry.

• (188) Other factors which could have caused injury to the Union industry were also analysed. In this respect, it was found that imports from other third countries, the export performance of the Union industry, competition with other fish species, administrative and regulatory burdens, geographical limitations, over-investments, financial expenses, exchange rate fluctuations and extra-ordinary losses linked to litigations did not contribute to the injury suffered by Union industry. Other factors such as the development of Union consumption and price pressure exerted by large retailers might have contributed to the injury suffered but they could not break the causal link established between the subsidised imports and the injury suffered by the Union industry during the investigation period.

• (189) On the basis of the above, the Commission concluded at this stage that the material injury to the Union industry was caused by the subsidised imports from the country concerned and that no other factors break that causal link. The injury notably consists of decrease in production and production capacity, sales volume, market share, employment while the profit and return of investments became negative during the period considered.

F. UNION INTEREST

• (190) In accordance with Article 31 of the basic Regulation, the Commission examined whether it could clearly conclude that it was not in the Union interest to adopt measures in this case, despite the determination of injurious subsidisation. The determination of the Union interest was based on an appreciation of all the various interests involved, including those of the Union industry, importers and users.

1. Interest of the Union industry

• (191) The investigation established that the Union industry suffered material injury caused by subsidised imports from Turkey.

• (192) The imposition of measures would restore fair competition on the market. The Union industry's downwards trend in financial performance indicators is the result of its difficulty in competing with the subsidised imports from the country concerned. The imposition of countervailing duties would therefore put the Union industry in the position to increase its prices to cover the cost of production and thus increase its market share, employment, production and improve its financial performance indicators such as profitability, cash flow and return on investments.

• (193) Should measures not be imposed, the price pressure from Turkish imports is likely to continue with further negative effects on the profitability of the Union industry. This further decline in performance would ultimately lead to further cuts in production and more closures of production sites, which would therefore threaten employment and investments in the Union.

• (194) On this basis, the Commission concluded at this stage, that countervailing measures were in the interest of the Union industry.

2. Interest of unrelated importers

• (195) In the Notice of Initiation the Commission invited importers and their representative associations to make them-selves known. As indicated in recital 12 above, three companies made themselves known by replying to the sampling form for unrelated importers. Consequently, questionnaires were sent to all three companies that came forward, but only one of them replied. From the reply it became apparent that although this party had imported a very small amount of trout during the investigation period, it was not usually an importer of trout but of other fish products. The amount of trout imported by this company was not sufficient to be considered overall representative.

• (196) At a later stage another importer came forward without however replying to the questionnaire. This importer claimed that the imposition of duties on trout from Turkey would interrupt its import activities without however detailing this claim or providing any information relevant for the assessment of any potential impact on its business activities, such as profitability, import and resale prices.

• (197) While it cannot be excluded that unrelated importers will be effected by the imposition of countervailing duties, the aim of such duties is to restore the level playing field in the Union market. Other sources of supply are also existent and importers in the Union should be able to switch their sources of supply in response to the imposition of duties. Overall, the investigation did not reveal any significant negative effects of the imposition of duties on unrelated importers/traders in the Union.

• (198) In the light of the above and in the absence of other data from unrelated importers/traders, the Commission concluded at this stage that the imposition of measures would not have an overall significant adverse effect on unrelated importers/traders.

3. Interest of users, consumers, suppliers

• (199) In the Notice of Initiation the Commission invited users and their representative associations, and representative consumer organisations to make themselves known. In addition, the Commission contacted all known relevant parties. However, none of these parties came forward.

• (200) After the deadline said in the Notice of Initiation, two parties that claimed to be suppliers of machinery to Turkish producers/processors of trout made themselves known.

• (201) One party claimed that the imposition of duties would result in increased prices for the final consumers. This party did not, however, substantiate this claim. The investigation did not reveal any significant negative effects of the imposition of duties on the final consumers. As mentioned above, consumer organisations did not cooperate and did not provide any information on the basis of which the impact of measures could have been assessed in detail. In any event, while countervailing duties may have an effect on import prices, such potential price increase may at least partly be diluted through the distribution chain and any price increase for the final consumer may therefore not to be significant at consumer level.

• (202) In addition, the aim of countervailing duties is to restore the level playing field in the Union market, but not to restrict imports of fair priced imports in the Union.

• (203) In view of the above, as well as the non-cooperation of users and consumer organisations in the investigation and in particular the level of measures, the Commission concluded at this stage that the imposition of measures would not have an overall significant adverse effect on users, consumers or suppliers.

4. Conclusion on Union interest

• (204) On the basis of the above, the Commission concluded that there were no compelling reasons that it was not in the Union interest to impose measures on imports of the product concerned from Turkey at this stage of the investigation.

G. PROVISIONAL COUNTERVAILING MEASURES

• (205) On the basis of the conclusions reached by the Commission on subsidisation, injury, causation and Union interest, provisional countervailing measures should be imposed to prevent further injury being caused to the Union industry by the subsidised imports.

1. Injury elimination level (Injury margin)

• (206) To determine the level of the measures, the Commission first established the amount of duty necessary to eliminate the injury suffered by the Union industry.

• (207) The injury would be eliminated if the Union industry was able to cover its costs of production and to obtain a profit before tax on sales of the like product in the Union market that could be reasonably achieved under normal conditions of competition by an industry of this type in the sector, namely in the absence of subsidised imports.

• (208) Imports from Turkey started to increase with significant quantities mainly in 2008, that is to say before the period considered. The profitability realised by the Union industry at the beginning of the period considered in 2010 was therefore not considered representative. As before 2008 the pressure of imports from Turkey was not substantial on the Union market, it was considered that profit margins realised before that period could be reasonable. On the basis of the complaint, in 2006 and 2007 the Danish trout industry realised a profit margin which, on average reached or exceeded the level of 12 %. Consequently, on this basis, it was considered at this stage that a profit margin of 12 % of turnover could be regarded as an appropriate level which the Union industry could expect to obtain in the absence of injurious subsidisation.

• (209) The Aegean Exporters' Association and one exporting producer claimed that the target profit should be lower than 12 % on the grounds that (i) in prior investigations (salmon; large rainbow trout) the target profits used were lower, (ii) the actual profit margin obtained by the Union industry at the beginning of the period considered was also lower and (iii) the profit margin of 12 % refers to Danish trout industry only and not to the Union industry as a whole and was therefore not representative. Finally, the exporting producer claimed further that a profit margin of 3 % should be used as such profit was in line with the average profit margin of the overall food industry.

• (210) First, as regards to the comparison to large trout and salmon investigations, it should be noted that each investigation must reach its conclusions on the basis of its own merits. In this specific case, information was available in the investigation file of the current investigation which was found to be reasonable and was therefore used.

• (211) Second, the target profit level on sales of the like product in the Union market should be the one that could be reasonably achieved under normal conditions of competition by an industry of this type in the sector, namely in the absence of subsidised imports. Given that during the period considered and even before that the subsidised imports were present in substantial quantities, it could not be accepted that there were normal conditions of competition. The profit level of 12 % was obtained in the absence of substantial presence of Turkish imports in the Union market and thus considered as reasonable target profit in the circumstance of the present case at this stage.

• (212) Third, the Danish trout industry was considered sufficiently representative for the Union market as Denmark was one of the main trout producing countries in the Union. In the absence of other available information at this stage it was used for the purpose of the determination of the target profit level.

• (213) Finally, the claim that the general profit margin of food industry realised a much lower profit margin was not substantiated. The Commission considered that in any event, the profit margin realised by the Danish trout industry should take better into account the specificities of this industry and would thus be more appropriate. Indeed, the food industry consists of various sub categories pertaining to different market segments and which are subject to different market conditions which are not necessarily applicable to the trout industry.

• (214) For the reasons above, the Commission concluded at this stage that a target profit margin of 12 % of turnover was reasonable to use.

• (215) On this basis, the Commission calculated a non-injurious price of the like product for the Union industry by subtracting from the Union sales prices the actual profit margin achieved during the investigation period and replacing it by the profit margin of 12 %.

• (216) The Commission then determined the injury elimination level on the basis of a comparison of the weighted average import price of the sampled exporting producers in Turkey, as established for the price undercutting calculations, with the weighted average non-injurious price of the like product sold by the sampled Union producers on the Union market during the investigation period. Any difference resulting from this comparison was expressed as a percentage of the weighted average import CIF value.

• (217) The injury elimination level for ‘companies in Annex I’ and for ‘all other companies’ is defined in the same manner as the subsidy margin for these companies (see recitals 96 and 97).

2. Provisional measures

• (218) Provisional countervailing duties should be imposed on imports of rainbow trout (Oncorhynchus mykiss) live weighing 1,2 kg or less each, or fresh, chilled, frozen and/or smoked in the form of whole fish or with heads off or in the form of fillets originating in Turkey, in accordance with the lesser duty rule in Article 12(1) of the basic Regulation. The Commission compared the injury margins and the subsidy margins. The amount of the duties should be set at the level of the lower of the subsidy margins.

• (219) On the basis of the above, the provisional countervailing duty rates, expressed on the CIF Union border price, customs duty unpaid, should be as follows:

• (220) The above countervailing measures are established in the form of ad valorem duties, that is to say, in proportion to the value of the import.

• (221) The individual company countervailing duty rates specified in this Regulation were established on the basis of the findings of this investigation. Therefore, they reflected the situation found during this investigation with respect to these companies. These duty rates are exclusively applicable to imports of the product concerned originating in the country concerned and produced by the named legal entities.

• (222) Imports of product concerned produced by any other company not specifically mentioned in the operative part of this Regulation, including entities related to those specifically mentioned, should be subject to the duty rate applicable to ‘all other companies’. They should not be subject to any of the individual countervailing duty rates.

• (223) A company may request the application of these individual countervailing duty rates if it changes subsequently the name of its entity. The request must be addressed to the Commission ¹². The request must contain all the relevant information enabling to demonstrate that the change does not affect the right of the company to benefit from the duty rate which applies to it. If the change of name of the company does not affect its right to benefit from the duty rate which applies to it, a notice informing about the change of name will be published in the Official Journal of the European Union.

• (224) To minimise the risks of circumvention due to the difference in duty rates, special measures are needed to ensure the application of the individual countervailing duties. The companies with individual countervailing duties must present a valid commercial invoice to the customs authorities of the Member States. The invoice must conform to the requirements set out in Annex II. Imports not accompanied by that invoice should be subject to the countervailing duty applicable to ‘all other companies’.

• (225) To ensure a proper enforcement of the countervailing duties, the residual duty for all other companies should apply not only to the non-cooperating exporting producers in this investigation, but to the producers which did not have exports to the Union during the investigation period.

H. FINAL PROVISIONS

• (226) In the interests of sound administration, the Commission will invite the interested parties to submit written comments and/or to request a hearing with the Commission and/or the Hearing Officer in trade proceedings within a fixed deadline.

• (227) The findings concerning the imposition of provisional duties are provisional and may be amended at the definitive stage of the investigation,

HAS ADOPTED THIS REGULATION:

Article 1

• — live weighing 1,2 kg or less each, or

• — fresh, chilled, frozen and/or smoked:

• — in the form of whole fish (with heads on), whether or not gilled, whether or not gutted, weighing 1,2 kg or less each, or

• — with heads off, whether or not gilled, whether or not gutted, weighing 1 kg or less each, or

• — in the form of fillets weighing 400 g or less each,

currently falling within the CN codes ex 0301 91 90 , ex 0302 11 80 , ex 0303 14 90 , ex 0304 42 90 , ex 0304 82 90 and ex 0305 43 00 (TARIC codes 0301 91 90 11, 0302 11 80 11, 0303 14 90 11, 0304 42 90 10, 0304 82 90 10 and 0305 43 00 11) and originating in Turkey.

Article 2

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 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, 29 October 2014.

For the Commission

The President

José Manuel BARROSO

ANNEX I

Cooperating Turkish exporting producers not sampled and not granted individual examination:

ANNEX II

The valid commercial invoice referred to in Article 1(4) must be issued showing the following:

• 1. The name and function of the official of the entity issuing the commercial invoice.

• 1. The following declaration:

‘I, the undersigned, certify that the rainbow trout sold for export to the European Union covered by this invoice was manufactured by (company name and address) (TARIC additional code) in Turkey. I declare that the information provided in this invoice is complete and correct.’

• 1. Date and signature of the official of the entity issuing the commercial invoice.