Commission Implementing Regulation (EU) 2023/111 of 18 January 2023 imposing a definitive anti-dumping duty on imports of fatty acid originating in Indonesia

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 9(4) thereof,

Whereas:

(1) On 30 November 2021, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of fatty acid originating in Indonesia (‘the country concerned’) on the basis of Article 5 of 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 18 October 2021 by the Coalition against Unfair Trade in Fatty Acid (‘the complainant’ or ‘CUTFA’). The complaint was made on behalf of the Union industry of fatty acid in the sense of Article 5(4) of the basic Regulation. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3) On 13 May 2022, the Commission initiated an anti-subsidy investigation with regard to imports of fatty acid originating in Indonesia. It published a Notice of Initiation in the Official Journal of the European Union (3).

(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, other known Union producers, the known exporting producers and the authorities of Indonesia, known importers and users, 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) Hearings were held with a biodiesel producer, Campa Iberia SAU (‘Campa’) and its related company, IM Biofuel Italy S.r.l. (‘IMBI’), (collectively called ‘Campa/IMBI’), and a sampled Union producer, AAK AB (‘AAK’).

(7) The Commission received comments on initiation from the exporting producers P.T. Musim Mas (‘Musim Mas’) and its related exporter P.T. Intibenua Perkasatama (‘IBP’) (collectively called ‘Musim Mas group’), P.T. Wilmar Nabati Indonesia (‘Wilmar’), P.T. Nubika Jaya and P.T. Permata Hijau Palm Oleo (collectively called ‘Permata group’), and the Government of Indonesia (‘GOI’).

(8) The Musim Mas group, Wilmar and the GOI claimed that the definition of the product under investigation in the complaint was too broad as it included fatty acids that were not the target of the complaint (such as fatty acid used for the production of biodiesel, palmitic acids used for animal feed, vegetable oleic acid used for food and fatty acids derived from coconut oil). The GOI claimed that the failure of the complainant to correctly define the product scope in the complaint would have an effect on the validity of the complaint and justification to initiate the investigation.

(9) It was further claimed that due to the broad definition of the product under investigation, the data in the complaint (such as production, production capacity, employment, sales, market share, profit, causation and Union industry) was incomplete as it was compiled only for the types of fatty acid that were targeted by the complainant.

(10) Furthermore, the Musim Mas group and Wilmar claimed that the imports from Indonesia were overstated in the complaint as they include fatty acid imported into the Union for biodiesel production and other fatty acids not used in food, cosmetics, personal care and pharmaceutical applications such as palmitic acids. As a result, the consumption and the market shares stated in the complaint were not correct.

(11) Moreover, it was claimed that the price of imports from Indonesia in the complaint was understated as it included lower-priced fatty acid produced from waste and by-products which are used for biodiesel production. Consequently, the undercutting margins were also not correct.

(12) Finally, the Musim Mas group and the GOI claimed that because of the issues with the product concerned and the like product, the initiation of the investigation was based on unreliable, incomplete and inaccurate information. Consequently, also the investigation suffers from the same issues as the complaint and therefore the investigation should be terminated.

(13) The product definition in the complaint and in the Notice of Initiation was based on the information available to the complainant at the time the complaint was prepared and lodged. There was at that time no information that the product as defined might cover types of fatty acid not produced by the complaining industry. This matter came to the fore after initiation and was adequately addressed as explained below in recitals (91) to (102) and (108) to (124). As to the injury data contained in the complaint, the allegations summarised in recital (9) are factually incorrect or based on a misunderstanding. Indeed, the injury data in the complaint relate to the product concerned. The product definition was based upon the product produced by the complainant and reflected the targeted product scope. The injury analysis was based on the targeted product scope, which was the actual product that the complainant wanted to cover. Therefore, the data in the complaint with regard to the injury analysis was complete, which has been confirmed by the investigation.

(14) The Indonesian import figures reflected in the complaint were based upon the information available to the complainant at that time. The Commission carefully examined the accuracy and adequacy of the information provided by the complainant and reached the conclusion that the different fatty acid types shared the same basic characteristics, meaning that they belong to the same product category. At the same time, the basic characteristics of the product concerned allowed to separate it from other product types to the extent that these could be considered to be different and belong to another category of fatty acid. It therefore appeared, at initiation stage, that the product definition proposed by the complainant met all the relevant statutory requirements.

(15) This is not called into question by the fact that information and evidence collected after initiation gave rise to a clarification of the product scope after initiation, as well as to appropriate product exclusion as stated in recitals (94) to (124). The data in the complaint was in line with the clarifications provided by the Commission in recital (91). Therefore, the claims were rejected.

(16) Wilmar claimed that the complaint contained insufficient evidence in support of a finding of material injury or threat thereof to the Union producers. It particular, it was stated that production and capacity utilisation did not show injury, and also that the employment and investments have increased and do not reflect injury. Furthermore, it was claimed that the price undercutting allegations in the complaint were not conclusive as the Union producers increased their selling prices substantially. It was also stated that the complaint was silent on the complainant’s profitability data. Furthermore, it was stated that there was also no threat of injury as the Indonesian capacities were overstated and the domestic demand was rising.

(17) The Commission recalls that Article 5(2) of the basic Regulation requires a complaint to contain the information on changes in the volume of the allegedly dumped imports, the effect of those imports on prices of the like product on the Union market and the consequent impact of the imports on the Union industry, as demonstrated by relevant (not necessarily all) factors and indices having a bearing on the state of the Union industry, such as those listed in Articles 3(3) and 3(5) of the basic Regulation, as reasonably available to the complainant. Not all factors must show deterioration in order for material injury to be established.

(18) In that regard, the complaint showed an overall injurious trend in both the macro and micro indicators. The analysis indicated a decrease in production and capacity utilisation. With respect to the increases in the selling prices of Union producers, the Commission considered that such increases would not be sufficient to put into question the complainants’ claims on undercutting, and that they partially reflected the increase in the cost of raw materials. With respect to the information on the complainant’s profitability, Wilmar’s claim was factually incorrect. The complaint included sufficient information, in the form of indices, on the negative evolution of profit margins of the Union industry. The information was considered confidential because of the limited number of complaining and supporting Union producers, and the high business sensitivity of such data. The complaint furthermore set out that the reason for the increase in investment was not linked to capacity building, but to national environmental requirements. Even though the employment marginally increased, the Commission considered that overall the complaint did provide sufficient evidence tending to show the existence of an injurious situation of the Union industry. Finally, with respect to Indonesian capacities and domestic demand, the complainant did provide evidence that the Indonesian production was larger than its local demand and consumption. In addition, a lower level of capacities and a rising domestic demand would not be sufficient to disprove the existence of material injury. Therefore, the claims were rejected.

(19) The Musim Mas group and Wilmar also claimed that the complaint was not representative of the Union production of fatty acid as it did not include any data from the Union biodiesel producers who also produce fatty acids in substantial quantities.

(20) In this respect, the Commission notes that fatty acid produced as a by-product of biodiesel production was not included in the scope of the investigation. A note clarifying this point was included in the file by the Commission on 21 January 2022. Therefore, there was no issue with respect to the representativity of the Union industry in the complaint. Thus, the claim was rejected.

(21) The Musim Mas group and Wilmar also claimed that the Union producers which were related to Indonesian producers of fatty acid or Malaysian exporters of fatty acid to the Union should be excluded from the definition of the Union industry as such companies were subject to a conflict of interest and in this case it was stated that the Commission should re-evaluate whether the remaining complainants would meet the necessary threshold for the complaint.

(22) The Commission notes that in the pre-initiation analysis, no reason for exclusion of any producers in the Union was found. As regards Union producers related to Malaysian exporters of fatty acid, the Musim Mas group and Wilmar did not explain what is the nature of the alleged ‘conflict of interest’, why it should give rise to an exclusion of these producers from the definition of the Union industry, and what would be the legal basis for such exclusion. Therefore, the claim was rejected.

(23) The Musim Mas group also claimed that the Malaysian and Indonesian governments have adopted a similar policy concerning the export duty on crude palm oil (‘CPO’) and crude palm kernel oil (‘CPKO’), and if this policy was causing injury to the Union industry, then the investigation should cover Malaysia as well. It was further claimed that the objective of the complainant was to block the imports from Indonesia to the advantage of the Malaysian companies who are related to the Union producers.

(24) The complaint assessed the imports from Malaysia. However, according to the information available to the complainant, the import volume from Malaysia was much lower than the volume from Indonesia and showed a small decrease from 2018 until March 2021. Moreover, the Malaysian imports were made at a price above the target price of the Union industry and could have not caused any injury. Therefore, the claim was rejected.

(25) The Musim Mas group and Wilmar also claimed that the complainant wrongly attributed all the alleged injury suffered by the Union industry to the imports from Indonesia. Furthermore, the Musim Mas group claimed that any causal link between the alleged injury suffered by the Union industry and the imports from Indonesia was also affected by the issues mentioned in recital (8). Wilmar claimed that other causes of injury broke the causal link that the complaint attempted to established, such as: (1) the increase of the Union producers’ main raw material, tallow, in biofuels production, (2) the impact of the Covid-19 pandemic on the automotive sectors, (3) inefficiencies in the Union industry caused by a lack of investments in novel and better equipment, (4) the Union industry’s performance in terms of punctuality and quality, (5) excessive production costs as a result of inflated labour costs, (6) the geographically disadvantageous location of production facilities, which increased the cost of access to the raw materials and affected export opportunities, and (7) regulatory developments including the entry into force of the 3-MCPD legal requirements.

(26) The complaint did include an analysis of other factors that might have affected the causal link between the alleged dumped imports from Indonesia and the injurious situation of the Union industry, i.e. other imports, the cost of raw materials, and exports by the Union industry. However, none of the other factors did attenuate the causal link in the complaint. This was sufficient evidence reasonably available to the complainant tending to show that the apparent material injury was not caused by other factors. During the investigation, interested parties are offered the opportunity to put forward more detailed claims regarding other factors that might have affected the causal link and which are assessed by the Commission.

(27) The Musim Mas group also stated that because of the wrong definition of the product concerned and the corresponding like product, the complaint did not consider the Union interest with respect to producers, users and importers of fatty acids which do not compete with fatty acids manufactured by the complainant (such as the Union biodiesel industry and consumers of imported fatty acids not used in food, cosmetics, personal care and pharmaceutical applications, including palmitic acids and fatty acids produced from coconut oil).

(28) Article 5(2) of the basic Regulation does not require the complainant to include information on Union interest in the complaint, and the Union interest test is not relevant for the initiation of the investigation. In any event, as stated in recital (20), fatty acid produced as a by-product of biodiesel production was not covered by the complaint/investigation.

(29) Wilmar claimed that the complaint did not include sufficient evidence justifying the application of Article 7(2a) of the basic Regulation. In particular, it stated that the export levy, introduced with the purpose of financing the Oil Palm Plantation Fund, served as a legitimate revenue-generating tax on competitive commodities and the complainant’s allegation that the export levy had a price distorting effect on CPO and CPKO prices were unfounded. Furthermore, it claimed that the complaint failed to establish that the export tax and export levy operate as a dual-system that functioned as an export restraint, and that the alleged maximum price of CPO and CPKO and the system of tenders organized by the State-owned companies under the name of P.T. Perkebunan Nusantara (collectively referred to as ‘PTPN’) did not depreciate domestic CPO prices. The prices accepted by PTPN resulted from competitive tenders and the system of tenders amounted to a transparent price mechanism similar to other exchange-traded markets. According to them, there was no evidence that PTPN intentionally set prices artificially low. PTPN sells to the highest bidder and the prices that PTPN can get in public tenders will not only depend on the price at which PTPN would like to sell, but also the price that purchasers are willing to pay. Therefore, Wilmar claimed that the price, which PTPN eventually accepted, was a market price, reflecting supply and demand in Indonesia. Moreover, the fact that CPO prices in Indonesia were lower than in other international markets did not demonstrate that prices were artificially low, as Indonesia was the largest CPO producer in the world. Finally, it was stated that alleged price differences between the domestic prices for CPO and CPKO and international prices were misguided as the complainant has used two different and inconsistent benchmarks, i.e. for CPO the Malaysian domestic price and for CPKO CIF Rotterdam port prices. Wilmar and the Musim Mas group stated that the complainant should have used one benchmark for both CPO and CPKO. Wilmar stated that the alleged price differences of 14 % for CPO and 11 % CPKO fell short of the ‘significantly lower’ threshold required by Article 7(2a) of the basic Regulation.

(30) The Commission disagreed with this claim. The complainant was not required to establish that the export tax and export levy operate as a dual-system that functioned as an export restraint. The export tax is one of the distortions on raw materials mentioned in Article 7(2a) of the basic Regulation. Regarding the benchmarks, the complainant used the most representative benchmark available to it, which was considered appropriate by the Commission at the complaint stage. Furthermore, the Commission found that the price difference in this case as presented in the complaint was ‘significantly lower’ within the meaning of Article 7(2a) of the basic Regulation. Therefore, the claim was rejected.

(31) The Permata group claimed that the complainant erred in stating that the goal of the export tax was to contribute to the Indonesian policy aimed at transitioning the Indonesian economy towards the production of high-value goods, such as oleochemical products. According to the Permata group, the export tax was introduced with the specific purpose of securing local demand for, and ensuring the price stability of, cooking oil. Therefore, Permata group submitted that no raw material distortions existed within the meaning of Article 7(2a) of the basic Regulation because the export tax was not designed or introduced with the purpose of keeping CPO and CPKO prices at an artificially low level for the benefit of the oleochemical products.

(32) The Commission noted that the analysis on the existence of raw material distortions takes into consideration the effects of the distortions on the price of the raw materials, irrespective of the purpose of the measures which cause the distortions. Thus, the claim was rejected.