Commission Implementing Regulation (EU) 2018/1570 of 18 October 2018 terminating the proceedings concerning imports of biodiesel originating in Argentina and Indonesia and repealing Implementing Regulation (EU) No 1194/2013

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 14(1) thereof,

Having regard to Regulation (EU) 2015/476 of the European Parliament and of the Council of 11 March 2015 on the measures that the Union may take following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and anti-subsidy matters (2) (‘the WTO enabling Regulation’) and in particular Articles 1 and 2 thereof,

Whereas:

(1) On 28 May 2013, the Commission imposed by Regulation (EU) No 490/2013 a provisional anti-dumping duty on imports of biodiesel originating in Argentina and Indonesia (‘the provisional Regulation’) (3).

(2) On 19 November 2013, the Council imposed by Implementing Regulation (EU) No 1194/2013 a definitive anti-dumping duty on imports of biodiesel originating in Argentina and Indonesia (‘the definitive Regulation’) (4).

(3) On 15 September 2016, the General Court of the European Union (‘the General Court’) delivered judgments in cases T-80/14, T-111/14 to T-121/14 (5) and T-139/14 (6) (‘the judgments’) annulling Articles 1 and 2 of the definitive Regulation to the extent that they apply to the applicants in those cases (‘the exporting producers concerned’) (7).

(4) The Council of the European Union had initially appealed the judgments. However, following the Council's decision to withdraw its appeals, the cases were removed from the European Court of Justice's Register on 2 and 5 March 2018 (8). Consequently, the judgments became definitive and binding as from the date of their delivery.

(5) The General Court held that the institutions failed to establish to the requisite legal standard that there was appreciable distortion of the prices of the main raw materials used for the production of biodiesel in Argentina and Indonesia as a result of a Differential Export Tax system that applied different tax rates on raw materials and on biodiesel. It ruled that the institutions should not have taken the view that the price of the raw materials was not reasonably reflected in the records of the Argentinian and Indonesian exporting producers and should not have disregarded those records when constructing a normal value for biodiesel produced in Argentina and Indonesia.

(6) On 26 October 2016 the WTO Dispute Settlement Body (DSB) adopted the panel report, as modified by the Appellate Body report (‘the Argentina Reports’) (9), in the European Union — Anti-Dumping Measures on Biodiesel from Argentina dispute (DS473).

(7) On 28 February 2018, the DSB also adopted the panel report in the European Union — Anti-Dumping Measures on Biodiesel from Indonesia dispute (DS480) (‘the Indonesia Report’) (10). Both Indonesia and the EU did not appeal that report.

(10) The Panel recommended that the DSB request the EU to bring its measures into conformity with the ADA and the GATT 1994.

(11) Following the Argentina Reports, the Commission had initiated a review (11) under Article 1(3) of Regulation (EU) 2015/476 of the European Parliament and of the Council (12) (‘the review’). At the initiation of the review, the Commission announced that it considered it appropriate to examine the consequences of the findings of the Argentina Reports also for the measures imposed on biodiesel from Indonesia, as the legal interpretations contained in the Argentina Reports appeared to be also relevant for the investigation concerning Indonesia.

(12) However, during the review, the Commission received a number of comments from interested parties concerning, in particular, the applicability of the interpretation of the Argentina Reports to the measures on biodiesel from Indonesia. The Commission considered that the analysis of the comments with regard to Indonesia required more time and decided not to include an examination of Indonesia in the amending Regulation, but instead to keep the review open as far as it concerned Indonesia.

(13) On 18 September 2017, the Commission adopted Implementing Regulation (EU) 2017/1578 amending the definitive Regulation (‘the amending Regulation’) in so far as Argentinian exporting producers were concerned (13).

(14) The annulment by the General Court of the operative parts of the definitive Regulation with regard to the exporting producers concerned also affects the validity of the amending Regulation. As the amending Regulation amended the Regulation of which the operative parts have been annulled, it has itself also become void and not applicable in respect of the exporting producers concerned.

(15) On 28 May 2018 a Notice (14) was published re-opening the original investigation concerning imports of biodiesel originating in Argentina and Indonesia that led to the adoption of the definitive Regulation (‘the Notice’). At the same time the pending review with regard to Indonesia was closed.

(16) According to the case-law of the Court, the procedure for replacing an annulled act may be resumed at the very point at which the illegality occurred. The Union's institutions, in so complying with the judgments, have the possibility to remedy the aspects of the definitive Regulation which led to its annulment in respect of the exporting producers concerned (15).

(17) The Commission should observe not only the operative part of the judgments but also the grounds which led to those judgments and constituted its essential basis, inasmuch as they were necessary to determine the exact meaning of what was stated in the operative part. Other findings reached in the definitive Regulation which were not contested within the time-limits for a challenge or which were contested but rejected by the General Court's judgments, and therefore did not lead to the annulment of the definitive Regulation, remain valid (16).

(18) In order to comply with its obligations, the Commission decided to resume the present anti-dumping proceeding at the very point at which the illegality occurred and thus to re-examine the methodology used for constructing a normal value.

(19) The Notice included in its scope the reasoning of the General Court's judgments for the exporting producers concerned and the possibility to extend the findings to all exporting producers from Argentina and Indonesia. Furthermore, it took into account the findings of the WTO panels and Appellate Body, both in respect of Argentina and Indonesia, in order to bring the measures found WTO inconsistent into full compliance with the WTO Agreements, in accordance with Article 19.1 of the Dispute Settlement Understanding.

(20) In the Notice the Commission invited the exporting producers concerned and the Union industry to make their views known in writing and to request a hearing within the time limit set out in the Notice.

(21) All parties who so requested within that time limit, and who demonstrated that there were particular reasons why they should be heard, were granted the opportunity to be heard.

(22) Representations were received from the European Biodiesel Board (EBB), five exporting producers in Indonesia and the authorities of Indonesia.

(23) The Commission has the possibility to remedy the aspects of the definitive Regulation which led to its annulment, while leaving unchanged the parts of the assessment which are not affected by the judgments (17).

(24) As indicated in the Notice, in addition the Commission reassessed the definitive findings of the original investigation by taking into account the findings of the WTO panels and Appellate Body both in respect of Argentina and Indonesia. The Commission decided to extend the findings to all exporting producers from Argentina and Indonesia. That reassessment was based on information collected in the original investigation and the review, as well as on information received by interested parties after the publication of the Notice.

(25) One Indonesian exporting producer, Wilmar, has claimed, before and after disclosure, that there is no legal basis to reopen the investigation with regard to Wilmar as the General Court had annulled the definitive Regulation in its entirety for that company. However, Article 266 TFEU provides that an institution whose act has been declared void must take the necessary measures to comply with the Court's judgment. In addition, the EU must bring the anti-dumping measures imposed on imports of biodiesel from Indonesia into conformity with the recommendations and rulings contained in the WTO Reports. In order to examine what measures should be taken to comply with the Court and WTO rulings, it was necessary to re-open the investigation at the time when the illegality was found for both countries and for all exporting producers concerned. Whether a measure is annulled in whole or in part is irrelevant for the purposes of determining whether the Commission must in consequence reinvestigate all the aspects of the investigation which preceded the annulled measure. The Commission therefore rejected this claim.

(26) The original investigation of dumping and injury covered the period from 1 July 2011 to 30 June 2012 (‘investigation period’). With respect to the parameters relevant in the context of the injury assessment, data covering the period from 1 January 2009 to the end of the investigation period were analysed (‘period considered’).

(27) The product concerned is fatty-acid mono-alkyl esters and/or paraffinic gasoils obtained from synthesis and/or hydro-treatment, of non-fossil origin, in pure form or as included in a blend originating in Argentina and Indonesia, currently falling within CN codes ex 1516 20 98, ex 1518 00 91, ex 1518 00 95, ex 1518 00 99, ex 2710 19 43, ex 2710 19 46, ex 2710 19 47, 2710 20 11, 2710 20 15, 2710 20 17, ex 3824 99 92, 3826 00 10 and ex 3826 00 90 (‘the product concerned’, commonly referred to as ‘biodiesel’).

(28) Neither the Court's judgments nor the Reports affect the findings set out in recitals 16 to 27 of the definitive Regulation concerning the product concerned and the like product.

(29) The Commission reassessed the findings of the original investigation on the issues of cost adjustment, profit cap and double counting.

(30) The General Court judgments and the WTO findings mentioned in recital 8 all relate to the cost-adjustment done by the EU institutions in the definitive Regulation.

(31) As mentioned in recital 28 of the definitive Regulation, the Commission had determined that the normal value had to be constructed as the domestic sales were considered not to be in the ordinary course of trade. This finding has not been contested and remains valid. No interested party contested this finding in the course of this review either.

(32) In recitals 29 to 34 of the definitive Regulation, the Commission established that the difference in the export taxes imposed by Indonesia on the main raw material input (crude palm oil in Indonesia and soybean oil and soya beans in Argentina) and those imposed on the finished product (biodiesel) depressed domestic prices in Indonesia and Argentina, and hence this should be taken into account in the construction of the normal value.

(33) As a result, when constructing the normal value, the Commission replaced the costs of the main raw material reported in the records of the exporting producers with reference prices published by the relevant authorities of the countries concerned.

(34) The Commission further based its conclusions in the original investigation on the interpretation that Article 2.2.1.1 of the ADA allows the investigating authority to decline to use the records of the exporting producers if it determines that they are either (i) inconsistent with GAAP or (ii) do not reasonably reflect the costs associated with the production and sale of the product under consideration (recitals 42 and 72 of the definitive Regulation).

(35) The Panel and Appellate Body, in the Reports for both Argentina and Indonesia, are of the opinion that the Commission did not provide a legally sufficient basis under Article 2.2.1.1 for concluding that the Indonesian and Argentinian producers' records did not reasonably reflect the costs associated with the production and sale of biodiesel, or for disregarding the relevant costs in those records when constructing the normal value of biodiesel.

(36) Following the Argentina Reports, the Commission had recalculated the normal value for exporting producers in Argentina using the methodology explained in recitals 40 to 49 for Argentina of the provisional Regulation (18). As explained above in recital 11 and 12, the Commission had initially also recalculated the normal value for exporting producers in Indonesia, using the methodology explained in recitals 60 to 65 for Indonesia of the provisional Regulation (18). The Commission now re-applied this methodology for both countries.

(37) In its submissions made after the re-opening of this case, EBB claimed that the Reports do not preclude recourse to a cost adjustment to the raw material costs when constructing the normal value, provided it is properly explained. The same claim was made during the Review following the Argentina Reports, and rejected by the Commission as accepting it would not be in line with the findings of the Reports, as explained in recitals 43 to 53 of the amending Regulation. As that explanation remains valid after the Indonesia Report, the Commission continued to reject this claim.

(38) For reasons explained in recitals 44 and 64 of the provisional Regulation, the domestic sales in either country were not considered as being made in the ordinary course of trade and the normal value of the like product had to be constructed under Article 2(3) and (6) of the basic Regulation. This was done by adding to the adjusted production costs during the investigation period, the selling, general and administrative expenses incurred (‘SG&A’) and a reasonable profit margin.

(39) As explained in recitals 46 and 65 of the provisional Regulation, the Commission considered that the amount for profit could not be based on the actual data of the sampled companies in Indonesia. Therefore, the amount for profit used when constructing the normal value was determined under Article 2(6)(c) of the basic Regulation on the basis of the reasonable amount of profit that a young and innovative capital intensive industry of this type under normal conditions of competition in a free and open market could achieve, that is 15 % based on turnover.

(40) In the Argentina and Indonesia WTO cases, the determination of an amount of profit of 15 % was challenged by both countries who claimed that the amount for profit was not based on a ‘reasonable method’ as required by Article 2.2.2(iii) ADA. The WTO adjudicating bodies found in both cases that the EU had not acted inconsistently with the ADA in this respect. Therefore, the amount for profit used for the construction of the normal value remains 15 %.

(41) One exporting producer from Indonesia, PT Cermerlang Energi Perkasa, claimed in its submission that the Commission should base its calculation on the data of the sampled producers, or in any case not automatically resort to Article 2(6)(c) of the basic Regulation. Following disclosure, it repeated the claim. However, as explained in recital 40, the WTO adjudicating bodies found that recourse by the Commission to and the application of this Article was not inconsistent with WTO rules. The Commission therefore rejected this claim.

(42) Although the WTO panel had upheld the EU's determination of the amount of profit under Article 2.2.2(iii) ADA, it did find in the Indonesia Report that, when an authority determines the profit on the basis of any other reasonable method under Article 2(6)(c) of the basic Regulation, the ADA requires it to ensure that that profit will not exceed the profit normally realised by other exporters of the same general category of products in the country. In the panel's view, the EU had failed to establish such a profit cap.

(43) In order to establish the profit cap required under Article 2.2.2(iii) ADA, it needed to be determined which companies produce products that would qualify as falling within ‘the same general category’ as biodiesel.

(44) In the Indonesia Report, the Panel noted in par. 7.62 that ‘Article 2.2.2(iii) ADA does not specify a particular requirement on an investigating authority as to how to define what products fall within the same general category of products, for purposes of determining ‘the profit normally realized’. We agree with the European Union that there is no obligation to construe the scope of products in the same general category broadly’. In par. 7.63 it added ‘in our view, a reasonable and objective authority may conclude that the same general category of products is a narrower category’.

(45) Based on the findings of the Indonesia report, the Commission re-examined the data available to it that can be used to determine a profit cap, both for Argentina and Indonesia. It considered that there are two sets of data available to it that would fall in the same general category of products.

(46) The first set of data was supplied by the sampled companies during the original investigation. Article 2.2.2 ADA provides that the amount for profit for ‘the exporter or producer under investigation’ is capped under Article 2.2.2(iii) by the amount of profit normally realized by ‘other exporters or producers on sales of products of the same general category’. The narrowest interpretation of the same general category of products under this article would be limited to the exact same product, i.e. biodiesel. The data needed to calculate the profit cap based on the profits realised by producers of biodiesel in Indonesia and Argentina are readily available to the Commission, as they were supplied to the Commission by the sampled companies during the original investigation.

(47) The fact that the profits actually realized by the sampled companies were not used to establish a profit margin for each of these producers under Article 2(6) of the basic Regulation does not preclude the Commission from using this data to establish the profit cap under Article 2(6)(c). This follows from the wording of the Panel in the Indonesia Report in par. 7.65 where the Panel does not agree with the argument that ‘profit normally realized’ in Article 2.2.2(iii) ADA means that an investigator may disregard the profit realized on sales that are considered not compatible with normal commercial practice. One Indonesian exporting producer, PT Cermerlang Energi Perkasa, also claimed in its submission that based on the Indonesia Report, when calculating the profit cap, the Commission is not allowed to ignore the profit relating to the domestic sales of biodiesel in Indonesia on the basis that the latter are not considered as being made in the ordinary course of trade.