Commission Implementing Regulation (EU) 2024/1064 of 9 April 2024 imposing a provisional anti-dumping duty on imports of certain alkyl phosphate esters originating in the People’s Republic of China

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 7 thereof,

After consulting the Member States,

Whereas:

(1) On 11 August 2023, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports of certain alkyl phosphate esters originating in the People’s Republic of China (‘China’) 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 30 June 2023 by ICL Europe U.A., Lanxess Deutschland GmbH and PCC Rokita S.A. (‘the complainants’). The complaint was made by the Union industry of certain alkyl phosphate esters (‘APE’) 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 21 December 2023, the Commission initiated a separate anti-subsidy investigation regarding imports of APE originating in China by publishing a Notice of Initiation in the Official Journal of the European Union (3).

(4) Under Article 14(5a) of the basic Regulation, the Commission shall register imports subject to an anti-dumping investigation during the period of pre-disclosure unless it has sufficient evidence within the meaning of Article 5 that the requirements either under point (c) or (d) of Article 10(4) are not met.

(5) The Commission did not register imports during the period of pre-disclosure as there was no increase in import quantities after the initiation of the investigation and therefore the conditions in Article 10(4) were not met.

(6) The Union industry requested the registration of imports under Article 14(5) in the complaint and its submission of 11 December 2023. The request was denied on the basis that import quantities decreased following the initiation of the investigation.

(7) In the Notice of Initiation, the Commission invited interested parties to contact it to participate in the investigation. In addition, the Commission specifically informed the complainants, the known exporting producers and the Chinese authorities, known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(8) 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.

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

(10) In the Notice of Initiation, the Commission provided for the possibility to select a sample of Union producers. Given that the three producers acting as complainants were understood to represent all the Union industry, the Commission provisionally decided that a sample was not necessary.

(11) The Commission invited interested parties to comment on the provisional decision to investigate all three known Union producers. No comments were received and the decision to investigate all three known Union producers was confirmed.

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

(13) Two unrelated importers provided the requested information and agreed to be included in the sample. In view of the low number of replies, the Commission decided that sampling was not necessary and asked the cooperating importers to submit replies to the questionnaire.

(14) To decide whether sampling was necessary and, if so, to select a sample, the Commission asked all exporting producers in China to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the People’s Republic of China to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(15) 14 exporting producers in China provided the requested information and agreed to be included in the sample.

(16) In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three exporting producers based on the largest representative volume of exports to the Union which could reasonably be investigated within the time available.

(17) In accordance with Article 17(2) of the basic Regulation, all known exporting producers and the Chinese authorities were consulted on the selection of the sample.

(18) One exporting producer not sampled, Zhejiang Wansheng Co., Ltd, responded to the consultation and requested to be included in the sample, extending the sample to four exporting producers.

(19) The request was not accepted, as this would be unduly burdensome on the grounds that Zhejiang Wansheng was a large group of companies, and adding Zhejiang Wansheng to the sample would effectively double the number of companies to be inspected.

(20) The initial sample was therefore confirmed and the reasons for not changing the sample placed on the open file (4).

(21) Two Chinese exporting producers, Zhejiang Wansheng Co., Ltd (which also requested to be sampled) and Futong Chemical Co., Ltd. requested individual examination under Article 17(3) of the basic Regulation.

(22) The examination of these requests during the provisional stage of the investigation would have been unduly burdensome given the need to investigate the three already sampled exporting producers.

(23) A final decision on accepting both, or neither, of these requests for an individual examination will be made at the definitive stage of the investigation.

(24) The Commission sent a questionnaire concerning the existence of significant distortions in China within the meaning of Article 2(6a)(b) of the basic Regulation to the Government of the People’s Republic of China (‘GOC’).

(25) The complainants also provided in the complaint sufficient evidence of raw material distortions in China regarding the product concerned. Therefore, as announced in the Notice of Initiation, the investigation covered those raw material distortions to determine whether to apply the provisions of Article 7(2a) and 7(2b) of the basic Regulation. For this reason, the Commission sent an additional questionnaire to the GOC.

(26) The Commission sent questionnaires to the Union producers, importers and exporting producers. The same questionnaires were made available online (5) on the day of initiation.

(27) Questionnaire replies were received from three Union producers, one importer, eight users, and five Chinese exporting producers. No questionnaire replies were received from the GOC.

(29) The investigation of dumping and injury covered the period from 1 July 2022 to 30 June 2023 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2019 to the end of the investigation period (‘the period considered’).

(30) The product under investigation is certain alkyl phosphate esters (‘APE’), currently classified under CN code ex 2919 90 00 (TARIC codes 2919900050 and 2919900065) and CN code ex 3824 99 92 (TARIC code 3824999238) (‘the product under investigation’).

(31) APE is defined as certain alkyl phosphate esters based exclusively on side chains with a length of two or three carbon atoms (also includes chlorinated alkyl chains) and with a phosphorus content of at least 9 % (per weight) and a viscosity between 1 and 100 mPa·s (at 20-25 °C) falling under Chemical Abstracts Service (‘CAS’) numbers 13674-84-5, 1244733-77-4 and 78-40-0.

(32) APE covers two product types, tris (2-chloro-1-methylethyl) phosphate (‘TCPP’) and triethyl phosphate (‘TEP’). They are commonly used as flame retardants in rigid and flexible foams.

(33) The product concerned is the product under investigation originating in the People’s Republic of China.

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

(36) The China Petrochemical and Chemical Industry Federation (‘CPCIF’), two importers of the product concerned, Prochema and Quimidroga, and one user, Kingspan, submitted claims regarding the product scope, requesting the exclusion of TEP from the product scope.

(37) In its comments to initiation CPCIF claimed that TCPP and TEP have different uses and are not interchangeable. It pointed out the differences in their respective production processes, in their distribution channels and in their technical and chemical characteristics.

(38) It claimed that TCPP is predominantly used as flame retardant in rigid and flexible polyurethane foam, while TEP is used as plasticiser in polymers, rubbers, and plastics and only in a secondary limited manner as a flame retardant.

(39) According to CPCIF, TEP is 60 % more expensive to produce than TCPP and therefore substituting TCPP with TEP would not be economically viable. CPCIF also brought forward that TCPP and TEP are classified under different chapters in the combined nomenclature.

(40) Two importers of the product concerned, Prochema and Quimidroga, and one user, Kingspan, submitted similar comments.

(41) They brought forward the technical and chemical characteristics and contested the view that TCPP and TEP would be interchangeable due to differences in their technical characteristics and flame-retardant behaviour.

(42) Kingspan also argued that China is the only producer of TEP worldwide and where substitution between TEP and TCPP is technically possible, it would still need a considerable amount of reformulation, recertification and significant capital expenditure.

(43) Kingspan and Quimidroga further claimed that the inclusion of TEP in the product scope is arbitrary, since there are a number of other products that have equally similar physical, chemical and technical characteristics as TEP and TCPP, such as cresyl diphenyl phosphate (‘CDP’), tris(2-ethylhexyl) phosphate (‘TEHP’) and Tributyl phosphate.

(44) The Commission analysed these claims. First, even if the production process, the molecule structure and certain chemical characteristics of TCPP and TEP differ, they both share similar essential physical, technical and chemical characteristics defined in recitals 31 to 32 above.

(45) The other products named by Kingspan and Quimidroga (CDP, TEHP and Tributyl phosphate) do not fall under the product scope of alkyl phosphate esters as defined in the complaint and in recitals 31 to 32. In fact, these products are not alkyl phosphate esters and do not have the same effectiveness as flame retardants. Also, no evidence was brought forward that CDP, TEHP and Tributyl phosphate could effectively be used in the same applications as a substitute of TCPP or TEP.

(46) Second, it was not contested by any of the parties that TCPP and TEP are substitutable for rigid foam applications which represent around two thirds of the total Union consumption of TCPP and TEP. TEP has a higher phosphorus content than TCPP and is therefore of a higher flame-retardant nature. According to a submission by Kingspan a smaller amount of TEP is needed to replace TCPP (about 1,8 kg of TCPP is needed to replace 1 kg of TEP), which would partially compensate for the higher production cost of TEP.

(47) Even if replacement of TCPP by TEP in new product types or compositions would need reformulation and recertification process, there was no evidence brought forward that this process would need significant or extraordinary capital expenditure. Furthermore, such recertifications costs are typically one-off costs and not recurrent ones.

(48) Third, the differences in production process, distribution channels and classification in the combined nomenclature do not negate the fact that both TCPP and TEP fall within the product definition as set out in recitals 30 to 32 and share similar essential physical and technical characteristics and the same main uses.

(49) On the basis of the above, the Commission concluded at this stage that TEP should not be excluded from the product scope.

(50) In view of the sufficient evidence available at the initiation of the investigation pointing to the existence of significant distortions within the meaning of point (b) of Article 2(6a) of the basic Regulation regarding China, the Commission considered it appropriate to initiate the investigation for the Chinese exporting producers having regard to Article 2(6a) of the basic Regulation.

(51) Consequently, to collect the necessary data for the possible application of Article 2(6a) of the basic Regulation, in the Notice of Initiation the Commission invited all exporting producers in China to provide information regarding the inputs used for producing APE. 10 exporting producers submitted the relevant information.

(52) In order to obtain information it deemed necessary for its investigation with regard to the alleged significant distortions, the Commission sent a questionnaire to the GOC. In the Notice of Initiation the Commission also invited all interested parties to make their views known, submit information and provide supporting evidence regarding the application of Article 2(6a) of the basic Regulation within 37 days of the date of publication of the Notice of Initiation in the Official Journal of the European Union.

(53) No questionnaire reply was received from the GOC and no submission on the application of Article 2(6a) of the basic Regulation from the GOC was received within the deadline.

(54) Subsequently, the Commission informed the GOC that it would use facts available within the meaning of Article 18 of the basic Regulation for the determination of the existence of the significant distortions in China.

(55) In the Notice of Initiation, the Commission also specified that, in view of the evidence available, it may need to select an appropriate representative country pursuant to Article 2(6a)(a) of the basic Regulation for the purpose of determining the normal value based on undistorted prices or benchmarks.

(56) On 25 October 2023 the Commission informed interested parties on the relevant sources it intended to use for the determination of the normal value by publishing a Note (‘the First Note’). In that note, the Commission provided a list of all factors of production such as raw materials, labour and energy used in the production of APE. In addition, based on the criteria guiding the choice of undistorted prices or benchmarks, the Commission identified Brazil and Türkiye as possible appropriate representative countries.

(57) The Commission received comments on the First Note from two Chinese exporting producers (Shandong Yarong and Anhui RunYue) and the Chinese association CPCIF.

(58) On 19 January 2024, the Commission informed interested parties by a second note (‘the Second Note’) about the relevant sources it intended to use for the determination of the normal value, and about the selection at this stage of the investigation of Brazil as the representative country.

(59) It also informed interested parties that it would establish selling, general and administrative costs (‘SG&A’) and profits based on the 2022 financial data available for the Brazilian company Elekeiroz, a producer of a product in the same general category as the product under investigation.

(60) The Commission received comments on the Second Note from Shandong Yarong and Anhui RunYue and the Chinese association CPCIF. All comments received are addressed in detail in Section 3.2.

(61) The Commission therefore concluded that normal value should be constructed using the method set out in Article 2(6a) of the basic Regulation, and that costs and prices in China should be rejected.

(62) 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’.

(63) However, according to Article 2(6a)(a) of the basic Regulation, if ‘it is determined […] that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks’, and ‘shall include an undistorted and reasonable amount of administrative, selling and general costs [SG&A] and for profits’.

(64) As further explained below, the Commission concluded in the present investigation that, based on the evidence available, the application of Article 2(6a) of the basic Regulation was appropriate.

(66) As the list in Article 2(6a)(b) of the basic Regulation is non-cumulative, not all the elements need to be given for a finding of significant distortions. Moreover, the same factual circumstances may be used to demonstrate the existence of one or more of the elements of the list.

(67) However, any conclusion on significant distortions within the meaning of Article 2(6a)(a) of the basic Regulation must be made on the basis of all the evidence at hand. The overall assessment on the existence of distortions may also take into account the general context and situation in the exporting country, in particular where the fundamental elements of the exporting country’s economic and administrative set-up provides the government with substantial powers to intervene in the economy in such a way that prices and costs are not the result of the free development of market forces.

(68) Article 2(6a)(c) of the basic Regulation provides that ‘[w]here the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector’.

(69) Pursuant to this provision, the Commission issued a country report concerning China (‘the Report’ (6)) containing evidence of the existence of substantial government intervention at many levels of the economy, including specific distortions in many key factors of production (such as land, energy, capital, raw materials and labour) as well as in specific sectors (such as steel and chemicals). Interested parties were invited to rebut, comment or supplement the evidence contained in the investigation file at the time of initiation. The Report was placed in the investigation file at the initiation stage. The complaint also contained some relevant evidence complementing the Report.