Commission Implementing Regulation (EU) 2019/1344 of 12 August 2019 imposing a provisional countervailing duty on imports of biodiesel originating in Indonesia

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (1), and in particular Article 12 thereof,

After consulting the Member States,

Whereas:

(1) On 6 December 2018, the European Commission (the ‘Commission’) initiated an anti-subsidy investigation with regard to imports into the European Union (the ‘Union’) of biodiesel originating in Indonesia (the ‘country concerned’) pursuant to Article 10 of Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not member of the European Union (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union (2) (the ‘Notice of Initiation’).

(2) The Commission initiated the investigation following a complaint lodged on 22 October 2018 by the European Biodiesel Board (‘EBB’ or the ‘complainant’) on behalf of producers representing 32 % of total Union production. Producers representing 63 % of the total Union production of biodiesel supported the complaint.

(3) Prior to the initiation of the anti-subsidy investigation, the Commission notified the Government of Indonesia (‘GOI’) that it had received a properly documented complaint, and invited the GOI for consultations in accordance with Article 10(7) of the basic Regulation. The GOI accepted the offer for consultations, which were held on 3 December 2018. During the consultations as well as subsequent exchanges with the GOI, due note was taken of the comments submitted by the GOI. However, no mutually agreed solution could be reached.

(5) The GOI similarly argued at the later stage of the investigation that the complaint did not include sufficient evidence of subsidisation to warrant an opening of procedure.

(6) With reference to the various subsidy schemes identified in the complaint, Wilmar preliminarily alleged that EBB failed to provide sufficient evidence of the existence of any subsidy and that therefore the complaint is unfounded.

(7) With particular reference to the export tax and levy imposed by the GOI on crude palm oil (‘CPO’), Wilmar submitted that the complainant failed to provide sufficient evidence of the required entrustment or direction of Indonesian CPO producers by the GOI.

(8) Furthermore, Wilmar submitted that none of the subsidy schemes identified in the complaint are export subsidies. In addition, according to Wilmar, the alleged subsidy schemes did not induce Indonesian biodiesel producers to sell biodiesel for export, rather they seek to reach out to the domestic Indonesian blending targets of biodiesel with mineral diesel (3).

(9) Finally, Wilmar submitted that the complaint failed to provide sufficient evidence of threat of material injury caused by Indonesian biodiesel imports into the Union and that, in any event, imports of Indonesian biodiesel did not create any such injury.

(10) Concerning the evidence of injurious subsidisation at initiation stage, the Commission made the open version of the complaint available and provided its analysis on the evidence available at that stage in the memorandum on sufficiency of evidence, on the basis of which the investigation was initiated. Therefore, contrary to what Wilmar alleged, the Commission considered and substantiated in the memorandum that there was sufficient evidence tending to show the existence of injurious subsidisation.

(11) On 19 June 2019 the Commission received a submission from Wilmar arguing inter alia that the Union industry was not under a threat of material injury from imports of Indonesian biodiesel.

(12) However, the Notice of Initiation specified that any information for the stage of provisional findings should be submitted within 70 days from the date of its publication. This deadline expired on 14 February 2019. Therefore, the part of the submission dealing with threat of injury could not be addressed at provisional stage and will be addressed instead at the definitive stage of the investigation. Moreover, section 5.2 of the Notice of Initiation specified that any comment on the complaint, including matters pertaining to injury and causality should be submitted within 37 days from the date of its publication. Interested parties having filed written submissions or provided any data after 14 February 2019 are invited to indicate together with their comments on the provisional measures whether they still consider those submissions relevant for the current investigation, indicating how such information should be taken into account for the definitive stage.

(13) The investigation of subsidisation and injury covered the period from 1 October 2017 to 30 September 2018 (the ‘investigation period’ or the ‘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’). Where appropriate, the Commission also examined post-IP data.

(14) In the Notice of Initiation, interested parties were invited to contact the Commission in order to participate in the investigation. In addition, the Commission specifically informed the complainant, other known Union producers, the known exporting producers and the GOI, the known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(15) 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.

(16) In its Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 27 of the basic Regulation.

(17) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of the highest representative quantity of production, which could reasonably be investigated within the time available.

(18) The provisional sample consisted of three Union producers and represented a broad geographical spread. The sampled Union producers accounted for more than 18 % of the total production volume of the Union industry. The Commission invited interested parties to comment on the provisional sample.

(19) The Commission received comments on the provisional sample from Wilmar. Wilmar commented on the size of the sample, saying that three producers was not large enough a sample, and requested that another company group consisting of two producers, Biopetrol, be added to the sample of Union producers.

(20) The Commission considered that the sample with the three largest producers of biodiesel in the Union is representative (including geographically) and a larger sample could not be reasonably investigated within the time available. Therefore, the claim was rejected.

(21) 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.

(22) Two unrelated importers provided the requested information and agreed to be included in the sample. One of them imported negligible amounts and did not resell it during the IP, so the Commission only investigated the other unrelated importer. In view of the low number of unrelated importers that cooperated the Commission decided that sampling was not necessary.

(23) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in Indonesia to provide the information specified in the Notice of Initiation. In addition, the Commission asked the authorities of Indonesia to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(24) Four exporting producers in the country concerned provided the requested information and agreed to be included in the sample. The responding companies or groups of companies accounted for 100 % of exports to the Union during the investigation period. Due to the limited number of exporting producers and the high level of cooperation, the Commission decided not to carry out sampling but rather to investigate all Indonesian exporting producers.

(25) The Commission sent questionnaires to the GOI, to the four exporting producers, to the three sampled Union producers, and to two unrelated importers of biodiesel.

(26) The Commission received questionnaire replies from the GOI, all groups of exporting producers, all sampled Union producers and both unrelated importers.

(27) The Commission sought and verified all the information deemed necessary for a determination of subsidy, resulting injury (including threat of injury) and Union interest. A verification visit took place at the premises of the GOI, the Ministry of Trade of the Republic of Indonesia in Jakarta, during which officials from other relevant ministries also participated.

(30) The Commission therefore issued an Article 28 letter to both the GOI and Wilmar Group, limited to the specific information they did not provide. Hence, the Commission used facts available with respect to the missing information.

(31) The product concerned is fatty-acid mono-alkyl esters and/or paraffinic gasoils obtained from synthesis and/or hydro-treatment, of non-fossil origin, commonly known as ‘biodiesel’, in pure form or as included in a blend, originating in Indonesia (the ‘product concerned’).

(32) The investigation indicated that biodiesel produced in Indonesia is primarily palm oil methyl ester (‘PME’), which is derived from palm oil. Biodiesel produced in the Union is instead mainly rapeseed methyl ester (‘RME’) but made also from other feedstock, including waste oils as well as virgin oils.

(33) PME and RME both belong to the category of fatty-acid mono-alkyl esters. The term ‘ester’ refers to the transesterification of vegetable oils, namely, the mingling of the oil with alcohol, which produces biodiesel and, as a by-product, glycerine. The term ‘methyl’ refers to methanol, the most commonly used alcohol in the process. Fatty-acid mono-alkyl esters are also known as ‘fatty-acid methyl esters’ or FAME.

(34) Although PME and RME are both fatty-acid mono-alkyl esters, they also have partially different physical and chemical properties, and notably they have a different cold filter plugging point (‘CFPP’). The CFPP is the temperature at which a fuel will cause a fuel filter to plug due to the crystallization or jellification of some fuel components. For RME, the CFPP can be – 14 °C while for PME it is about 13 °C. The market often describes biodiesel at a particular CFPP as FAMEX, such as FAME0 or FAME5.

(35) The product concerned is currently falling under CN codes ex 1516 20 98 (TARIC codes 1516209821, 1516209829 and 1516209830), ex 1518 00 91 (TARIC codes 1518009121, 1518009129 and 1518009130), ex 1518 00 95 (TARIC code 1518009510), ex 1518 00 99 (TARIC codes 1518009921, 1518009929 and 1518009930), ex 2710 19 43 (TARIC codes 2710194321, 2710194329 and 2710194330), ex 2710 19 46 (TARIC codes 2710194621, 2710194629 and 2710194630), ex 2710 19 47 (TARIC codes 2710194721, 2710194729 and 2710194730), 2710 20 11, 2710 20 15, 2710 20 17, ex 3824 99 92 (TARIC codes 3824999210, 3824999212 and 3824999220), 3826 00 10 and ex 3826 00 90 (TARIC codes 3826009011, 3826009019 and 3826009030).

(37) The Commission decided that, for the purpose of this investigation, those products are therefore like products within the meaning of Article 2(c) of the basic Regulation.

(39) The complainant claimed that the GOI supports the biodiesel industry by providing grants to the Indonesian biodiesel producers in the amount of the difference between the GOI's reference price for biodiesel and the price at which oil companies purchase biodiesel, namely the reference price for diesel oil.

(40) The investigation established that the ‘Biodiesel Subsidy Fund’, which is part of the Oil Palm Plantation Fund (‘OPPF’), was established in 2015 by Presidential Regulation No. 61/2015.

(41) Presidential Regulation 61/2015 entrusted an agency, the Oil Palm Plantation Fund Management Agency (the ‘Management Agency’) to collect export levies on the exportation of palm oil commodities by virtue of Minister of Finance Regulation No. 133/PMK.05/2015.

(42) The money collected by the customs authorities through the export levies on palm oil products constitutes the funds of the OPPF and the latter is formally controlled by the Management Agency.

(43) The higher in the value chain each specific product is, the higher the export levy: the export levy on CPO during the investigation period was set at 50 USD/tonne while on derivatives, including biodiesel, at 20 USD/tonne.

(44) By Presidential Regulations 24/2016 and 26/2016, the GOI clarified that the mandate of the Biodiesel Subsidy Fund includes the procurement and utilization of biodiesel on the domestic market. Particularly, the GOI stipulates that the OPPF shall be used to support purchases of biodiesel by entities appointed by governmental bodies.

(45) More precisely, Presidential Regulation 26/2016 stipulates in its Article 9(1) that ‘[t]he Director General of EBTKE shall appoint the Petrofuel Entity which shall carry out the procurement of biodiesel as meant in Article 4 in the framework of financing by the Fund Management Agency by observing the policy of the Steering Committee of the Fund Management Agency’ and in the following Article 9(8) that ‘[b]ased on the approval from the Minister as meant in paragraph (7), the Director General of EBTKE on behalf of the Minister shall appoint: a. the biodiesel producers which are going to participate in the procurement of biodiesel; and b. the allocation of volume of biodiesel for each biodiesel producer’. Moreover, the Steering Committee of the Management Agency is composed exclusively of officials of various ministries of the GOI.

(47) The OPPF envisages a specific payment mechanism, whereby Pertamina (and for some small volumes, AKR) pays biodiesel producers the diesel reference price (as opposed to the actual biodiesel price which, during the IP. would have been higher), whereas the difference between such diesel reference price and the biodiesel reference price is paid to the biodiesel producers out of the OPPF by the Management Agency.

(49) More precisely, each biodiesel producer – including all the exporting producers – invoices Pertamina (or AKR, as the case may be) the volume of biodiesel which the buyer is required to use under the blending obligation, and Pertamina (or AKR) pays to the producer the diesel reference price for that period. The investigation revealed that the vast majority of the sales by the biodiesel producers were made to Pertamina and a small portion to AKR. Moreover, the sales to AKR were fully identical to the ones made to Pertamina in terms of prices and all other conditions attached. Consequently, the Commission focused its analysis below on the sales to Pertamina.

(50) The producer of biodiesel, in order to obtain reimbursement of the price difference between the price paid by Pertamina and AKR (based on the diesel reference price) and the reference price for biodiesel, shall then send an additional invoice for the same volume to the Management Agency, enclosing a list of documents. Once the Management Agency has received the invoice, and after verification of the elements contained therein, the Management Agency shall pay to the relevant biodiesel producer the difference between the reference price for diesel (paid by Pertamina or AKR, as the case may be) and the reference price of biodiesel set for that period.

(51) In this investigation, the Commission examined whether the set of measures adopted by the GOI to support the Indonesian biodiesel industry through the payments by the Management Agency amount to a countervailable subsidy.

(52) In order to establish the existence of a countervailable subsidy, three elements must be present: (a) a financial contribution or income/price support; (b) a benefit, and (c) specificity (Article 3 of the basic Regulation).

(53) At the outset, the Commission observed that during the investigation period all the exporting producers chose to participate in the procurement of biodiesel and thus were under the obligation to sell biodiesel to Pertamina and AKR. The Commission also observed that during the investigation period the reference price for biodiesel was higher than the reference price for mineral diesel. As a result, during the investigation period all the exporting producers received payments from the OPPF.

(54) Article 3(1)(a)(i) of the basic Regulation states that there is a financial contribution by the government where the government practice involves a direct transfer of funds. In line with the provision of the WTO Agreement on Subsidies and Countervailing Measures (the ‘SCM Agreement’), Article 2 of the basic Regulation stipulates that ‘government’ means a government or any public body within the territory of the country of origin or export.

(55) The WTO Appellate Body in the Report on the US-Anti-Dumping and Countervailing Duties (China) found that the term ‘public body’ means an entity that ‘possesses, exercises or is vested with governmental authority’ (6).

(56) The Commission observed that the OPPF has been created by an act of the GOI and the Management Agency has been explicitly entrusted by the GOI with the duty to make payments to biodiesel producers.

(57) First, Article 11 of Presidential Regulation 66/2018 defined the remit of the OPPF by broadening it as follows: ‘(1) The collected Fund shall be used for: a. development of Oil Palm Plantation human resources; b. Research and development of Oil Palm Plantation; c. Promotion of Oil Palm Plantation; d. rejuvenation of Oil Palm Plantation; and e. Oil Palm Plantation facilities and infrastructures. (2) The use of Fund collected for the interests as referred to in paragraph (1), including for the fulfilment of Oil Palm Plantation products for the need of food, Oil Palm Plantation downstream industry development, and procurement and use of biodiesel.’

(58) Second, in its Article 18(1), that regulation expressly stipulates that ‘the use of fund for provision and utilization of biodiesel referred to in Article 11 paragraph (2) is purported to cover the difference between market index price of diesel and the market index price of biodiesel.’

(59) Hence, the Commission observed that the legal acts implementing the OPPF expressly confirm that its funds are used for the benefit of the biodiesel producers.