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

• (267) The EBB compiles data concerning production that it receives from its members, which account for around 70 % of the biodiesel production in the Union. With regard to non-member producers accounting for around 30 % of the biodiesel production in the Union, it gathers the information concerning production from the relevant national industry associations and from other publicly available sources.

• (268) The methodology and correctness of the data gathered by the EBB was subject to a verification visit under Article 26 of the basic Regulation carried out at the premises of the EBB.

Table 3

Union production (tonnes)

	2015	2016	2017	IP
Total Union production	11 789 896	11 958 862	13 071 053	13 140 582
Index	100	101	111	111
Source: EBB	Source: EBB	Source: EBB	Source: EBB	Source: EBB

• (269) Total Union production gradually increased by 11 % between 2015 and 2017. It remained stable between 2017 and the end of the investigation period. When compared to Union consumption indicated in table 4 below, the production of the Union industry did not keep up with demand, the difference being imported biodiesel.

4.2.   Union consumption

• (270) The Commission established the Union consumption of biodiesel by adding imports of biodiesel into the Union to the sales of the Union industry on the Union market.

• (271) Union consumption developed as follows:

Table 4

Union consumption (tonnes)

	2015	2016	2017	IP
Total Union consumption	11 791 953	11 435 468	14 202 128	15 634 102
Index	100	97	120	133
Source: EBB, EU import statistics	Source: EBB, EU import statistics	Source: EBB, EU import statistics	Source: EBB, EU import statistics	Source: EBB, EU import statistics

• (272) The Union's biodiesel consumption was stable until 2016. It increased in 2017 and the investigation period by 33 % as compared with 2015. The consumption of biodiesel depends on two major factors, the consumption of diesel fuel and the content of biodiesel in this fuel.

• (273) The steadily increasing demand and the Union production results from the energy policy of the Union. The Renewable Energy Directive 2009/285 (‘the RED’) ⁵⁵ established that ‘each Member State shall ensure that the share of energy from renewable sources in all forms of transport in 2020 is at least 10 % of the final consumption of energy in transport in that Member State’ (‘blending mandate’). The Directive allows each Member State to set their own country-specific mandates.

• (274) The Second Renewable Energy Directive 2018/2001 (‘RED II’) was published on 21 December 2018 ⁵⁶, after the end of the investigation period. The Directive continues the policy of renewable fuels being used in the transport sector, continues the target of 10 % renewables in transport, and sets out biofuels sustainability criteria for all biofuels produced or consumed in the EU

• (275) The fact that more biodiesel is being mixed into mineral diesel is an important element in the analysis of biodiesel market trends in the Union. The cost of production and prices of biodiesel are generally higher than the cost of production and prices of mineral diesel. The EU legislation makes producers of fuels (refineries) purchase biodiesel to mix it with fossil-based fuel.

• (276) The consumption of biodiesel is directly linked to measures introduced in each Member State in order to comply with the blending mandate to mix certain levels of biodiesel in fossil fuels. The consumption of biodiesel is set to increase as and when more Member States transpose EU directive targets into their national legislation.

• (277) Another important factor relates to the consumption of diesel fuel for road transport in the Union. This consumption is driven by the Union's general economic situation, which drives the need to transport goods and persons.

• (278) Another factor relating to the consumption of diesel fuel (and as a consequence biodiesel) in the Union is the fuel efficiency of the diesel trucks, buses and diesel cars. Higher fuel efficiency directly leads to a lower diesel consumption. Another factor is a switch from diesel engines to engines using other types of fuel, such as petrol, LPG/CNG, hybrid and fully electric engines.

4.3.   Imports from the country concerned

4.3.1.   Volume and market share of the imports from the country concerned

• (279) The Commission established the volume of biodiesel imports and their market share based on Surveillance 2 ⁵⁷ database.

• (280) Biodiesel imports into the Union from the country concerned developed as follows. The IP has been split into quarters to show the effect of the annulment of the duties in March 2018:

Table 5

Import volume (tonnes) and market share

	2015	2016	2017	IP
Volume of imports from Indonesia (tonnes)	13 340	31 115	24 984	516 088
Index	100	233	187	3 869
Market share	0,1 %	0,3 %	0,2 %	3,3 %
Index	100	241	156	2 918
Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database

Table 6

Quarterly import volume (tonnes) from Indonesia in the IP

	Q4 2017	Q1 2018	Q2 2018	Q3 2018
Volume of imports from Indonesia (tonnes)	0	25 275	227 114	263 678
Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database

• (281) Because of the anti-dumping duties concerning imports from Indonesia imposed on 26 November 2013 by Regulation (EU) 1194/2013 ⁵⁸, there were only minor imports from Indonesia to the Union between 2015 and February 2018.

• (282) However, these duties were annulled by a judgment of the European Court of Justice in March 2018 ⁵⁹ and as a result, imports increased dramatically thereafter as can be seen in Table 6.

4.3.2.   Prices of imports from the country concerned and price undercutting

• (283) As set out above, there have been imports from Indonesia throughout the period considered. The evolution of prices in the period considered, from 2015 to the investigation period was as follows.

Table 7

Import price

	2015	2016	2017	IP
Import prices from Indonesia (EUR per tonne)	853	619	803	671
Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database

• (284) During the IP, there was a difference of around 15 % between those import prices and the EU sales prices (Table 10). From 2015 to 2017 the difference was between 5 % and 10 %.

• (285) The Commission determined the price undercutting during the investigation period by comparing:

• (1) the corresponding weighted average prices per product type of the imports from the Indonesian producers to the first independent customer on the Union market, established on a Cost, Insurance, Freight (‘CIF’) basis, with appropriate adjustments for importation costs; and

• (2) the weighted average sales prices per product type of the sampled Union producers charged to unrelated customers on the Union market.

• (286) The Commission made price comparisons on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts.

• (287) The comparison on a type-by-type basis focused on a comparison of the CFPP, irrespective of the feedstock used. Another characteristic that the Commission took into account was whether a product was subject to ‘double-counting’ in most Member States. For Germany, where a different way of calculating the efficiency of CO2 emission reduction is in place, the Commission also took into account this specificity of the German market.

• (288) The Commission noted that some Indonesian exporters reported exports to the EU without a certificate (known as a ‘RED certificate’) which is required under the Renewable Energy Directive to allow the biodiesel to count towards the blending mandate in the EU. The Commission considered that these sales were in direct competition with Union industry sales with such a RED certificate, as these imports were in free circulation and the technical specifications of the product are the same.

• (289) The Commission established that in most cases the final customer purchasing biodiesel is not aware of, nor concerned by, the feedstock that was used in the production, but requires a product that fulfils a certain maximum CFPP level. This level would vary depending on the season and climatic conditions. During summer months and in warmer regions, higher CFPP levels can be sold, while lower CFPP level biodiesel is required during winter months and in colder regions.

• (290) Given the higher CFPP level of pure PME (normally CFPP +13), it is not normally blended with mineral diesel by itself, but is usually mixed with other biodiesels with lower CFPP first to produce a blend at CFPP +5 or CFPP 0 which is then blended with mineral diesel.

• (291) The amount of PME used in a blend depends on the season and location across Europe. In southern Europe CFPP –5 is used in the winter, and CFPP +5 in the summer. In northern Europe CFPP –10 is used in winter, and CFPP 0 in summer. The higher the CFPP, the larger the percentage of PME that can be used in the blend of biodiesels ⁶⁰.

• (292) To calculate price undercutting at the level of each exporting producer, the Commission first compared the imports from Indonesia, which are pure palm oil biodiesel, to the pure palm oil biodiesel sales of the Union industry.

• (293) Consequently, that type of biodiesel sold by the Union industry was in direct competition with the biodiesel imported from Indonesia, in line with the WTO panel report on Biodiesel from Indonesia ⁶¹. That comparison covered around 20 % of all sales by the sampled Union producers. According to WTO case law, there is no requirement providing for any specific percentage of the domestic industry sales to be considered in the price effects analysis ⁶².

• (294) The Commission expressed the result of this direct comparison of PME imports to PME sales as a percentage of the sampled Union producers' turnover of PME sales during the investigation period. It showed a weighted average undercutting margin by the imports of exporters from the country concerned on the Union market of between 6,0 % and 11,6 %.

• (295) The remainder of the sales of the sampled Union producers have a lower CFPP, which allow these products to be used at lower temperatures. Because the above-mentioned comparison between Indonesian imports and Union industry sales only covered around 20 % of the sales of the sampled Union producers, the Commission made two other types of price comparisons to assess the reliability of this undercutting finding.

• (296) In the second option, the Commission broadened the comparison by including biodiesel with a CFPP of around 0 degrees (‘FAME0’), the most common type of biodiesel sold by the sampled Union producers, in the comparison. For this purpose, the prices of FAME0 were adjusted downwards taking account of the market value of the difference in physical properties. This market value was assessed based on the price difference between FAME10 and FAME0 on the Union market. This comparison covered 55 % of all sales of the Union industry and showed undercutting of 7,4 %.

• (297) This comparison takes into account that biodiesel at CFPP0 – FAME0 - is usually a blend of various types of biodiesel, often including up to 20 % of PME. The Commission therefore considered that the sales price of FAME0 on the Union market is affected by the price of the biodiesels blended to make it and therefore a comparison is appropriate, to check the like-for-like comparison.

• (298) In the third option, the Commission compared all imports of the Indonesian exporting producers with all sales of the sampled Union producers, regardless of the product type. This comparison showed undercutting of 17,5 % ⁶³.

• (299) This comparison showed that imports of PME from Indonesia at subsidised prices would have the effect of lowering the price of most blends sold on the Union market.

• (300) Consequently, all three types of price comparisons showed significant levels of price undercutting. Therefore, irrespective of the methodology used, the Commission provisionally established that the prices of Indonesian imports significantly undercut the prices of the Union industry.

• (301) In addition, in recital (328) the Commission analysed whether the Union industry prices were depressed by the subsidised imports.

4.4.   Economic situation of the Union industry

4.4.1.   General remarks

• (302) In accordance with Article 8(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

• (303) As mentioned in recitals (17) to (20), sampling was used for the determination of injury and the negative impact on the level of the sales prices, quantities sold, market share and profits of the Union industry.

• (304) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators based on data contained in the questionnaire replies from the sampled Union producers and based on the information provided by the EBB.

• (305) The Commission verified the methodology of collection of data submitted by the EBB and that the information was supported by adequate documentation and research procedures.

• (306) Both sets of data were found to be representative of the economic situation of the Union industry.

• (307) The macroeconomic indicators are: production, production capacity, capacity utilisation, sales volume, market share, growth, employment, productivity, magnitude of the amount of subsidisation, and recovery from past subsidisation or dumping.

• (308) The microeconomic indicators are: average unit prices, unit cost, labour costs, inventories, profitability, cash flow, investments, return on investments, and ability to raise capital.

4.4.2.   Macroeconomic indicators

4.4.2.1.   Production capacity and capacity utilisation

• (309) The total Union production capacity and capacity utilisation developed over the period considered as follows:

Table 8

Production capacity and capacity utilisation

	2015	2016	2017	IP
Production capacity (tonnes)	16 009 878	16 561 814	16 594 853	17 031 230
Index	100	103	104	106
Capacity utilisation	74 %	72 %	79 %	77 %
Source: EBB	Source: EBB	Source: EBB	Source: EBB	Source: EBB

• (310) Production capacity increased slowly throughout the period considered, to take account of growing demand. However, since the Union industry was only able to benefit from the market growth to a very limited extent due to the significant increase in subsidised imports, in particular during the investigation period, the increase in production capacity is significantly lower than the demand growth.

• (311) Similarly, as in the case of the information on production, in recital (309), the EBB compiles data concerning capacity from its members, including national associations, and with regard to non-members, it gathers the information concerning capacity from other publicly available sources.

• (312) The production capacity figures do not include a significant part of capacity that is considered idle. The EBB explained that a number of installed biodiesel plants have not been operational for several years and should be considered as long-term out-of-use. These plants, although nominally installed, would only be able to restart production after investment in technical adaptation and after a significant period.

• (313) Capacity utilisation of the Union industry increased by 3 percentage points from 74 % to 77 % in the period considered. The industry achieved the highest levels of capacity utilisation during 2017 and the investigation period.

4.4.2.2.   Sales volume and market share

• (314) The Union industry's sales volume and market share developed over the period considered as follows:

Table 9

Sales volume and market share

	2015	2016	2017	IP
Sales volume on the Union market (tonnes)	11 305 117	10 920 665	13 004 462	12 741 791
Index	100	97	115	113
Market share	95,9 %	95,5 %	91,6 %	81,5 %
Source: EBB, import and export statistics	Source: EBB, import and export statistics	Source: EBB, import and export statistics	Source: EBB, import and export statistics	Source: EBB, import and export statistics

• (315) The Union industry's sales dropped between 2015 and 2016, increased in 2017 but then fell back slightly in the investigation period.

• (316) The factors driving sales are the same factors driving Union consumption. Imports did not affect the sales level to a significant extent in the years 2015-2016, which was a reason for the rather stable levels of both sales and market share.

• (317) The removal of duties on imports from Indonesia changed the picture of the market in 2018. After the removal of duties the Union industry significantly lost market share compared to 2016 (almost 15 %), in particular between 2017 and the investigation period.

4.4.2.3.   Growth

• (318) While the market in the Union was growing by 33 % during the period considered, the sales quantity and production of the Union industry increased by only 13 % and 11 % respectively. The Union industry was therefore only able to benefit from the market growth during the investigation period to a very limited extent, since a significant part of this growth was absorbed by increasing quantities of imports, such as the subsidised imports from Indonesia.

4.4.2.4.   Employment and productivity

• (319) Employment and productivity developed over the period considered as follows:

Table 10

Employment and productivity

	2015	2016	2017	IP
Number of employees	2 763	2 762	2 733	2 841
Index	100	100	99	103
Productivity (tonne/employee)	4 267	4 329	4 782	4 625
Index	100	101	112	108
Source: EBB	Source: EBB	Source: EBB	Source: EBB	Source: EBB

• (320) Employment by the Union industry remained stable throughout the period considered. Productivity increased between 2016 and 2017 and then slightly decreased by four percentage points.

4.4.2.5.   Magnitude of the amount of the countervailable subsidies and recovery from past subsidisation or dumping

• (321) The impact of the subsidised imports from Indonesia on the Union industry will likely be substantial, given the significant volumes and low prices of these imports.

• (322) On 26 November 2013, the EU imposed definitive anti-dumping duties on imports of biodiesel from Indonesia. The duties ranged between 8.8 % and 20,5 %.

• (323) As stated in recital (282), those anti-dumping duties were annulled in March 2018 and as a result, the imports from Indonesia started notably to increase. As noted in recital (280) the market share of Indonesian imports reached 3,3 % in the investigation period, almost exclusively in the second half of the investigation period.

• (324) As a consequence of the increasing imports at low prices significantly undercutting or depressing the Union industry's prices, the Union industry lost market share and was not able to benefit from the market growth.

4.4.3.   Microeconomic indicators

4.4.3.1.   Prices and factors affecting prices

• (325) The weighted average unit sales prices of the sampled Union producers to unrelated customers in the Union developed over the period considered as follows:

Table 11

Sales prices in the Union

	2015	2016	2017	IP
Average unit sales price in the Union on the total market (EUR/tonne)	715	765	832	794
Index	100	107	116	111
Unit cost of production (EUR/tonne)	728	767	827	791
Index	100	105	114	109
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (326) The weighted average unit sales price of the sampled Union producers to unrelated customers increased by 16 % between 2015 and 2017. Prices subsequently decreased by 5 percentage points between 2017 and the investigation period.

• (327) The unit cost of production of the sampled Union producers followed the trend of prices, and increased by 14 % between 2015 and 2017. Costs subsequently decreased by 5 percentage points between 2017 and the investigation period.

• (328) The biodiesel market is a price-sensitive commodity market. In such a commodity market a price undercutting of around 10 % does exercise a significant downward pressure on prices. Due to this price pressure, the Union industry could not benefit from the decreasing costs during the investigation period, because it had to fully pass on this cost decrease to its customers to avoid an even larger loss of market share.

• (329) As a result, the Union industry could not improve their unsatisfactory profit margin due to the price pressure exercised by significant quantities of low-priced subsidised imports in an otherwise favourable market situation.

4.4.3.2.   Labour costs

• (330) The average labour costs of the sampled Union producers developed over the period considered as follows:

Table 12

Average labour costs per employee

	2015	2016	2017	IP
Average labour costs per employee (EUR)	71 573	65 237	65 874	65 730
Index	100	91	92	92
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (331) Average labour costs went down between 2015 and 2016, and subsequently remained stable until the end of the investigation period.

4.4.3.3.   Stocks

• (332) Stock levels of the sampled Union producers developed over the period considered as follows:

Table 13

Stocks

	2015	2016	2017	IP
Closing stocks (tonnes)	85 725	92 291	87 864	88 457
Index	100	108	102	103
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (333) Stock levels of the sampled Union remained relatively stable throughout the period considered. Given that the product concerned is sold in bulk, a single delivery can comprise a significant volume of more than 10 000 tonnes and can have a significant impact on the stock level, depending on the precise transaction date. Therefore the level of stocks is a less meaningful indicator for the Union industry.

4.4.3.4.   Profitability, cash flow, investments, return on investments and ability to raise capital

• (334) Profitability, cash flow, investments and return on investments of the sampled Union producers developed over the period considered as follows:

Table 14

Profitability, cash flow, investments and return on investments

	2015	2016	2017	IP
Profitability of sales in the Union to unrelated customers (% of sales turnover)	– 0,1 %	0,9 %	0,8 %	0,8 %
Index	– 100	900	800	824
Cash flow (EUR)	23 004 159	26 458 832	35 102 719	26 286 866
Index	100	115	153	114
Investments (EUR)	19 697 707	8 039 845	38 946 892	13 265 279
Index	100	41	198	67
Return on investments	– 3 %	18 %	16 %	17 %
Index	– 100	600	533	573
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (335) The Commission established the profitability of the three sampled Union producers by expressing the pre-tax net profit of the sales of the like product to unrelated customers in the Union as a percentage of the turnover of those sales. The profitability is based on cost of goods sold.

• (336) The profitability was around break-even during the whole period considered, remaining below 1 % of turnover.

• (337) In spite of low profit levels, the Union industry was generating a positive cash flow from its operations in the whole period considered. It was able to self-finance its activities.

• (338) The Union industry continued to invest during the whole period considered. Investments strongly fluctuated during the whole period, reaching their highest level in 2017.

• (339) The return on investments is the profit in percentage of the net book value of investments. The return on investment was low but positive while the industry was profitable, between 2016 and the end of the investigation period.

• (340) The financial performance of the Union industry in terms of profits during the investigation period limited its ability to raise capital.

4.4.4.   Conclusion on injury

• (341) Imports from Indonesia were negligible throughout the period considered until March 2018 when the existing anti-dumping duties were discontinued. As a result, during the investigation period the imports increased significantly reaching 3,3 %.

• (342) Union consumption was constantly increasing during the period considered, reaching an increase by 33 % for the entire period. This positive development was only partially reflected in the Union industry production and sales volume which increased only by 11 % and 13 % respectively during the same period. As a result, the imports, including those from Indonesia, increased their market share.

• (343) During the period considered the injury indicators showed a mixed picture. Production and sales of the Union industry to a certain extent followed the market demand, but were only able to benefit from the market growth towards the end of the period considered to a very limited extent.

• (344) Investments fluctuated throughout the period considered. The number of employees in the Union industry remained stable throughout the period considered, which in combination with an increasing production led to an increasing productivity per employee.

• (345) However, the profitability of the Union industry remained poor throughout the period considered. This indicates that the Union industry did not manage to reach the level of normal profitable operations.

• (346) Despite an increase of sales and production, caused by increasing consumption, the Union industry did not show indications of improving its economic situation. Whilst not being conclusive on the existence of material injury during the investigation period, the Commission will examine whether there is, at the very least, a threat of material injury.

5. THREAT OF INJURY

5.1.   Introduction

• (347) In accordance with Article 8(8) of the basic Regulation, the Commission examined whether the subsidised imports from Indonesia constitute a threat of material injury to the Union industry.

• (348) In the analysis of a threat of material injury to the Union industry, in accordance with Article 8(8), second subparagraph, of the basic Regulation, the Commission considered such factors as:

• — the nature of the subsidy or subsidies in question and the trade effects likely to arise therefrom;

• — a significant rate of increase of subsidised imports into the Union market indicating the likelihood of substantially increased imports;

• — sufficient freely disposable capacity on the part of the exporter or an imminent and substantial increase in such capacity indicating the likelihood of substantially increased subsidised exports to the Union, account being taken of the availability of other export markets to absorb any additional exports;

• — whether imports are entering at prices that would, to a significant degree, depress prices or prevent price increases which otherwise would have occurred, and would probably increase demand for further imports; and

• — the level of inventories.

5.2.   The nature of the subsidy or subsidies in question and the trade effects likely to arise therefrom

• (349) In recital (263), the Commission provisionally concluded on the existence of countervailable subsidies in accordance with the provisions of the basic Regulation. Those subsidies show that the imports of the product concerned benefit from governmental support. The significant undercutting and price depression found during the investigation period is expected to affect the delicate economic situation of the Union industry already observed during the investigation period even more negatively in the near future.

• (350) Moreover, as explained in recital (203), the GOI's measures supporting the domestic biodiesel industry ensure that biodiesel exports remain very competitive because of the lower costs of obtaining CPO (as opposed to Union producers who cannot benefit from such low prices). It is therefore foreseeable that the subsidised imports of the product concerned, because of the nature of the GOI's support measures, will continue to negatively affect the Union industry's economic situation.

5.3.   Significant rate of increase of subsidised imports into the Union market indicating the likelihood of substantially increased imports

• (351) There is a clear link between the sudden and substantial increase of imports to the Union market from Indonesia since March 2018 and the removal of the anti-dumping duties in the same month. This indicates the ability of the Indonesian exporting producers to quickly react to the changing market conditions.

• (352) Therefore, in view of the attractiveness of the Union market for the Indonesian exports, the Commission considered that after the termination of anti-dumping duties in March 2018, the fact that the volume of biodiesel imports from Indonesia has increased significantly indicates the likelihood that such imports will continue to increase.

5.4.   Sufficient freely disposable capacity and absorption capacity of third countries

• (353) According to information provided by the GOI, the production capacity of the Indonesian biodiesel producers significantly exceeds the domestic demand by around 300 %. More than half of this production capacity is spare capacity, which the Indonesian exporters will have to export if they want to increase their currently low capacity utilisation.

• (354) The spare capacity of the Indonesian biodiesel producers during the investigation period is established at around 40 % of EU consumption. This figure is based on verified information provided by the GOI.

• (355) In November 2017, the USA imposed provisional anti-dumping duties and countervailing duties against imports of biodiesel from Indonesia. They were largely confirmed by definitive duties in April 2018 ranging between 92 % and 277 % for the anti-dumping duties ranging between 34 % and 65 % for the countervailing duties.

• (356) The magnitude of the level of duties imposed in the USA means this market will not be able to absorb a significant part of the Indonesian spare capacity. There are no other known export markets that could absorb the very large Indonesian spare capacity, since the USA and the Union together account for around two thirds of the global consumption of biodiesel.

• (357) In the absence of other significant markets available to the Indonesian producers, they are likely to direct their spare capacities to the Union market, causing further injury to the Union industry.

5.5.   Price level of subsidised imports

• (358) The biodiesel from Indonesia that arrived in the Union market during the investigation period was imported at substantially lower prices than the prices charged by the Union industry. As explained in recital (294), the Commission established weighted average undercutting margins for the investigation period of between 6,0 % and 11,6 %. A comparison of all product categories also shows undercutting of 15 % – 17,5 %.

5.6.   Level of inventories

• (359) The evolution of level of inventories of the sampled Union producers is described in detail in recital (332). As explained, due to the fact that the product concerned is sold in bulk, the level of inventories is a less meaningful indicator for the threat of injury analysis.

5.7.   Conclusion

• (360) In view of the analysis of factors concerning the threat of injury listed in recital (348), the Commission concluded that the fragile economic condition of the Union industry is likely to be aggravated by the imminent and continuing subsidised imports of biodiesel from Indonesia, which supports a provisional finding of threat of injury under Article 8(8) of the basic Regulation.

6. CAUSATION

6.1.   Effects of the subsidised imports

• (361) As stated in recital (280), there were only negligible imports to the Union from Indonesia in the years 2015-2017 as well as during the first months of the investigating period. However, the imports increased significantly during the second half of the investigation period. As indicated in recital (280) the market share of the Indonesian imports for the investigation period is 3,3 %. As shown in recital (294), the Indonesian biodiesel imports were undercutting the Union industry prices by at least 6,0 % to 11,6 % during the investigation period, and such undercutting could be even higher depending on the approach to be followed. The Commission also established that the Indonesian biodiesel imports depressed the Union industry prices during the investigation period.

• (362) Due to the significant and sudden increase of the subsidised imports of Indonesian biodiesel at prices below those of the Union industry, the Union industry lost market share in the investigation period, and could not improve its unsatisfactory profit margin in an otherwise favourable market situation.

• (363) Therefore, the Commission concluded that those subsidised imports had a negative impact on the situation of the Union industry.

• (364) Moreover, not only do the Indonesian biodiesel producers have significant spare capacity, which can be directed to the Union, but the closure of the second biggest export market of Indonesia – the USA –has directed excess production from Indonesia to the Union, which constitutes 40 % of the worldwide consumption. Thus, the Union has become the most attractive destination for Indonesian subsidised imports of biodiesel, to the detriment of the Union industry.

• (365) Therefore, the Commission considered that the subsidised imports of Indonesian biodiesel are causing a threat of material injury to the Union industry.

6.2.   Other known factors

• (366) The Commission also examined whether other known factors, individually or collectively, are capable of attenuating the causal link established between the subsidised imports and the threat of injury provisionally found to exist to the effect that such link would no longer be genuine and substantial.

6.2.1.   Imports from third countries

• (367) Other than imports from Indonesia, imports from only three other countries, Argentina, Malaysia and the People's Republic of China (‘the PRC’), had a significant market share during the period considered. The volume of imports from other third countries developed over the period considered as follows:

Table 15

Imports from third countries

Country		2015	2016	2017	IP
Argentina	Volume (tonnes)	31 340	0	394 005	1 525 081
Argentina	Index	100	0	1 257	4 866
Argentina	Market share	0,3 %	0 %	2,8 %	9,8 %
Argentina	Average price	633	0	636	621
Malaysia	Volume (tonnes)	349 571	273 427	378 395	404 058
Malaysia	Index	100	78	108	116
Malaysia	Market share	3,0 %	2,4 %	2,7 %	2,6 %
Malaysia	Average price	880	975	1 007	899
the PRC	Volume (tonnes)	1 159	38 496	217 313	272 146
the PRC	Index	100	3 320	18 742	23 472
the PRC	Market share	0 %	0,3 %	1,5 %	1,7 %
the PRC	Average price	818	763	812	778
All other countries except Argentina, Indonesia, Malaysia and the PRC	Volume (tonnes)	90 620	169 864	181 209	174 938
All other countries except Argentina, Indonesia, Malaysia and the PRC	Index	100	187	200	193
All other countries except Argentina, Indonesia, Malaysia and the PRC	Market share	0,8 %	1,5 %	1,3 %	1,1 %
All other countries except Argentina, Indonesia, Malaysia and the PRC	Average price	771	789	894	852
Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database

• (368) Imports from Argentina reached a market share of 2,8 % in 2017, increasing to almost 10 % during the investigation period. These imports were subject to an earlier investigation, which resulted in the imposition of a definitive countervailing duty ⁶⁴ and the acceptance of undertaking offers ⁶⁵ in February 2019. The investigation showed that, at that time, subsidised imports threatened to cause material injury to the Union industry at the end of the investigation period of that case, i.e. the end of 2017.

• (369) Imports from Argentina were to a certain extent responsible for the negative development of some injury indicators, such as the loss of market share of the Union industry and their inability to fully benefit from the growing consumption in the Union during the investigation period. Notably, the average import price from Indonesia of 671 EUR per tonne in the investigation period was higher than the import price from Argentina during the investigation period, which was 621 EUR per tonne.

• (370) However, the threat of injury from Argentinian imports in the past including their very low prices was addressed by imposing countervailing duties and accepting undertaking offers in February 2019. Therefore, Indonesian imports have become the main cause for a threat of injury to the Union industry since then and Argentinian imports do not weaken the causal link between the subsidized imports and threat of material injury to the effect of rendering the link non-genuine or non-substantial.

• (371) Imports from Malaysia were at a stable level throughout the period considered with a market share between 2,4 % and 3,0 % and prices were considerably higher (899 EUR per tonne) than Indonesian prices (671 EUR per tonne), and even higher than the Union's sales prices. Therefore, they do not weaken the causal link.

• (372) Imports from the PRC continuously increased during the period considered, reaching a market share of 1,7 % in the investigation period. However, imports from the PRC are considerably lower in volume than from Indonesia and prices from the PRC are considerably higher (778 EUR per tonne) than Indonesian prices (671 EUR per tonne). Therefore, they do not weaken the causal link.

• (373) Imports from third countries other than Argentina, Indonesia, the PRC and Malaysia never exceeded a combined market share of 1,5 %. Therefore, none of these other countries could have had any significant influence on the Union industry, in particular given the limited quantities of such imports.

• (374) Based on the above analysis, the Commission concluded that the imports from other countries did not weaken the causal link between the subsidized imports and the threat of injury to the Union industry during the investigation period.

6.2.2.   Export performance of the Union industry

• (375) None of the sampled Union producers exported biodiesel during the period considered. The below export statistics are therefore based on Eurostat, and provide an estimate for the whole Union industry. The data is the published exports of biodiesel from the EU under CN codes 3826 00 10 and 3826 00 90:

Table 16

Export performance of the Union industry

	2015	2016	2017	IP
Export volume (tonnes)	199 740	336 394	323 085	462 368
Index	100	168	162	231
Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat

• (376) The level of exports of the Union industry was limited. It did not exceed 4 % of its sales in any year of the period considered. The export performance of the Union industry cannot have been weakening the causal link between the subsidised imports and the threat of injury.

6.3.   Conclusion

• (377) The Commission identified a link between the increasing imports of subsidised imports from Indonesia during the period considered and the threat of material injury.

• (378) The Commission distinguished and separated the effects of all known factors on the situation of the Union industry from the injurious effects of the subsidised imports from Indonesia.

• (379) The Commission found that the other identified factors such as imports from other third countries and export performance of the Union industry did not weaken the causal link, either individually or collectively. The Commission notes that while the subsidised imports from Argentina were also a factor contributing to the threat of injury during and shortly after the investigation period, this issue had been addressed in the meantime by imposing countervailing duties and accepting undertaking offers in February 2019.

• (380) In fact imports from Indonesia have continued to increase after February 2019, showing that they remain the main cause of the threat of injury:

Table 17

Import volume (tonnes) from Indonesia after the IP

	10/2018	11/2018	12/2018	1/2019	2/2019	3/2019	4/2019	5/2019
Imports from Indonesia (tonnes)	53 204	7 020	78 866	63 409	41 757	129 511	113 831	56 283
Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database	Source: Surveillance 2 database

7. UNION INTEREST

• (381) 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 countervailing measures corresponding to the total amount of countervailable subsidies in this case, despite the determination of injurious subsidisation. The Commission based the determination of the Union interest on an analysis of all the various interests involved, including those of the Union industry, importers and consumers.

7.1.   Interest of the Union industry

• (382) Biodiesel is an important element of an effort to reduce greenhouse gas emissions and improve the sustainability of the energy supply in the European Union.

• (383) The Union industry mainly uses feedstock produced by Union agriculture. The upstream agricultural oil sector also largely depends on the biodiesel industry. Imports of biodiesel from Indonesia would therefore not only affect the biodiesel industry, but also the agricultural sector in the Union.

• (384) The Commission found that the situation of the Union industry is fragile since it has not recovered from the dumping previously suffered. The Commission therefore provisionally concluded that the imposition of measures would be in the interest of the Union industry.

7.2.   Interest of unrelated importers

• (385) As referred to in recital (22), only two unrelated importers replied to the questionnaire sent by the Commission. Both importers stated that they are against the imposition of measures. The importer Gunvor further commented that the situation of the Union industry is caused by an inefficient production system and management.

• (386) The Commission observes that importers of biodiesel, including the two co-operating companies, are very often traders on the Union market that not only import and export biodiesel worldwide, but also trade biodiesel purchased from Union producers. Both co-operating importers purchase biodiesel from Indonesia, other third countries and the Union industry. They therefore only to a certain extent depend on supplies from Indonesia for their business operations.

• (387) However, the Union producers, especially the larger ones, rely to a significant extent on their own distribution channels. The Commission therefore does not expect the importers would be able to fully replace the level of imports affected by measures with biodiesel purchased from Union producers.

• (388) The Commission concluded that the imposition of duties would not be in the interest of importers. The possible negative effect on importers can however partially be balanced by the increased volume of trade of biodiesel purchased from the Union industry.

7.3.   Interest of users/consumers

• (389) No users or consumers cooperated with the investigation despite the explicit invitation to do so in the Notice of Initiation.

• (390) Producers of diesel fuel, that is refineries, purchase the biodiesel, imported or produced by the Union industry. Due to the legal requirements referred to in recitals (273) and (274), refineries need to add biodiesel to the mineral diesel sold on the market.

• (391) It is therefore the final consumer that would be affected should the price of diesel at the pump increase following imposition of measures. The price of mineral diesel is, with rare exemptions, lower than price of biodiesel. Given that the amount of biodiesel blended with mineral diesel is normally no more than 10 %, the negative effect of any price increase of biodiesel is diluted before being passed on to the consumer.

7.4.   Trade-distorting effects of subsidies/restoring effective competition

• (392) Under Article 31(1) of the basic Regulation, special consideration shall be given to the need to eliminate the trade-distorting effects of injurious subsidisation and to restore effective competition.

• (393) The investigation has established that the Indonesian producers sell significant quantities of subsidised biodiesel at artificially low prices to the Union market. If this situation continues, the Indonesian exporters will maintain their unfair competitive advantage, further weakening the already vulnerable situation of the Union industry. As a result, the subsidised Indonesian imports will increase their trade-distorting effects over time, and continue to deny a level playing field to the Union industry.

7.5.   Conclusion on Union interest

• (394) The Commission provisionally concluded that the imposition of duties would have an effect of increasing consumer prices. However, because of the limited content of biodiesel in the final product purchased by consumers (typically no more than 10 %), this negative effect on the price of diesel fuel would only be a small proportion of the direct change in the price of biodiesel.

• (395) On the basis of the above, the Commission provisionally concluded that there were no compelling reasons that it was not in the Union interest to impose countervailing measures corresponding to the total amount of countervailable subsidies on imports of biodiesel originating in Indonesia.

8. REGISTRATION

• (396) On 22 May 2019 the complainants submitted a request for imports from Indonesia to be registered, under Article 24(5) of the basic Regulation.

• (397) The complainants requested registration on the grounds of:

• (a) Evidence of massive subsidisation of the Indonesian biodiesel industry;

• (b) an actual and significant risk of severe injury that would be difficult to repair if the imports continue to increase with the same trends; and

• (c) a need to register imports as soon as possible in order to preclude the recurrence of injury due to the seasonality of imports.

• (398) The Commission examined the request in the light of Article 16(4) of the basic Regulation which sets out the conditions for collecting duties on registered imports. The Commission's examination also took into account comments received on the request for registration from the GOI, from the importer Gunvor and from the Wilmar group of exporting producers.

• (399) Article 16(4)(c) of the basic Regulation requires the Commission to consider whether there is sufficient evidence that there will be critical circumstances where, for the product concerned, injury which is difficult to repair is caused by massive imports in a relatively short period of a product benefitting from countervailable subsidies.

• (400) In addition, Article 16(4)(d) of the basic Regulation requires the Commission to assess whether ‘it is deemed necessary, in order to preclude the recurrence of such injury, to assess countervailing duties retroactively on those imports’.

• (401) As explained in section 4 above, the Commission did not conclude that the Union industry suffered from material injury during the investigation period. Rather, as explained in sections 5 and 6 above, the Commission found that there is a threat of injury caused by the subsidised imports.

• (402) Consequently, the Commission could not determine that injury difficult to repair is caused by the subsidised imports in the sense of Article 16(4)(c) of the basic Regulation.

• (403) The Commission therefore concluded that the conditions for registration were not met.

• (404) Since the Commission had sufficient evidence that the requirement under Article 16(4)(c) is not met, the Commission did not register imports of biodiesel from Indonesia for the three week pre-disclosure period under Article 24(5a) of the basic Regulation.

9. PROVISIONAL COUNTERVAILING MEASURES

• (405) Based on the conclusions reached by the Commission on subsidisation, injury, causation and Union interest, and in accordance with Article 15(1) of the basic Regulation, a provisional countervailing duty should be imposed on imports of biodiesel originating in Indonesia.

9.1.   Provisional measures

• (406) Provisional countervailing measures should be imposed on imports of biodiesel originating in Indonesia, in accordance with the rules in Article 12(1) of the basic Regulation which states that the provisional duty shall correspond to the total amount of countervailable subsidies as provisionally established.

• (407) 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:

Company	Provisional countervailing duty
PT Ciliandra Perkasa	8,0 %
PT Intibenua Perkasatama and PT Musim Mas (Musim Mas Group)	16,3 %
PT Pelita Agung Agrindustri and PT Permata Hijau Palm Oleo (Permata Group)	18,0 %
PT Wilmar Nabati Indonesia and PT Wilmar Bioenergi Indonesia (Wilmar Group)	15,7 %
All other companies	18,0 %

• (408) 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. Imports of the 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.

• (409) 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 ⁶⁶. 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.

10. INFORMATION AT PROVISIONAL STAGE

• (410) In accordance with Article 29a of the basic Regulation, the Commission informed interested parties about the planned imposition of provisional duties. This information was also made available to the general public via DG TRADE's website. Interested parties were given three working days to provide comments on the accuracy of the calculations specifically disclosed to them.

• (411) Comments were received from the Wilmar Group, the Permata Group and P.T. Ciliandra Perkasa. The Commission took the comments into account that were considered of a clerical nature and corrected the rates accordingly.

11. FINAL PROVISIONS

• (412) 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.

• (413) 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

Company	Provisional countervailing duty	TARIC additional code
PT Ciliandra Perkasa	8,0 %	B786
PT Intibenua Perkasatama and PT Musim Mas (Musim Mas Group)	16,3 %	B787
PT Pelita Agung Agrindustri and PT Permata Hijau Palm Oleo (Permata Group)	18,0 %	B788
PT Wilmar Nabati Indonesia and PT Wilmar Bioenergi Indonesia (Wilmar Group)	15,7 %	B789
All other companies	18,0 %	C999

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, 12 August 2019.

For the Commission

The President

Jean-Claude JUNCKER