Commission Implementing Regulation (EU) 2019/576 of 10 April 2019 imposing a provisional anti-dumping duty on imports of mixtures of urea and ammonium nitrate originating in Russia, Trinidad and Tobago and the United States of America

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) and in particular Article 7 thereof,

After consulting the Member States,

Whereas:

(1) On 13 August 2018, the European Commission initiated an anti-dumping investigation with regard to imports into the Union of mixtures of urea and ammonium nitrate originating in Russia, Trinidad and Tobago and the United States of America ‘the countries concerned’) on the basis of Article 5 of Regulation (EU) 2016/1036 of the European Parliament and of the Council (‘the basic Regulation’). The Notice of Initiation (‘NoI’) was published in the Official Journal of the European Union (2).

(2) The Commission initiated the investigation following a complaint lodged on 29 June 2018 by Fertilizers Europe (‘the complainant’) on behalf of producers representing more than 50 % of the total Union production of mixtures of urea and ammonium nitrate (‘UAN’). The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3) The Commission made imports of the product concerned subject to registration under Article 14(5a) of the basic Regulation by Commission Implementing Regulation (EU) 2019/455 of 20 March 2019 (3) (‘the registration Regulation’).

(4) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In addition, the Commission specifically informed the complainant, known Union producers, the known exporting producers and the authorities of the Russian Federation (‘Russia’), Trinidad and Tobago (‘TT’), and the United States of America (‘US’), known importers and associations representing the interests of users and other associations known to be concerned about the initiation of the investigation and invited them to participate.

(5) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

(6) The co-operating exporting producers in Russia and US claimed that the complainants had no standing and that there was no sufficient evidence of dumping and injury to initiate the investigation.

(7) The Commission rejected both claims. The Commission cross-checked and confirmed the conclusions contained in the Note to the file on standing available for inspection by interested parties that the complaint was lodged on behalf of producers representing more than 50 % of the total Union production of UAN. Moreover, the Commission carried out an examination of the complaint in accordance with Article 5 of the basic Regulation, coming to the conclusion that the requirements for initiation of an investigation were met, namely that the adequacy and accuracy of the evidence presented by the complainant was sufficient. According to Article 5(2) of the basic Regulation, a complaint shall contain such information as is reasonably available to the complainant on the factors indicated therein. On the basis of the evidence provided, as confirmed by the Commission's own assessment, that requirement was satisfied.

(8) In its Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

(9) In the Notice of Initiation, the Commission stated that it had decided to limit to a reasonable number the Union producers that would be investigated by applying sampling and that it had provisionally selected a sample of Union producers. The Commission selected the provisional sample on the basis of the reported production and Union sales volume, by the Union producers, in the context of the pre-initiation standing assessment analysis. The provisional sample thus established consisted of three Union producers that accounted for around 70 % of Union production and sales according to the information available. Details of this provisional sample were made available in the file for inspection by interested parties and the Commission invited interested parties to comment.

(10) Shortly after initiation, one of the provisionally sampled producers, Yara Sluiskil B.V., informed the Commission that it did not want to cooperate. Moreover, two Union producers sent replies in response to the pre-initiation standing assessment after the publication of the Notice of Initiation. The Commission took into account those Union producers' data on production and sales in order to establish the final sample.

(11) Several interested parties submitted further comments with regard to the provisional sample. The Commission considered the comments and explained in the note added to the open file on 5 September 2018 why those comments did not have an impact on the final sample selection.

(12) The Commission's approach to apply sampling, pursuant to Article 17 of the basic anti-dumping Regulation, on the basis of volume of production and sales of the like product in the Union during the investigation period, was consequently maintained.

(13) Given that Yara Sluiskil B.V. did not wish to cooperate, the Commission decided to replace it with OCI Nitrogen. The final sample of Union producers, comprising AB Achema, Grupa Azoty Zaklady Azotowe Pulawy S.A. and OCI Nitrogen B.V., accounted for more than 50 % of the total Union production and sales volumes of the like product. The sample is representative of the Union industry.

(14) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

(15) Several unrelated importers made themselves known as interested parties, although only three provided the requested information and agreed to be included in the sample. In view of the low number of replies received, the Commission decided that sampling was not necessary. All three importers were invited to complete a questionnaire.

(16) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all known exporting producers in Russia, TT and US to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the Russian Federation to the European Union, the Mission of Trinidad and Tobago to the European Union, and the Mission of the United States of America to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(17) Two exporting producers in Russia, one exporting producer in TT, and one exporting producer in US provided the requested information and agreed to be included in the sample.

(18) In view of the low number of responses from exporting producers, the Commission decided that sampling was not necessary.

(19) All known exporting producers concerned, and the authorities of the countries concerned, were informed on the selection of the companies to be investigated by note of 21 August 2018. No comments were received.

(20) The Commission sent questionnaires to the three sampled Union producers, the complainant, the three unrelated importers which had made themselves known, the four exporting producers in the countries concerned and all users' associations and economic operators which made themselves known and requested a questionnaire.

(21) In the complaint, the complainant provided sufficient evidence of raw material distortions in Russia regarding the product concerned. Therefore, as announced in the Notice of Initiation, the investigation covers these raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation with regard to Russia. For this reason, the Commission sent an additional questionnaire to the Government of Russia (‘GOR’).

(22) Questionnaire replies were received from the three sampled Union producers, Fertilizers Europe, three unrelated importers, the four exporting producers in the countries concerned and seventeen different economic operators, including some representing the interests of users.

(23) A questionnaire reply was also received from the GOR. However, the GOR's reply was significantly incomplete and lacked the basic information needed by the Commission to examine the allegations of raw material distortions in Russia and to assess whether a duty lower than the margin of dumping would be sufficient to remove injury. The GOR did not reply to the Commission's request with regard to an on-spot verification of the data provided in the questionnaire reply.

(24) The Commission informed the GOR by two notes of 22 October and 19 December 2018 of the deficiencies of the response to the questionnaire and the lack of reply to the Commission's request to verify the provided data. The Commission indicated that by not providing the necessary information, it would make its findings with regard to the existence of raw material distortions in Russia on the basis of the facts available. The GOR failed to provide the necessary information in response to those notes.

(26) The investigation of dumping and injury covered the period from 1 July 2017 to 30 June 2018 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2015 to the end of the investigation period (‘the period considered’).

(27) The product concerned is mixtures of urea and ammonium nitrate in aqueous or ammoniacal solution originating in Russia, TT, and the US, currently falling under CN code 3102 80 00 (‘the product concerned’ or ‘UAN’).

(28) UAN is a liquid nitrogen fertilizer.

(29) The nitrogen content is the most significant feature of the product concerned. It can vary between 28 % and 32 % of UAN. Such variation is usually obtained by adding more or less water to the solution. Most of the imported solutions tend to have a nitrogen content of 32 %. UAN with a nitrogen content of 32 % is more concentrated than UAN with 30 % or lower, and therefore cheaper to ship. However, whatever their nitrogen content, all solutions of urea and ammonium nitrate are considered to have the same basic physical and chemical characteristics and therefore constitute a single product

(30) UAN is a pure commodity product, and its quality and basic physical characteristics are identical whatever the country of origin. Union producers offer UAN with a nitrogen content ranging from 28 to 32 %.

(32) The Commission decided at this stage that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

(33) One Union producer highlighted that adding other substances (‘additives’, notably ammonium sulphate but potentially also other substances) to UAN still entailed the resulting mixture to be UAN and fall under CN code 3102 80 00. The investigation showed that it is a common practice to add additives in small quantities and that the market still considers the resulting product to be UAN.

(34) Therefore, the Commission decided at this stage to clarify that the product scope of the investigation includes mixtures of urea and ammonium nitrate in aqueous or ammoniacal solution that may have additives unless the additives are of the kind and of the quantity to make the mixture be classified under a different CN code.

(35) According to the findings of the investigation, there were three groups of companies in Russia that produced UAN in the IP: Acron Group, Eurochem Group and Kuibyshev Azot. Of those, the two first groups exported UAN to the Union during the IP. Both groups cooperated in the investigation.

(36) In the case of Acron Group, there was one producer of UAN in the group operating in Russia. The domestic sales of the like product in the IP were made directly to unrelated customers and also indirectly via one related domestic trader. Export sales to the Union in the IP were made directly to independent customers or indirectly through either a related exporter located in Switzerland or a related importer located in France.

(37) In the case of Eurochem Group, there were two producers of UAN in the group operating in Russia. The domestic sales of the like product in the IP were all made via one of the two related domestic traders. Export sales to the Union in the IP were made solely through a related exporter located in Switzerland and subsequently via a related importer located in Germany. The German related importer was then further selling either directly to unrelated customers or via one of three related traders located in Bulgaria, France and Spain. The latter company still made some part of its sales via another related trader also located in Spain.

(38) To calculate the normal value, the Commission first examined whether the total volume of domestic sales for each cooperating exporting producer was representative, in accordance with Article 2(2) of the basic Regulation. The investigation found that Acron was producing, selling domestically and exporting to the Union only UAN with nitrogen content of 32 % in the IP. The domestic sales are considered to be representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represent at least 5 % of its total export sales volume of the product concerned to the Union during the investigation period.

(39) On this basis, the sales of Acron of the like product on the domestic market were found not to be representative.

(40) As the like product was not sold in representative quantities on the domestic market, the Commission constructed the normal value for Acron in accordance with Article 2(3) and Article 2(6) of the basic Regulation.

(42) The costs of manufacturing used for construction of the normal value were adjusted as explained in recitals (52) to (55) and (59) to (60).

(43) In case of Eurochem, on the basis of the representativity test described in recital (38), it was found that the like product was sold in representative quantities on the domestic market. The investigation found that in the IP Eurochem was producing, selling domestically and exporting to the Union only one product type, UAN with nitrogen content of 32 %.Therefore, the Commission did not have to examine whether the quantities of domestic sales for each product type that is identical or comparable with a product type sold for export to the Union were representative.

(44) The Commission next defined the proportion of profitable sales to independent customers on the domestic market in order to decide whether to use actual domestic sales for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(46) In this case, the normal value is the weighted average of the prices of all domestic sales of that product type during the IP.

(48) The analysis of domestic sales showed that less than 15 % of all domestic sales were profitable and that the weighted average sales price was lower than the cost of production. Accordingly, the normal value was calculated as a weighted average of the profitable sales only.

(49) The costs of manufacturing, being part of the cost of production used for the ordinary course of trade test (‘OCOT’) described in recitals (45) to (48), were adjusted as explained in the recitals (52) to (55) and (59) to (60).

(50) Eurochem claimed that in the calculation of the net domestic sales price an additional allowance should be applied for the SG&A cost of the domestic related trader and for a part of the SG&A costs of the two producers within the same group. It claimed that these costs resulted from a different level of trade of the domestic sales in comparison with the export sales, namely from the fact that, through its related traders, the majority of domestic sales is sold directly to farmers.

(51) However, such an allowance would not reflect properly the net domestic sales price where normally the SG&A costs of related domestic traders and those of producers are not deducted so that it reflects properly the price paid or payable, at arm's length, in the domestic market. The claim was therefore rejected.

(52) Natural gas is the main raw material in the manufacturing process of UAN and represents a significant proportion, more than 50 % (4), of the total cost of production. Following the claim by the complainant and the findings of previous investigations concerning fertilizers originating in Russia, the Commission examined whether the costs of natural gas associated with the production of the product concerned were reasonably reflected in the records of the Russian exporting producers, in accordance with Article 2(5) of the basic Regulation.

(53) The investigation found that natural gas prices in Russia are regulated by the State via federal laws and are based on policy objectives. Natural gas prices in Russia do not reflect normal market conditions. Under normal market conditions, prices are mostly set by production costs and profit expectations. In contrast, in Russia prices set by the State are directly applicable to Gazprom, the Russian state-owned gas provider. Gazprom is the biggest gas provider in the country with a market share above 50 % and therefore acts as price-setter. The investigation confirmed this price-setting behaviour, where all other gas providers sell at similarly low prices. In addition, Gazprom is the owner of the pipelines through which all gas, including the one supplied by the independent producers, is transported at tariffs which are also regulated.

(56) Finally, the GOR and the Russian cooperating exporting producers invoked a recent ruling of the WTO panel in the dispute between Russia and Ukraine in ‘DS493 - Ukraine - Anti-Dumping Measures on Ammonium Nitrate’ which rejected the gas adjustment made by Ukraine.

(57) It should be noted that the WTO panel report in DS493 concerns a dispute between Russia and Ukraine whereby Russia challenged the determinations reached by Ukraine. The Union was not involved in that case. As noted by the Panel in that case, the question of whether the records of the exporters or producers reasonably reflect the costs associated with production and sale of the product under consideration ‘is a question which needs to be assessed on a case-by-case basis, taking into account the evidence before the investigating authority, and the determination that it makes’. (11) While this in itself already shows the irrelevance of the panel report for the current investigation, the Commission further notes that the panel report is currently under appeal. Therefore, the Commission rejects the comment relating to the panel report.

(58) For all those reasons, the Commission rejected those claims and considered the gas adjustment warranted under Article 2(5) of the basic Regulation as confirmed by the Court of Justice (12).