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

• (111) In this respect, the Commission concluded that food grade oleic acids had similar basic physical, technical and chemical characteristics as the industrial grade oleic acid. Although food grade oleic acid was subject to stricter quality and purity requirements, it had the same carbon chain length as oleic acid used for industrial applications. The price difference between the two grades is not per se a key element for product exclusion. Furthermore, the Union industry is indeed producing food grade oleic acid and other sources of supply exists such as Malaysia. In view of this, the Commission rejected the exclusion request.

• (112) In its comments following final disclosure, AAK reiterated its request to exclude food grade oleic acid from the product scope of the investigation. AAK criticised the Commission for not properly addressing its claims and claimed it used inconsistent criteria in its decision to exclude fatty acid meant for biodiesel production as compared to food grade oleic acid. In particular, AAK claimed that in recital (102) the Commission’s conclusion of excluding fatty acid produced from waste was based on the fact that this particular fatty acid had different uses and was not in competition with the like product while sharing the same characteristics with other fatty acids. On the other hand, for not excluding food grade oleic acid from the product scope of the investigation, the Commission concluded in recital (111) that food grade oleic acids have similar basic physical, technical and chemical characteristics as the industrial grade oleic acid with the same carbon chain length. Furthermore, AAK stated that food grade oleic acid and industrial grade oleic acid have different uses and are not in competition with each other, and that the Commission’s statement that both types have similar physical, chemical and technical characteristics was not supported by the facts and unsubstantiated in the regulation. Finally, AAK claimed that had the Commission done similar analysis for food grade and industrial grade oleic acid, it would have found differences in type, grade and quality between the two types.

• (113) The Commission disagreed with these claims. First, as concerns fatty acid made of waste, as stated in recital (102), fatty acid made of waste was not supposed to be covered by the investigation. However, because it shared the same physical, technical and chemical characteristics with other fatty acids, it was unintentionally caught by the product definition. In order to make sure the investigation and potential measures were correctly conducted and applied, the Commission investigated in depth this particular product before confirming that indeed it should not have been investigated/covered by measures, as explained in recitals (98) to (102). This is in contrast with fatty acids for food applications (such as food grade oleic acid), which were covered by the complaint and for which the complainants provided evidence of dumping, injury and causal link, which was confirmed during the investigation. Second, the criticism expressed by AAK is based on a misunderstanding of the factual and legal situation with regards to the exclusion request of food grade oleic acid. Even if industrial and food grades oleic acid were considered two different types of fatty acid as claimed by AAK, that would have no bearing on the Commission’s findings. The Union industry produces and sells food grade oleic acid, there are potentially imports of food grade oleic acid from Indonesia ²², which could be in direct competition with the product sold by the Union industry and, consequentially, causing injury. Thus, there is no reason why the Commission would conclude that an exclusion of food grade oleic acid is warranted. In fact, the logical conclusion must be the exact opposite: it is not possible to exclude food grade oleic acid without undermining the remedial effects of the measures to be imposed.

• (114) AAK also stated that the marginal Union production of food grade oleic acid and the existence of one other third country supplying the product did not support the continued inclusion of food grade oleic acid in the product scope of the investigation. In particular, AAK stated that in product scope determinations, the Commission in the past gave weight to the fact that the Union production of a product type was limited. In this regard, AAK referred to the anti-dumping investigation on imports of synthetic staple fibres of polyesters (‘PSF’) originating in Malaysia and Taiwan ²³. AAK also referred to a product scope review concerning the anti-dumping measures on imports of grain oriented flat-rolled products of silicon-electrical steel (‘GOES’) originating in the United States of America and Russia, claiming that a thin variant of this product was excluded because no producer had a direct interest in producing it.

• (115) In addition to the two companies mentioned by the AAK in the submission, a third Union producer offers food grade oleic acid to the Union market ²⁴. Furthermore, the Commission noted that in respect of this product, supply can also be obtained from suppliers from Malaysia. Therefore, the claim was rejected.

• (116) AAK and the Musim Mas group requested the exclusion of palmitic acid used for animal feed from the product scope. AAK is a producer of palmitic acid in the Union. However, its total demand exceeds its production capacity. It was stated that pure palmitic acid, with carbon chain length C16, was produced from CPO and CPKO. According to them, tallow could not be used as a raw material for producing palmitic acid for animal feed production, as EU animal feed legislation prohibited the use of animal fat in feed for ruminants ²⁵. It was further stated that European production of palmitic acid was negligible with only two other Union producers of palmitic acid, namely KLK and IOI Oleo GmbH. AAK estimated that the demand in the Union of palmitic acid was 45 000 tonnes per year. AAK stated that pure palmitic acid was not substitutable with other fatty acids, nor could other fatty acids replace palmitic acid. Furthermore, it was stated that fatty acids made from rapeseed/canola, which allegedly is the main raw material available in the Union, were not suitable for animal feed as it did not support cow milk production, as palmitic acid does. According to AAK, Union producers lack the incentives to produce palmitic acid in significant quantities due to the low demand for stearic acid, as these products are produced in parallel. AAK suggested that this exclusion could be implemented by removing C16 from the product definition.

• (117) In response to the claims Cailà & Parés stated that it could produce 17 000 tonnes of palmitic acid per year once the level playing field is restored on the Union market, which Cailà & Parés stated constituted a significant share of the Union demand.

• (118) In view of the above, the Commission accepted the argument that the profitability of palmitic acid production is associated with the demand for stearic acid. However, it took the view that restoring a level playing field in the Union for all fatty acids, including palmitic and stearic acids, would likely restore also the Union producers’ incentives to produce palmitic acid in significant quantities, including palmitic acid suitable for animal feed. Furthermore, there are other sources of supply for palmitic acid such as Malaysia. On this basis, and taking into account the information provided by Cailà & Parés on its production capacity that is higher that the volume of imports from Indonesia and also higher than the demand of AAK, the Commission rejected the request for the exclusion of palmitic acid.

• (119) In their comments following final disclosure, the Musim Mas group and AAK reiterated their request to exclude palmitic acid from the product scope. Both companies questioned Cailà & Parés’ capability to increase its palmitic acid production after the imposition of the anti-dumping measures. In particular, the Musim Mas group stated that it was a speculative claim, without any evidentiary support. AAK reiterated that the production of palmitic acid was coupled with the production of pure stearic acid and that there was no market for the latter in the Union as the main use of pure stearic acid was the production of AKD (Alkyl-Ketene-Dimer) wax, which was no longer produced in the Union.

• (120) The Commission did not accept these arguments, neither on technical capacity nor on incentives to produce palmitic acid. As regards technical capacity, the Commission confirmed during the verification visit at Cailà & Parés’ premises that the overall capacity of the company for fatty acid production was significantly higher than its stated capacity for the production of palmitic acid (including the respective co- or by- products) and it did not reveal any obvious bottlenecks that could be specific for an increased production of palmitic acid. As regards incentives, and as stated in recital (118), the investigation confirmed that palmitic acid production is coupled with the production of stearic acid. However, contrary to what AAK suggested, the latter is not limited to pure stearic acid. For Cailà & Parés in particular, the co-products of palmitic acid production are other types of stearic acid which are sold in significant quantities in the Union. Therefore, the Commission maintains that the imposition of measures on fatty acids, including palmitic acids and stearic acids, would likely also restore incentives for the production of palmitic acid in the Union.

• (121) The Musim Mas group also argued that palmitic acid was not intended to be covered by the complaint as the complaint intended to address fatty acids for human consumption, and not for animal consumption. Moreover, according to the Musim Mas group, Union production of palmitic acid was unsuitable for animal feed applications because it used tallow as feedstock, and therefore could not meet certain requirements, such as Kosher and Halal. The Musim Mas group concluded that the Commission rejected the exclusion request merely due to the possibility of shifting the supply of palmitic acid to Malaysia.

• (122) The Commission did not accept these arguments. In addition to ‘food’, the complaint explicitly makes reference to ‘feed’ ²⁶, as an application of the products in its scope. Furthermore, the investigation has shown that Union producers use vegetable oils, including palm oil, for their palmitic acid production. Finally, the Commission notes that, as shown above, rather than relying merely on other non-Union producers, it has also assessed the ability and incentives of the Union industry to increase its palmitic acid production.

• (123) The Musim Mas group stated that as there was no export duty or export levy on coconut oil, the fatty acid produced from coconut oil should not be the target of the complaint.

• (124) The Commission notes that although the complaint alleges distortions of CPO and CPKO due to export duty and export levy for the purposes of Article 7(2a) of the basic Regulation, the complaint and the investigation cover all types of fatty acid covered by the product definition, and not only the types produced from CPO and CPKO. In any event, the investigation did not reveal any type of fatty acid being exported from Indonesia to the EU that was produced only from coconut oil. Therefore, the claim was rejected.

• (125) In their comments following final disclosure, NYCO asked the Commission to exclude from the product scope C8-C10 fatty acids. In this regard, NYCO stated that C8-C10 fatty acids are a very specific form of fatty acid produced in limited quantities in the Union. This fatty acid was also imported from Indonesia and Malaysia. NYCO submitted that since September 2021 there was a worldwide shortage of C8-C10 fatty acid on the market, resulting in a significant price increase of this fatty acid. NYCO claimed that the imposition of anti-dumping duties on this product would have very negative consequences on its global competitiveness and profitability and asked the Commission to exclude this fatty acid from the product scope.

• (126) The Commission noted that comments on the product scope should have been submitted in the early stages of the investigation, in order to allow sufficient time to assess their merit and to give the opportunity to other interested parties to react to them. Furthermore, NYCO did not submit any basic physical, chemical and technical characteristics that could differentiate this type of fatty acid from the other types of fatty acids covered by the investigation. As regards the substantive points of the request, and in particular in relation to Union interest, these are addressed in recital (470). In view of these considerations, the claim was rejected.

• (127) In their comments following final disclosure, Wilmar stated the product covered by measures should explicitly exclude any products covered by Taric codes excluded from the calculation of imports.

• (128) The Commission confirmed that the description of product concerned above was compatible with the calculation of imports. The Taric codes used to describe the product are given for information only.

3. DUMPING

3.1.   Normal value

• (129) According to Article 2(1) of the basic Regulation, ‘the normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’.

• (130) The Commission first examined whether the total volume of domestic sales for each sampled cooperating exporting producer was representative, in accordance with Article 2(2) of the basic Regulation. On this basis, the total sales by each sampled exporting producer of the like product in the domestic market were found representative.

• (131) The Commission subsequently identified the product types sold domestically that were identical or comparable with the product types sold for export to the Union for both exporting producers.

• (132) The Commission then examined whether the domestic sales by each sampled exporting producer in its domestic market for each product type that is identical or comparable with a product type sold for export to the Union were representative, in accordance with Article 2(2) of the basic Regulation. The Commission established that the domestic sales of certain product types were not representative for both sampled exporting producers.

• (133) The Commission next defined the proportion of profitable sales to independent customers on the domestic market for each product type during the investigation period 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.

• (134) The normal value is based on the actual domestic price per product type, irrespective of whether those sales are profitable or not, if:

• (a) the sales volume of the product type, sold at a net sales price equal to or above the calculated cost of production, represented more than 80 % of the total sales volume of this product type; and

• (b) the weighted average sales price of that product type is equal to or higher than the unit cost of production.

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

• (136) The normal value is the actual domestic price per product type of only the profitable domestic sales of the product types during the IP, if:

• (a) the volume of profitable sales of the product type represents 80 % or less of the total sales volume of this type: or

• (b) the weighted average price of this product type is below the unit cost of production.

• (137) The analysis of domestic sales showed that at least 80 % of the domestic sales of each product type was profitable and that their weighted average sales price was higher than the cost of production. Accordingly, the normal value was calculated as a weighted average of the prices of all domestic sales for those product types during the IP.

• (138) For certain product types for which there were no or insufficient sales of a product type of the like product in the ordinary course of trade or where a product type was not sold in representative quantities on the domestic market, the Commission constructed the normal value in accordance with Article 2(3) and (6) of the basic Regulation, unless it was considered more appropriate to use the price of a sufficiently comparable product type sold on the domestic market which could be adjusted for differences in physical characteristics for the purposes of ensuring a fair comparison with the relevant export price, as indicated in recital (145).

• (139) For certain product types, normal value was constructed by adding the following to the average cost of production of the like product of the cooperating sampled exporting producers during the investigation period:

• (a) the weighted average selling, general and administrative (‘SG&A’) expenses incurred by the cooperating sampled exporting producers on domestic sales of the like product, in the ordinary course of trade, during the IP; and

• (b) the weighted average profit realised by the cooperating sampled exporting producers on domestic sales of the like product, in the ordinary course of trade, during the IP.

• (140) For the product types not sold in representative quantities on the domestic market, the average SG&A expenses and profit of transactions made in the ordinary course of trade on the domestic market for those types were added. For the product types not sold at all on the domestic market, the weighted average SG&A expenses and profit of all transactions made in the ordinary course of trade on the domestic market were added.

3.2.   Export price

• (141) The sampled exporting producers exported to the Union through related companies acting as an importer in the Union.

• (142) Thus, the export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses, and for profits accruing.

• (143) As to the profit margin, due to the non-cooperation of any unrelated importer as stated in recital (38), the Commission decided to resort to the profit margin used in a previous proceeding concerning another chemical product manufactured by a similar industry and imported under similar circumstances, namely a profit margin of 6,89 % ²⁷ established in the recent PVA investigation.

3.3.   Comparison

• (144) The Commission compared the normal value and the export price of the sampled exporting producers on an ex-works basis.

• (145) Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for differences in physical characteristics, handling, loading and ancillary expenses, freight in the country concerned, domestic insurance, domestic ocean freight, freight in the Union, credit costs, bank charges, ocean freight, ocean insurance, packing expenses, warranty and guarantee expenses, and commissions.

• (146) An adjustment under Article 2(10)(i) was made for sales through related trading companies. It was found that the functions of the traders in Singapore and the United Kingdom were similar to those of an agent. Those traders were looking for customers, established contact with them, bore the responsibility of the selling process, received a mark-up for their services, and traded a broad array of goods other than the product concerned. The adjustment consisted of the SG&A of the trading companies and the profit stated in recital (143).

• (147) In their comments following final disclosure, Wilmar claimed that it formed a single economic entity with its related trader in Singapore, WTPL and therefore no adjustments on the basis of Article 2(10)(i) of the basic Regulation should be made for sales made by WTPL. In the confidential version of its submission, Wilmar elaborated on its claim in more detail. Furthermore, Wilmar claimed that even if Wilmar and WTPL did not form a single economic entity, the conditions for the application of Article 2(10)(i) of the basic Regulation were not satisfied in case of Wilmar sales through WETBV and Volac Wilmar Feed Ingredients Ltd (‘VWFI’). Wilmar stated that it was WETBV and VWFI – and not WTPL – that looked for customers, established contact with them, bore the responsibility of the selling process and received a mark-up for their services. Wilmar referred to the sales contracts, purchase orders, invoices, bills of lading, clearance documents, clearance confirmations and bank statements that are all addressed to WETBV and VWFI, and not to WTPL. WTPL thus had no involvement in sales made by WETBV and VWFI to unrelated parties in the EU and thus did not perform any functions similar to those of an agent. Therefore, there should be no adjustment for WTPL’s SG&A and profit for EU sales that Wilmar made through WETBV and VWFI. Wilmar also referred to the anti-dumping investigation of imports of mixtures of urea and ammonium nitrate originating in Russia ²⁸. In that investigation, a Russian exporter had sold the product under investigation first to a related trader in Switzerland that subsequently re-sold it to the related importer in the EU, and the Commission adjusted the sales prices to an unrelated customer in the EU only for the SG&A and profit of the related importer in the EU under Article 2(9) of the basic Regulation, but not for the profit of the related trader in Switzerland. In their comments following the additional disclosure, Wilmar claimed that as the Commission used the methodology from the Biodiesel investigation (referred to in recital (163)) for P.T. Musim Mas for the calculation of export price, based on the principle of non-discrimination, the Commission should also use for WINA the methodology in the Biodiesel investigation and in particular construct an export price without deductions of WTPL’s SGA and profit.

• (148) The Commission carefully reviewed the comments by Wilmar received following final and additional disclosures, and on the basis of all relevant factors, considered that the evidence put forward by Wilmar justified treating Wilmar and WTPL as a single economic entity.

• (149) Furthermore, Wilmar contested the use of the profit margin of 6,89 % stated in recital (143) claiming that it was outdated, did not take into account the recent market development such as significant fluctuations of raw material prices and transport costs and was not applicable to the product concerned.

• (150) As explained in recital (38), no unrelated importers cooperated in the current investigation. Therefore, in the absence of any alternative data on file which could be used, the Commission decided to use the profit margin established in the recent PVA investigation. This profit margin is the most objective basis available for the purpose of arriving at a satisfactory estimate of an arm’s length and therefore reasonable export price, based on detailed sales data for a similar product. The Commission noted that Wilmar did not suggest other alternatives. Therefore, the claim was rejected.

• (151) Wilmar also stated that the profit margin established in the PVA investigation was for an unrelated importer in the Union and therefore it claimed that it was inapplicable in the present case for the adjustment of profits of a trader in a third country, whose activity is different than the one of an importer in the Union.

• (152) It is the Commission practice to use the profit of an unrelated importer in the Union as a proxy for a profit of a trader in a third country in the absence of any alternative data on file which could be used. The Commission noted that Wilmar did not suggest other alternatives. Therefore, the claim was rejected.

• (153) In relation to the construction of the normal value for the PCN (product control number) whose sales were considered not to be in the ordinary course of trade by reason of price, Wilmar claimed that the Commission should have calculated the profit margin on the basis of all domestic sales including the sales pertaining to the PCN for which the normal value needed to be constructed. According to Wilmar, since overall for all PCNs taken together, profitable domestic sales account for more than 80 % of total domestic sales, all the domestic sales have to be considered to be in the ordinary course of trade.

• (154) The Commission noted that Wilmar’s argument is intrinsically contradictory and, in any event, is mixing two provisions of the basic Regulation. First, as to the intrinsic contradiction, Wilmar’s argument loses sight of the fact that the ordinary course of trade test is conducted at the level of each PCN. The purpose is to determine, for each PCN, whether the relevant sales are in the ordinary course of trade in relation to the relevant costs. In the case at hand, it is because the sales of the said PCN were considered not to be in the ordinary course of trade that the normal value for that PCN needed to be constructed. While Wilmar does not contest that conclusion reached on the basis of Article 2(4), third subparagraph, it argues that the very same sales should nevertheless be used for the computation of a profit margin in the ordinary course of trade pursuant to Article 2(6). The Commission disagreed. Sales that were lawfully considered not to be in the ordinary course of trade and could therefore be excluded from the normal value determination (which Wilmar does not contest) cannot subsequently be used to compute a profit margin in the ordinary course of trade. Therefore, the claim was rejected.

• (155) Wilmar also claimed that for the product types sold on both the domestic and export market, when constructing the normal value, the Commission should have used the data of cost of production for export (table EUCOP and not DMCOP). In this regard Wilmar referred to the judgment in joined cases C273/85 and C-107/86 ²⁹, which stated in paragraph 16 that ‘the purpose of constructing the normal value is to determine the selling price of a product as it would be if that product were sold in its country of origin or in the exporting country’.

• (156) The Commission noted that the same judgment in the same paragraph states that ‘Consequently, it is the expenses relating to sales on the domestic market which must be taken into account’, and therefore the cost of production on the domestic market. Furthermore, it is recalled that normal value is the price paid or payable, in the ordinary course of trade, by independent customers in the exporting country and therefore for constructing the normal value the Commission must use the cost of production for the product sold on the domestic market and not the exported ones. Therefore, the claim was rejected.

• (157) Wilmar also claimed that the related sales of its importer in the Union should be excluded from the calculation of the dumping margin, arguing that it was the Commission’s standard practice to exclude sales made to related parties for captive use from the dumping margin calculation, as it is impossible in such cases to establish an export price on the basis of the price at which the imported product was first resold to independent customers in the Union in accordance with Article 2(9) of the basic Regulation.

• (158) The Commission disagreed with this claim. The Commission does not have such a practice. In fact, pursuant to the Appellate Body compliance report in EC – Fasteners (DS397) ³⁰, the dumping calculations must cover 100 % of export transactions. Furthermore, as specified in Article 2(9) of the basic Regulation, if the products are not resold to an independent buyer, the price may be established on any reasonable basis. Therefore, in view of the fact that the volume of these sales represent around 1 % of total exports to the Union, and as the related price is slightly lower than the unrelated price, the Commission revised the calculation of the export price by using the price to unrelated customers as a proxy for the price to related customers for the same product types.

• (159) Wilmar also claimed that the SG&A expenses of its related importer in the Union should be determined without the financial costs. In the confidential version of its submission, Wilmar elaborated in more details this claim.

• (160) The Commission disagreed with this claim. More details regarding the Commission’s assessment were provided to Wilmar in its specific disclosure as it included business confidential information.

• (161) Wilmar also claimed that the Commission deducted twice certain expenses of WETBV, once as an allowance in the calculation of the export price and then as included in the SG&A. In the confidential version of its submission, Wilmar elaborated in more details on this claim.

• (162) This claim was found to be justified and therefore the Commissions agreed to revise the calculation of the export price accordingly.

• (163) In their comments following final disclosure, the Musim Mas group claimed that in view of the fact that the Commission concluded in recitals (388) to (400) that the cost of production of domestic sales was distorted by the Indonesian government’s export duties and levies imposed on crude palm oil and crude palm kernel oil along with a maximum price, this meant that also the profit margin resulting from comparing the cost of production for domestic sales with the domestic sales was distorted and could not be used as the profit margin for constructed normal value. In this regard the Musim Mas group referred to the Biodiesel investigation ³¹ in which the Commission did not use the actual profit of domestic sales. Furthermore, the Musim Mas group stated that the Commission used a 6 % profit as a benchmark for its analysis of the Union industry, while it used a profit margin nine times higher to construct normal value. Therefore, Musim Mas group stated that the Commission used an unreasonable profit margin for constructing normal value. Furthermore, Musim Mas group stated that, as the Commission used distorted costs to calculate a distorted profit, this resulted in a distorted dumping margin higher than the injury margin, which in turn created a situation whereby the Commission could invoke Article 7(2a) of the basic Regulation to investigate those same costs and conclude that those costs were distorted. Therefore, Musim Mas group stated that the Commission should either use an undistorted profit rate for constructing normal value in its dumping calculation before applying Article 7(2a), or not apply Article 7(2a) at all.

• (164) The Commission disagrees with this claim. Musim Mas is mixing different provisions of the basic Regulation, i.e. Article 2(1) to (7) for the determination of the normal value, and Article 7(2a) for setting the level of measures. The Commission normally cannot disregard the actual profit of the exporters of domestic sales for the construction of normal value in a country, unless it can be rejected pursuant to Articles 2(6) or 2(6a) of the basic Regulation. Furthermore, Article 7(2a) of the basic Regulation does not cover the calculation of the normal value. Article 7(2a) allows the Commission to set the measures at the level of the dumping margin in situations where the complainant claimed the existence of raw materials distortions and the investigation confirms such allegations. The normal value is calculated in isolation of this provision. Therefore, the Commission cannot disregard the profit margin of the domestic sales made in the ordinary course of trade. As regards the methodology used by the Commission in the Biodiesel investigation mentioned by the Musim Mas group, it is highlighted that this methodology was rejected by both the General Court in Musim Mas v Council ³², Pelita Agung Agrindustri v Council ³³ and Wilmar Bioenergi Indonesia and Wilmar Nabati Indonesia v Council ³⁴, and the WTO Panel in EU – Biodiesel (Indonesia) ³⁵. As regard the profit margin of 6 % referred to by the Musim Mas group, this is the target profit of the Union industry which is a different concept than the profit margin of the domestic sales made in the ordinary course of trade for the exporters. The target profit is the minimum profit provided for in the basic Regulation for the calculation of the target price and the injury margin. Therefore, the claim was rejected.

• (165) The Musim Mas group also stated that ICOF Singapore serves as the marketing unit of Musim Mas Holdings (‘MMH’) and its subsidiaries. MMH is the ultimate corporate parent of various entities. Therefore, according to the Musim Mas group, MMH is a consolidated corporate legal entity which constitutes a single economic entity. Furthermore, it was stated that Musim Mas was 95 % owned by Musim Mas Resources which in turn is 99,95 % owned by MMH. ICOF Europe is a 100 % subsidiary of ICOF Singapore. Furthermore, the Musim Mas group stated that all accounts, including profit and loss information were consolidated into MMH. Therefore, it was stated that, as MMH is a single economic entity, the profit used by the Commission in calculating the dumping rate for the Musim Mas group should be inclusive of all profit for MMH and its subsidiary as Musim Mas, ICOF Singapore and ICOF Europe are all subsidiaries of MMH. Therefore, the Commission should not deduct the 6,9 % profit for sales made through ICOF Europe because this would result in a duplicative adjustment of profit resulting from the profit in constructed normal value, or the profit generated from sales made on the domestic market. Furthermore, it was stated that as regards ICOF Singapore, the Commission should not have deducted the hypothetical profit of 6,9 % and the actual SG&A of ICOF Singapore. In this regard, the Musim Mas group referred to the Biodiesel investigation where the Commission deducted ICOF Singapore’s actual mark-up for biodiesel.

• (166) The Commission disagreed with the Musim Mas group’s claim that Musim Mas and ICOF Singapore form a single economic entity. The Commission did not consider that Musim Mas had demonstrated, based on all relevant factors, that Musim Mas and ICOF Singapore formed a single economic entity. In fact, the investigation revealed that the sales between Musim Mas and ICOF Singapore were governed by a framework agreement. Moreover, as recalled in recital (146), ICOF Singapore traded a large array goods other than the product concerned, and it was not a party to any of the domestic sales of Musim Mas. More details regarding the Commission’s assessment were provided to Musim Mas in its specific disclosure as it included business confidential information.

• (167) However, in view of this framework agreement, the Commission revised the calculation of the export price for the sales via ICOF Singapore by deducting the actual mark-up from the export price instead of the profit of unrelated importer and the SG&A of ICOF Singapore.

• (168) As concerns the export sales via the related importer ICOF Europe, the Commission disagrees with the claim that no profit of unrelated importer and SG&A should be deducted. As ICOF Europe is an importer in the Union, the export price of its Union sales should be established pursuant to Article 2(9) of the basic Regulation.

3.4.   Dumping margins

• (169) For the sampled cooperating exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

• (170) On this basis, the definitive weighted average dumping margins expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

Company	Definitive dumping margin (%)
P.T. Musim Mas	46,4
P.T. Wilmar Nabati Indonesia	15,2

• (171) For the cooperating exporting producers outside the sample, the Commission calculated the weighted average dumping margin, in accordance with Article 9(6) of the basic Regulation. Therefore, that margin was established on the basis of the margins of the sampled exporting producers.

• (172) On this basis, the definitive dumping margin of the cooperating exporting producers outside the sample is 26,6 %.

• (173) For all other exporting producers in Indonesia, the Commission established the dumping margin on the basis of the facts available, in accordance with Article 18 of the basic Regulation. To this end, the Commission determined the level of cooperation of the exporting producers. The level of cooperation is the volume of exports of the cooperating exporting producers to the Union expressed as proportion of the total imports from the country concerned to the Union in the IP, that were established on the basis of the methodology explained in recital (195).

• (174) The level of cooperation in this case was high because the exports of the cooperating exporting producers covered the totality of imports during the IP. On this basis, the Commission decided to establish the dumping margin for non-cooperating exporting producers at the level of the sampled company with the highest dumping margin.

• (175) The definitive dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

Company	Definitive dumping margin (%)
P.T. Musim Mas	46,4
P.T. Wilmar Nabati Indonesia	15,2
Other cooperating companies	26,6
All other companies	46,4

• (176) In their comments following final disclosure, the Greven group claimed that the Commission was not transparent enough with the calculation of the dumping margins and it should disclose more information on this.

• (177) The Commission disagreed with this claim. The calculation methodology is fully explained in recitals (129) to (175). However, the Commission cannot disclose the calculations of the individual dumping margins of the sampled exporting producers to other interested parties as those calculations include confidential information. The Commission has disclosed the details of the calculations to the sampled exporting producers and they were able to provide comments in this regard. The Commission addressed these comments in recitals (147) to (168) and revised the calculations when appropriate. Therefore, this claim was rejected.

• (178) The Greven group also argued that the high difference between the dumping margins of the two sampled exporting producers did not seem reasonable.

• (179) The dumping margins of the two sampled exporting producers have been calculated based on their own sales and cost data which was verified during the on-spot verification visit at their premises. The fact that for one exporting producer the dumping margin was higher than for the other one is irrelevant. Therefore, the claim was rejected.

4. INJURY

4.1.   Definition of the Union industry and Union production

• (180) The investigation showed that 15 producers in the Union were manufacturing the like product during the investigation period. They constitute the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

• (181) The total Union production during the investigation period was established at around 872 000 tonnes. The Commission established that figure on the basis of the macro data contained in the questionnaire supplied by CUTFA. The sampled Union producers represented around 61 % of the total Union production of the like product.

• (182) Wilmar and the Musim Mas group claimed that certain Union producers should be excluded from the definition of the Union industry because of a relationship with Indonesian and Malaysian producers of the product concerned. In particular, Wilmar and the Musim Mas group stated that KLK, a sampled Union producer, was part of a Malaysian group related to a fatty acid producer in Indonesia. Wilmar and the Musim Mas group also stated that Oleon was related to a Malaysian producer of fatty acid, Oleon Asia-Pacific Sdn Bhd and Oleon Port Klang Sdn Bhd, who exported to the Union and was in competition with the imports of Indonesia. The GOI also requested the Commission to examine this claim.

• (183) The examination of the above claim showed that KLK imported limited quantities of fatty acid from Indonesia and that less than 5 % of its Union sales were resales of imported products. Furthermore, the fact that Oleon was related to a company in Malaysia is not relevant for the current investigation as this investigation covers imports from Indonesia. The Commission, therefore, found no grounds to exclude this company from the definition of the Union industry, either on the grounds of being an importer of fatty acid, or because of its relationship to companies in Indonesia or Malaysia.

• (184) Wilmar also claimed that Temix International – Temix Oleo was part of the same group of companies as P.T. Sinar Mas Agro Resources and Technology TbK which is an Indonesian exporting producer. Golden Agri Resources Ltd held 92 % stake in P.T. Sinar Mas and 25 % in Temix Oleo S.r.l. Therefore, Wilmar claimed that on the basis of this relationship, Temix Oleo S.r.l should be removed from the definition of the Union industry.

• (185) However, it should be noted that Temix International – Temix Oleo was not a sampled producer and data relating to this company has only been used to establish macroeconomic trends, such as sales and production volumes. As such data could not be distorted by a relationship with an exporting producer, it was not considered appropriate to examine this matter further.

4.2.   Union consumption

• (186) The Commission established the Union consumption on the basis of the verified Union industry data supplied by CUTFA concerning the sales in the EU free market and the transfers for captive use by all 15 producers included in the definition of the Union industry. Import volumes from all countries were obtained from Eurostat.

• (187) Fatty acids are normally sold on the free market but can also be used as an intermediate material for the manufacture of downstream products. The Commission found that around 11 % of the Union producers’ production of the like product was destined for captive use. These quantities were simply transferred (without invoicing), and/or delivered at transfer prices, within the same company or groups of companies for further downstream processing.

• (188) To provide a picture of the Union industry that is as complete as possible, the Commission obtained data for the entire product activity and determined the production destined for captive use and that for the free market.

• (189) Table 1 below shows that only a small part of the total Union industry’s production was destined for captive use during the period considered. It also shows that the captive market was stable at around 8 % of consumption in that period. For the sake of completeness, and where appropriate, the figures for the small captive market are shown, and separately analysed as part of the overall assessment of the relevant injury indicator. For other indicators, such as production, capacity, productivity, employment and wages, the figures quoted below relate to the whole activity and no separation of figures was considered to be necessary.

• (190) Union consumption developed as follows:

Table 1

Union consumption tonnes

	2018	2019	2020	Investigation period
Total Union consumption	1 278 072	1 295 034	1 240 681	1 219 265
Index	100	101	97	95
Captive market	92 607	92 409	87 133	94 575
Index	100	100	94	102
Free market consumption	1 185 465	1 202 625	1 153 549	1 124 691
Index	100	101	97	95
Source: CUTFA and Eurostat	Source: CUTFA and Eurostat	Source: CUTFA and Eurostat	Source: CUTFA and Eurostat	Source: CUTFA and Eurostat

• (191) The free market consumption in the Union decreased by 5 % during the period considered. A detailed analysis shows that from 2018 to 2019 the Union market increased by 1 % from around 1,19 to 1,20 million tonnes and in 2020 it fell by 4 % to around 1,15 million tonnes. In the IP, free market consumption fell by a further 2,5 % to reach 1,12 million tonnes.

• (192) The fluctuation and overall decrease over the period considered was due to the development in certain sectors of users, such as home care, often due to factors relating to the Covid-19 pandemic in particular in 2020 and the IP. Apart from this temporary phenomenon, the Union producers considered that demand for fatty acids in the Union market was in general stable.

• (193) The trends and development in the total market (namely including captive use) were very similar to those observed in the free market.

• (194) Developments in the captive market are shown and analysed at Table 5 below.

4.3.   Imports from the country concerned

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

• (195) The Commission established the volume of imports on the basis of Eurostat figures collected for the CN and Taric codes mentioned in the Notice of Initiation. In order to obtain reliable import data for the product concerned, the import figures available were adjusted because not all codes were fully related to the product concerned. For import codes partially related to the product concerned, a percentage was obtained from the Taric codes set up at the date of the Notice of Initiation. The data covered the period from December 2021 to April 2022. For such codes, a percentage was calculated for both imports from Indonesia and those from third countries. For all countries, a further 2 % deduction to the import volume was applied to cover imports which were recorded under the relevant codes but which were below 97 % in terms of the DoS. The 2 % figure was calculated on the basis of the sampling form replies of the cooperating exporting producers, which revised the sampling form replies after the Commission clarified the product scope as stated in recital (71).

• (196) The above methodology for calculating imports was described in a Note to the file, dated 2 June 2022, and interested parties were given the opportunity to comment on it. The volume of imports does not include the fatty acid that was excluded from the product scope of the investigation.

• (197) Several interested parties commented on the Note but did not object to the methodology as such, nor did they suggest an alternative methodology to reliably establish the import volumes of the fatty acids concerned by the investigation.

• (198) CUTFA suggested that the adjustment of 2 % was not appropriate, arguing that the Commission’s methodology relying on percentages already took account of fatty acids with a DoS value of at least 97 %.

• (199) The Commission noted that at least until the end of April 2022, the description of the codes listed in the complaint did not cover the DoS criterion. Therefore, the suggestion to abandon the 2 % adjustment was not justified and could not be accepted.

• (200) The market share of the imports from all third countries was established on the basis of the total imports established per country and compared to the free market consumption shown in Table 1 above.

• (201) Imports into the Union from the country concerned developed as follows:

Table 2

Import volume (tonnes) and market share

	2018	2019	2020	Investigation period
Volume of imports from the country concerned (tonnes)	202 755	228 139	231 243	228 156
Index	100	113	114	113
Market share of free market (%)	17,1	19,0	20,0	20,3
Index	100	111	117	119
Source: Eurostat and CUTFA	Source: Eurostat and CUTFA	Source: Eurostat and CUTFA	Source: Eurostat and CUTFA	Source: Eurostat and CUTFA

• (202) The volume of dumped imports from the country concerned increased from around 203 000 tonnes to around 228 000 tonnes over the period considered, an overall increase of 13 %. Import quantities rose by 11 % in 2019, but after that remained stable at around 230 000 tonnes. The information collected during the investigation suggested that some exporting producers experienced problems relating to the Covid-19 pandemic, including supply chain issues (see in particular recital (266)).

• (203) Nevertheless, the market share of those imports increased in all years, from 17,1 % to 20,3 % over the period considered, an overall increase of 3,2 percentage points or by 19 %.

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

• (204) The Commission established the prices of imports on the basis of Eurostat figures. The relevant imports were identified using the methodology explained in recital (195). These figures were crosschecked to the figures of the sampled exporting producers, confirming the same trends.

• (205) The weighted average price of imports into the Union from the country concerned developed as follows:

Table 3

Import prices (EUR/tonne)

	2018	2019	2020	Investigation period
Indonesia	912	765	805	1 023
Index	100	84	88	112
Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat	Source: Eurostat

• (206) Import prices from Indonesia increased from 912 to 1 023 EUR/tonne over the period considered, a rise of 12 %. Prices fell by 12 % from 2018 to 2020 but then rose by 27 % from 2020 to the IP. These developments should be seen in the light of the worldwide raw material price increase in that period, which is the main reason for the increase in costs. As shown in Table 7, the increase in raw material prices was the main reason for the increases of the Union prices. Similarly, the unit costs of production of Indonesian exporters also increased in the IP as compared to 2020 due to an increase in their raw materials prices.

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

• (i) the weighted average sales prices per product type of the sampled Union producers charged to unrelated customers on the Union market, adjusted to an ex-works level;

• (ii) and the corresponding weighted average prices per product type of the sampled Indonesian exporting producers to the first independent customer on the Union market, established on a cost, insurance, freight (CIF) basis, with appropriate adjustments for customs duties and post-importation costs.

• (208) Where the sale from the sampled Indonesian exporting producers to the first independent customer in the Union market was made through a related sales company based in the Union, the price of the import was established on a CIF basis, by adjusting the sales price to the first independent customer. All costs incurred between the importation and resale, including the SG&A of the related importer and the profit margin as established in recital (143), applying Article 2(9) of the basic Regulation by analogy, were taken into account.

• (209) The price comparison was made 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. The result of the comparison was expressed as a percentage of the sampled Union producers’ turnover during the investigation period. It showed a weighted average undercutting margin of over 20 %. The actual figures calculated are not recorded here for reasons of confidentiality (as they are based on two companies only), but have been disclosed to the cooperating exporting producers concerned and are within the range of 11 % to 29 %. All sales of the sampled Union producers were made directly to independent customers, without related selling entities. One sampled exporting producer sold also directly to independent customers in the Union, without the participation of its related selling entities in the Union. As regards the other exporting producer, the majority of its sales were made through a related selling entity in the Union. No interested party disputed the existence of significant undercutting.

• (210) The Commission further considered other price effects, in particular the existence of significant price depression. Already in the beginning of the period considered, the sales prices and profitability of the Union industry were low (see profitability figures in Table 10). In 2019, the Union industry was forced to decrease its prices further, incurring losses. But for the dumped imports, which showed their highest increase in 2019 and remained at elevated levels in 2020 and the IP, the Union industry would likely have been able to keep its prices at least at the level needed to sell without losses in 2019 and 2020. During 2020 and the IP, Union’s sales prices increased (in parallel with the increase in the costs of production), but again at levels that resulted in losses in 2020 and only marginal profitability in the IP. The Union producers consistently lost market share between 2019 and IP. Thus, the dumped imports were capable of exercising significant price pressure on Union sales, preventing Union producers from increasing prices to accommodate costs increases in a way that would have allowed them to obtain reasonable profits.

4.4.   Economic situation of the Union industry

4.4.1.   General remarks

• (211) In accordance with Article 3(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.

• (212) For the injury determination, the Commission distinguished between macroeconomic and microeconomic injury indicators. The Commission evaluated the macroeconomic indicators on the basis of data contained in the macro questionnaire supplied by CUTFA. The data related to all Union producers. The Commission evaluated the microeconomic indicators on the basis of data contained in the questionnaire replies from the four sampled Union producers. Both sets of data were found to be representative of the economic situation of the Union industry.

• (213) The macroeconomic indicators were produced by CUTFA based on a report of LMC International Ltd ³⁶, an independent company conducting market research in the agriculture and agribusiness sectors, including oleo-chemical products such as fatty acids (‘report data’). The report data has wider scope than the fatty acids covered by this investigation and is widely used by the oleochemical industry. To distinguish the like product from other products, CUTFA used additional information on quantities of raw materials used, relying on the fact that the like product was produced only with specific raw materials, such as palm oil, palm kernel oil or tallow. The products not covered by the investigation use other raw materials, such as rapeseed oil or soya oil. By using this methodology, it was possible to establish the quantity of production and sales of both the product under investigation and other products. Report data was available for the period 2018-2020. Data for the IP was estimated pro rata, based on developments in production and sales of the companies which made their data directly available to CUTFA. Data for other indicators, mentioned below, was also established using the same company data. The calculations made by CUTFA were verified and the macro data was crosschecked with the data collected by the Commission from the sampled Union producers, which represent 61 % of total Union production.

• (214) Wilmar queried why the macro data submitted by CUTFA was lower in volume than the report data, which was available widely to the oleochemical industry.

• (215) This was because of the necessary adjustments, explained in recital (213), made by CUTFA to exclude products out of product scope.

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

• (217) The four sampled producers were the source of the data of the microeconomic indicators.

• (218) The microeconomic indicators are: average unit prices, unit cost of production, 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, production capacity and capacity utilisation

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

Table 4

Production, production capacity and capacity utilisation

	2018	2019	2020	Investigation period
Production volume (tonne)	936 063	924 837	862 055	872 185
Index	100	99	92	93
Production capacity (tonne)	1 161 964	1 134 616	1 097 798	1 118 314
Index	100	98	94	96
Capacity utilisation (%)	80,6	81,5	78,5	78,0
Index	100	101	97	97
Source: CUTFA	Source: CUTFA	Source: CUTFA	Source: CUTFA	Source: CUTFA

• (220) For reasons of efficiency, Union production of the product under investigation is planned for 24 hours per day except in periods of normal maintenance. However, in some cases and to a certain extent, the investigation showed that other products can be produced on the same production facilities. Production is based on orders. Table 4 indicated a spare capacity of around 20 % each year.

• (221) Throughout the period considered the production volume of the Union industry decreased by 7 %. A detailed analysis shows that this fall in production took place mainly in 2020.

• (222) The Union production capacity was calculated on the basis of an achievable maximum production in the long-term, taking into account maintenance. During the period considered, Union production capacity decreased by 4 %. This decrease reflects a reallocation of capacity to other products because of reduced orders of fatty acids. Yet, the Union industry was unable to fully replace the production of fatty acids with other products.

• (223) During the period considered, despite a 4 % reduction in production capacity, Union capacity utilisation fell by 3 %.

4.4.2.2.   Sales volume and market share

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

Table 5

Sales volume and market share

	2018	2019	2020	Investigation period
Total Sales volume on the Union market including captive use (tonne)	947 561	943 413	875 893	862 863
Index	100	100	92	91
Market share (including captive use) (%)	74,1	72,8	70,6	70,8
Index	100	98	95	95
Captive use	92 607	92 409	87 133	94 575
Index	100	100	94	102
Captive use as a % of total market sales	9,8	9,8	9,9	11,0
Index	100	100	102	112
Free market sales	854 953	851 004	788 760	768 288
Index	100	100	92	90
Market share of free market sales (%)	72,1	70,8	68,4	68,3
Index	100	98	95	95
Source: CUTFA	Source: CUTFA	Source: CUTFA	Source: CUTFA	Source: CUTFA

• (225) The trend of Union industry sales (including captive use) was similar to production over the period considered. This is because production in this industry is driven by sales orders. Storage space is typically limited, and stocks of finished goods can over time deteriorate in quality or fall outside specifications. Therefore, inventories are normally kept at very low volumes.

• (226) Throughout the period considered, the total Union sales volume of the Union industry decreased by 9 %.

• (227) Union sales volume on the free market decreased by 10 % over the period considered. From 2018 to 2019 Union sales volumes were stable. However, from 2019 to the IP these volumes decreased by 10 %.

• (228) The Union’s industry captive market (expressed as a percentage of its total Union sales including captive use) was around 10-11 % throughout the period considered.

• (229) The market share of Union sales on the free market decreased from 72,1 % to 68,3 % over the period considered, a fall of 3,9 percentage points or by 5 %.

Growth

• (230) Bearing in mind that the Union industry lost 5 % of market share over the period considered, and its sales on the free market fell by 10 %, it is clear that no growth took place, but rather it was a period of contraction in both absolute terms and in relation to the free market consumption.

4.4.2.3.   Employment and productivity

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

Table 6

Employment and productivity

	2018	2019	2020	Investigation period
Number of employees (FTE)	945	914	952	898
Index	100	97	101	95
Productivity (tonne/employee)	990	1 012	906	971
Index	100	102	91	98
Source: CUTFA	Source: CUTFA	Source: CUTFA	Source: CUTFA	Source: CUTFA

• (232) The Union industry employment fell by 5 % over the period considered on a full time equivalent (FTE) basis.

• (233) Productivity in terms of tonnes per employee fell in 2020, but overall remained largely stable over the period considered.

4.4.2.4.   Magnitude of the dumping margin and recovery from past dumping

• (234) All dumping margins were significantly above the de minimis level. The impact of the magnitude of the actual margins of dumping on the Union industry was considered substantial, given the volume and prices of imports from the country concerned.

• (235) This is the first anti-dumping investigation regarding fatty acid. Therefore, no data were available to assess the effects of possible past dumping.

4.4.3.   Microeconomic indicators

4.4.3.1.   Prices and factors affecting prices

• (236) 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 7

Sales prices and unit cost of production in the Union

	2018	2019	2020	Investigation period
Average unit sales price on the free market (EUR/tonne)	879	770	861	1 101
Index	100	88	98	125
Unit cost of production (EUR/tonne)	856	764	861	1 056
Index	100	89	101	123
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (237) Sales on the Union market to unrelated customers were made to both independent traders and to end-users in a large number of user sectors. Prices to both types of customers and to the various sectors were set in the same way and at a similar level.

• (238) Sales prices on the Union market to unrelated parties (in the free market) increased from 879 EUR/tonne to 1 101 EUR/tonne over the period considered, an increase of 25 %. These sales prices fell by 12 % in 2019, but increased by 12 % in 2020 and 28 % in the IP.

• (239) This apparent positive trend should be seen in the context of important increases in raw material costs. During the IP, these costs represented more than 70 % of the full unit production cost. This unit cost of production increased by 23 %, over the period considered, namely at a rate similar to the average sales prices increase in the free Union market.

4.4.3.2.   Labour costs

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

Table 8

Average labour costs per employee

	2018	2019	2020	Investigation period
Average labour costs per employee (EUR)	81 344	85 487	89 010	87 188
Index	100	105	109	108
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (241) The average labour costs per employee increased by 8 % over the period considered. Developments in salaries were negotiated with labour unions and other employee related costs were set by national administrations.

4.4.3.3.   Inventories

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

Table 9

Inventories

	2018	2019	2020	Investigation period
Closing stocks (tonnes)	21 784	23 066	23 708	19 013
Index	100	106	109	87
Closing stocks as a percentage of production	3,8	4,1	4,5	3,6
Index	100	108	116	93
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (243) The stocks of the sampled Union producers decreased by 23 % over the period considered. However, closing stocks as a percentage of production were low throughout the period. As mentioned in recital (225) above, this is because the fatty acid industry generally operates on a production to order basis and stocks are kept at a low level because they can deteriorate in quality or change specifications. This indicator is therefore of a lesser importance in the overall injury analysis.

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

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

Table 10

Profitability, cash flow, investments and return on investments

	2018	2019	2020	Investigation period
Profitability of sales in the Union to unrelated customers (% of sales turnover)	1,9	– 0,5	– 2,1	2,5
Index	100	– 27	– 108	128
Cash flow (EUR)	27 037 404	12 370 885	–1 239 176	22 774 816
Index	100	46	– 5	84
Investments (EUR)	7 394 509	11 769 077	10 473 680	8 531 863
Index	100	159	142	115
Return on investments (%)	9,0	0,6	– 4,4	12,1
Index	100	7	– 48	134
Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers	Source: Sampled Union producers

• (245) The Commission established the profitability of the 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 of the sampled producers remained low, namely below 3 %, throughout the period considered and even declined from 1,9 % in 2018 to – 2,1 % in 2020. In the investigation period, profitability recovered to 2,5 %, although it remained at low levels. The slight recovery in the IP was because customers in the Union market were more likely to accept price increases from Union producers as exporting producers were impacted by the supply chain crisis in the context of the COVID-19 pandemic.