Commission Implementing Regulation (EU) 2026/1045 of 12 May 2026 imposing a provisional anti-dumping duty on imports of certain alkyl phosphonic acids and their sodium salts originating in the People’s Republic of China

• (137) In the Note on production factors, the Commission explained that, outside of China, the product under investigation appears to be produced only in the European Union (Germany) and India none of which is a country with a level of economic development similar to China in accordance with the criteria mentioned in recital (135).

• (138) As all countries where there is production of PBTC (Germany and India) have a different level of economic development than China, the Commission considered the production of a product in the same general category and/or sector of the product under investigation. The Commission therefore indicated it would use ‘other organo-inorganic compounds’ as the general category of products to which PBTC belongs to establish an appropriate representative country for the application of Article 2(6a) of the basic Regulation.

• (139) In the Note on production factors, the Commission identified Brazil, Colombia, Indonesia and Malaysia as countries with a similar level of economic development as China according to the World Bank, i.e. they are all classified by the World Bank as ‘upper-middle income’ countries on a gross national income basis where production of a product in the same general category and/or sector of the product under investigation is considered.

• (140) No comments were received with respect to the level of economic development of the identified countries.

• (141) In their comments to the Note, Taihe agreed with the Commission that the product under investigation was only produced in the EU, India and China and that ‘other organo-inorganic compounds’ should be the general category of products to which PBTC belongs.

3.2.4.   Existence of relevant readily available data in the representative country

• (142) In the Note, the Commission identified countries where there was production of ‘other organo-inorganic compounds’, i.e. Brazil, Colombia, Indonesia and Malaysia. Furthermore, Commission found that that all four potential representative countries had sufficient number of profitable companies producing ‘other organo-inorganic compounds’ which would allow the Commission to establish an undistorted and reasonable amount for SG & A costs and profits.

• (143) The Commission also analysed the imports of the main factors of production into Brazil, Colombia, Indonesia and Malaysia.

• (144) The Commission found that none of these countries imported DMPI, the main raw material to produce PBTC. The Commission checked other potential countries but concluded that there were almost no imports of DMPI into upper-middle income countries. Therefore, the Commission decided to use Global Trade Atlas (‘GTA’) import data from all countries into all countries to establish an undistorted international benchmark for DMPI. Having found that the prices of DMPI imports from China were much lower than the prices of imports from other sources (and therefore likely affected by the distortions found in this case), the Commission removed from the calculation of the benchmark imports of DMPI originating in China.

• (145) Next, the Commission looked at imports of methyl acrylate (AM), maleic anhydride (MA), methanol (MeOH), IBC barrels and plastic buckets into Brazil, Colombia, Indonesia and Malaysia. The analysis of import data showed that the imports from sources other than China into Colombia, Indonesia and Malaysia of some of the major factors of production were not sufficient, and therefore neither Colombia, Indonesia nor Malaysia could be considered as a suitable representative country. Notably, the analysis showed that for Colombia the share of imports from China of Methyl acrylate represented 77 % of total imports. These imports were on average 20 % lower priced than from sources other than China (and therefore likely affected by the distortions found in China). Additionally, 62 % of imports of IBC barrels were from China with 44 % lower prices than from other sources. For Indonesia, imports from China of Maleic anhydride represented 91 % of total imports and were in average 22 % lower price than from sources other than China and imports from China of IBC barrels and of plastic buckets represented respectively 84 % and 61 % of total imports which were in average respectively 44 % and 26 % lower price than from sources other than China. For Malaysia the share of imports from China of Methyl Acrylate represented 87 % of total imports and were in average 36 % lower price than from sources other than China. Also, imports from China of Maleic anhydride and of plastic buckets represented both 73 % of total imports which were in average respectively 73 % and 18 % lower price than from other sources than China. In contrast, for Brazil the only main raw material where the imports from China were an important source (58 %) was Maleic anhydride. The average import price from China was comparable (indeed 3,6 % higher) to the prices from the other sources and therefore unlikely to be affected by distortions.

• (146) Therefore, the analysis showed that Brazil could be used as an appropriate representative country as the imports of the main factors of production were sufficient in quantities and not materially affected by imports from China or any of the countries listed in Annex I to Regulation (EU) 2015/755 of the European Parliament and of the Council [^ntr105-L_202601045EN.000101-E0105]. Notably, the imports to Brazil from other sources than China represented for Methyl acrylate 71 %, Methanol 100 %, IBC barrels 85 % and plastic buckets 57 %.

• (147) In light of the above considerations, the Commission informed the interested parties that it intended to use Brazil as an appropriate representative country and the companies Unipar Carbocloro S.A, Videolar-Innova S/A, Sika S A, Braskem Green S.A, Basequimica S.A. and Birla Carbon Brasil LTDA, in accordance with Article 2(6a)(a), first indent of the basic Regulation in order to source undistorted prices or benchmarks for the calculation of normal value. Interested parties were invited to comment.

• (148) Taihe argued that Türkiye, instead of Brazil, should be used as a representative country. Taihe claimed that for some of the factors of production, namely maleic anhydride, plastic bucket and IBC barrels (the two latter ones are used as packing material), Türkiye imported less from China than Brazil.

• (149) However, while for some FoPs Türkiye imported less from China than Brazil, the Commission found that publicly available data (Orbis) for the Turkish producers of ‘other organo-inorganic compounds’ showed unreasonably high rate for SG & A costs (59 %). Therefore, Türkiye was not considered as a suitable representative country.

• (150) Taihe also claimed that the Commission should not have used GTA import data from all countries to all countries to establish the international market price of DMPI, but instead it should have applied solely the export price from Malaysia.

• (151) The Commission disagreed with the claim. Having found that no upper-middle income countries imported DMPI, the Commission decided that an undistorted international benchmark was more appropriate in this case than exports from Malaysia, which was found not to be a suitable representative country in this case. In addition, the Commission noted that the quantities exported from Malaysia were small (50 400 tonnes out of 867 115 tonnes of total world export excluding China), fact which reinforced that an international benchmark was more appropriate in the present case. Therefore, this claim was rejected.

• (152) Finally, Taihe claimed that three of the six Brazilian companies selected for calculating the undistorted benchmark for SG & A and profit should not be used because their main business activity was other than ‘other organo-inorganic compounds’. These companies were: UNIPAR CARBOCLORO S.A, SIKA S A, and BIRLA CARBON BRASIL LTDA. The Commission analysed this claim and confirmed that two of the companies (SIKA S A, and BIRLA CARBON BRASIL LTDA) had core business activities other than ‘other organo-inorganic compounds’. However, for the third company, UNIPAR CARBOCLORO S.A, no such evidence was found.

• (153) The Commission took this information into account for the determination of the list of companies whose financial data were used to establish undistorted benchmarks for SG & A and profit, and revised list of companies in Brazil with financial data for 2024 showing positive profitability:

• — UNIPAR CARBOCLORO S.A,

• — VIDEOLAR-INNOVA S/A,

• — BRASKEM GREEN S.A,

• — BASEQUIMICA S.A.

3.2.5.   Level of social and environmental protection

• (154) Having established that Brazil was the appropriate representative country, based on all of the above elements, there was no need to carry out an assessment of the level of social and environmental protection in accordance with the last sentence of Article 2(6a)(a) first indent of the basic Regulation.

3.2.5.1.   Conclusion

• (155) In view of the above analysis, Brazil met the criteria laid down in Article 2(6a)(a), first indent of the basic Regulation in order to be considered as an appropriate representative country.

3.2.5.2.   Factors of production

• (156) Considering all the information submitted by the interested parties and collected during the verification visits, the following factors of production and their sources have been identified in order to determine the normal value in accordance with Article 2(6a)(a) of the basic Regulation:

Table 1

Factors of production of PBTC

Factor of Production	Commodity Code	Undistorted value (CNY)	Unit of measurement
RAW MATERIALS	RAW MATERIALS	RAW MATERIALS	RAW MATERIALS
Source of data: HIS Markit Global Trade Atlas (GTA)[^ntr106-L_202601045EN.000101-E0106] for imports and Market Access Map, International Trade Centre (MacMap)[^ntr107-L_202601045EN.000101-E0107] for customs duties.	Source of data: HIS Markit Global Trade Atlas (GTA)[^ntr106-L_202601045EN.000101-E0106] for imports and Market Access Map, International Trade Centre (MacMap)[^ntr107-L_202601045EN.000101-E0107] for customs duties.	Source of data: HIS Markit Global Trade Atlas (GTA)[^ntr106-L_202601045EN.000101-E0106] for imports and Market Access Map, International Trade Centre (MacMap)[^ntr107-L_202601045EN.000101-E0107] for customs duties.	Source of data: HIS Markit Global Trade Atlas (GTA)[^ntr106-L_202601045EN.000101-E0106] for imports and Market Access Map, International Trade Centre (MacMap)[^ntr107-L_202601045EN.000101-E0107] for customs duties.
Dimethyl phosphite (DMPI)	2920 21 00	42 099,04	MT
Methyl acrylate (Acrylic Acid Methyl esters) (AM)	2916 12 10	14 023,20	MT
Maleic anhydride (MA)	2917 14 00	8 672,81	MT
Methanol (Methyl alcohol) MeOH	2905 11 00	3 300,10	MT
Intermediate bulk container (IBC) barrels	— in polymers: 3925 10 00 — in steel, or stainless steel: 7309 00 7310 10	42 455,19	MT
Plastic buckets	3923 90 90 3926 90	67 003,64	MT
LABOUR	LABOUR	LABOUR	LABOUR
n/a	n/a	23,01	Manhour
ENERGY	ENERGY	ENERGY	ENERGY
Sources of data: Electricity: Ministério de Minas e Energia in Brazil[^ntr108-L_202601045EN.000101-E0108], Water: Sanel Brazil[^ntr109-L_202601045EN.000101-E0109], Gas: Ministério de Minas e Energia in Brazil[^ntr110-L_202601045EN.000101-E0110], methodology suggested by the U.S. Department for Energy[^ntr111-L_202601045EN.000101-E0111] based on the cost of gas required to produce it.	Sources of data: Electricity: Ministério de Minas e Energia in Brazil[^ntr108-L_202601045EN.000101-E0108], Water: Sanel Brazil[^ntr109-L_202601045EN.000101-E0109], Gas: Ministério de Minas e Energia in Brazil[^ntr110-L_202601045EN.000101-E0110], methodology suggested by the U.S. Department for Energy[^ntr111-L_202601045EN.000101-E0111] based on the cost of gas required to produce it.	Sources of data: Electricity: Ministério de Minas e Energia in Brazil[^ntr108-L_202601045EN.000101-E0108], Water: Sanel Brazil[^ntr109-L_202601045EN.000101-E0109], Gas: Ministério de Minas e Energia in Brazil[^ntr110-L_202601045EN.000101-E0110], methodology suggested by the U.S. Department for Energy[^ntr111-L_202601045EN.000101-E0111] based on the cost of gas required to produce it.	Sources of data: Electricity: Ministério de Minas e Energia in Brazil[^ntr108-L_202601045EN.000101-E0108], Water: Sanel Brazil[^ntr109-L_202601045EN.000101-E0109], Gas: Ministério de Minas e Energia in Brazil[^ntr110-L_202601045EN.000101-E0110], methodology suggested by the U.S. Department for Energy[^ntr111-L_202601045EN.000101-E0111] based on the cost of gas required to produce it.
Electricity	n/a	1,08	kWh
Water	n/a	13,36	m3
Steam	n/a	206 –252	MT
BY-PRODUCTS	BY-PRODUCTS	BY-PRODUCTS	BY-PRODUCTS
Methanol (Methyl alcohol) MeOH	2905 11 00	3 300,10	Kg

[^ntr111-L_202601045EN.000101-E0111]: https://www1.eere.energy.gov/manufacturing/tech_assistance/pdfs/steam15_benchmark.pdf. The methodology refers to the cost of saturated steam for typical values of operating pressure and feedwater temperature. In the application of the methodology, a calculation was applied on basis of each company’s use of pressure and temperature.

• (157) The Commission included a value for manufacturing overhead costs in order to cover costs not included in the factors of production referred to above. To establish this amount, the Commission expressed the manufacturing overhead cost incurred by the sampled exporting producers for the production of the product under investigation as a percentage of the actual cost of the used raw materials and then applied the same percentage to the undistorted cost of the same raw materials in order to obtain the undistorted manufacturing overhead cost. The Commission considered that, in the context of this investigation, the ratio between the exporting producer’s raw material and the reported overhead costs could be reasonably used as an indication to estimate the undistorted manufacturing overhead costs.

3.2.5.3.   Raw materials

• (158) In order to establish the undistorted price of raw materials as delivered at the gate of a representative country producer, the Commission used as a basis the weighted average import price to the representative country as reported in the GTA to which import duties and transport costs were added. An import price in the representative country was determined as a weighted average of unit prices of imports from all third countries excluding China and countries which are not members of the WTO, listed in Annex I to Regulation (EU) 2015/755 [^ntr112-L_202601045EN.000101-E0112]. The Commission decided to exclude imports from China into the representative country as it concluded in recitals (132) and (133) that it is not appropriate to use domestic prices and costs in China due to the existence of significant distortions in accordance with Article 2(6a)(b) of the basic Regulation. Given that there is no evidence showing that the same distortions do not equally affect products intended for export, the Commission considered that the same distortions affected export prices.

• (159) For a number of factors of production, the actual costs incurred by the cooperating exporting producers represented a negligible share (less than 2 %) of total raw material costs in the review investigation period. As the value used for these had no appreciable impact on the dumping margin calculations, regardless of the source used, the Commission decided to include those costs into consumables.

• (160) In order to establish the undistorted price of raw materials, as provided by Article 2(6a)(a), first indent of the basic Regulation, the Commission used the CIF value recorded in the import statistics of the representative country, as available in GTA. The relevant import duties, available in MacMap, were added to the CIF values.

• (161) The Commission expressed the transport cost incurred by the cooperating exporting producers for the supply of raw materials as a percentage of the actual cost of such raw materials and then applied the same percentage to the undistorted cost of the same raw materials in order to obtain the undistorted transport cost. The Commission considered that, in the context of this investigation, the ratio between the exporting producer’s raw material and the reported transport costs could be reasonably used as an indication to estimate the undistorted transport costs of raw materials when delivered to the company’s factory.

3.2.5.4.   Labour

• (162) International Labor Organization (‘ILO’) publishes detailed information on wages in different economic sectors in Brazil. The Commission used the latest available statistics covering year 2024 for average labour cost from ILOSTAT in Sector of manufacturing in Brazil, corresponding to the Statistical Classification of Economic Activities, commonly referred to as NACE, which includes costs for labour in the manufacture of other organic basic chemicals [^ntr113-L_202601045EN.000101-E0113].

• (163) Following the Note, Lanxess submitted that for the labour benchmark in Brazil, the official national statistics of Brazil published by the Instituto Brasileiro de Geografia e Estatística (IBGE), should be used instead of ILOSTAT data. The Commission examined the data submitted by Lanxess and found that the available IBGE statistical information did not overlap with the investigation period and therefore it was considered less suitable than ILOSTAT data from 2024 which covers at least half of the investigation period. Therefore, this claim was rejected.

3.2.5.5.   Electricity

• (164) The price of electricity for companies (industrial users) in Brazil is published by Ministério de Minas e Energia in Brazil. The Commission used the data on the industrial electricity prices in the corresponding consumption band in BRL/kWh as published on 14 July 2025, covering 2024 [^ntr114-L_202601045EN.000101-E0114].

3.2.5.6.   Water

• (165) The Commission used the average cost of water in Brazil as charged by the Sanel Brazil [^ntr115-L_202601045EN.000101-E0115] for 2025, i.e. 13,36 CNY/m³.

3.2.5.7.   Steam

• (166) The Commission calculated the price of steam in Brazil for the investigation period using the methodology suggested by the U.S. Department for Energy [^ntr116-L_202601045EN.000101-E0116] based on the cost of gas required to produce it. The resulting average price for IP ranged between 206–252 CNY/tonne.

3.2.5.8.   By-products

• (167) To establish the benchmark for by-products, the Commission used the ratio between the value of the by-products and the value of the original raw material, as recorded in the exporting producers’ accounting system and applied this ratio to the benchmark obtained from GTA.

3.2.5.9.   Manufacturing overhead costs, SG & A costs and profits

• (168) According to Article 2(6a)(a) of the basic Regulation, ‘the constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profits’. In addition, a value for manufacturing overhead costs needs to be established to cover costs not included in the factors of production referred to above.

• (169) The manufacturing overheads incurred by the cooperating exporting producers were expressed as a share of the costs of manufacturing actually incurred by the exporting producers. This percentage was applied to the undistorted costs of manufacturing.

• (170) For establishing an undistorted and reasonable amount for SG & A costs and profit, the Commission relied on the financial data for 2024 for companies referred to in recital (153) as extracted from Orbis.

Calculation

• (171) On the basis of the above, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

• (172) The Commission applied the undistorted unit costs to the actual consumption of the individual factors of production of the cooperating exporting producer. These consumption rates were verified during the verification. The Commission multiplied the usage factors by the undistorted costs per unit observed in the representative country, as described in Section 3.2.5.3.

• (173) Once the undistorted manufacturing cost established, the Commission applied the manufacturing overheads, SG & A costs, profit and depreciation as noted in recitals (169) to (170).

• (174) SG & A costs expressed as a percentage of the Costs of Goods Sold (‘COGS’) and applied to the undistorted costs of production, amounted to 21,0 %. The profit expressed as a percentage of the COGS and applied to the undistorted costs of production, amounted to 20,0 %.

• (175) On that basis, the Commission constructed the normal value per product type on an ex-works basis in accordance with Article 2(6a)(a) of the basic Regulation.

3.3.   Export price

• (176) The sampled exporting producers exported to the Union either directly to independent customers or through related companies acting as an importer.

• (177) For the exporting producers that exported the product concerned directly to independent customers in the Union, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

• (178) For the exporting producer that exported the product concerned to the Union through a related company acting as an importer, 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 (4,6 %), representing the profit of the cooperating unrelated importer.

3.4.   Comparison

• (179) Article 2(10) of the basic Regulation requires the Commission to make a fair comparison between the normal value and the export price at the same level of trade and to make allowances for differences in factors which affect prices and price comparability. In the case at hand the Commission chose to compare the normal value and the export price of the sampled exporting producers at the ex-works level of trade. As further explained below, where appropriate, the normal value and the export price were adjusted in order to: (i) net them back to the ex-works level; and (ii) make allowances for differences in factors which were claimed, and demonstrated, to affect prices and price comparability.

3.4.1.   Adjustments made to the normal value

• (180) As explained in recital (171), the normal value was established at the ex-works level of trade by using costs of production together with amounts for SG & A expenses and for profit, which were considered to be reasonable for that level of trade. Therefore, no adjustments were necessary to net the normal value back to the ex-works level.

3.4.2.   Adjustments made to the export price

• (181) In order to net the export price back to the ex-works level of trade, adjustments were made on the account of: freight, insurance, handling and loading expenses.

• (182) Allowances were made for the following factors affecting prices and price comparability: credit cost and bank charges.

3.5.   Dumping margins

• (183) 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.

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

Company	Provisional dumping margin (%)
Jiyuan Qingyuan Water Treatment Co., Ltd.	210,4
Nantong Uniphos Chemicals Co., Ltd.	219,4
Shandong Taihe Technologies Co., Ltd.	182,9

• (185) For the non-sampled cooperating exporting producers, the Commission calculated the weighted average dumping margin of the sampled exporting producers, in accordance with Article 9(6) of the basic Regulation.

• (186) On this basis, the provisional dumping margin of the non-sampled cooperating exporting producers is 210,4 %.

• (187) For all other exporting producers in China, 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 information provided by the complainant.

• (188) The level of cooperation in this case is high because the exports of the cooperating exporting producers constituted more than 80 % of the total 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 cooperating sampled company with the highest dumping margin; 219,4 %.

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

Company	Provisional dumping margin (%)
Jiyuan Qingyuan Water Treatment Co., Ltd.	210,4
Nantong Uniphos Chemicals Co., Ltd.	219,4
Shandong Taihe Technologies Co., Ltd.	182,9
Cooperating non-sampled exporting producers	200,4
All other Chinese exporting producers	219,4

4. INJURY

4.1.   Definition of the Union industry and Union production

• (190) The like product was manufactured by a single producer in the Union during the investigation period, Lanxess. The company hence constituted the ‘Union industry’ within the meaning of Article 4(1) of the basic Regulation.

• (191) The total Union production during the investigation period was established at around [7 200–9 600] tonnes. The Commission based this figure on the complainant’s verified questionnaire response.

4.2.   Union consumption

• (192) The Commission based this figure on the complainant’s verified questionnaire response and the sampling replies provided by the cooperating Chinese producers, accounting for totality of the Chinese imports over the period considered.

• (193) Union consumption [^ntr117-L_202601045EN.000101-E0117] developed as follows:

Table 2

Union consumption (tonnes)

	2022	2023	2024	Investigation period
Total Union consumption	[12 100 –16 200 ]	[11 500 –15 300 ]	[12 200 –16 300 ]	[11 300 –15 000 ]
Index	100	95	100	93
Source: Lanxess, cooperating Chinese exporting producers.	Source: Lanxess, cooperating Chinese exporting producers.	Source: Lanxess, cooperating Chinese exporting producers.	Source: Lanxess, cooperating Chinese exporting producers.	Source: Lanxess, cooperating Chinese exporting producers.

• (194) The union consumption decreased by 5 % from 2022 to 2023, returning to levels nearly identical to those of 2022 by 2024. The consumption then dropped in the IP to the levels seen in 2023. The fluctuation in 2022 and 2023 reflects the impact of post Covid-19 trade disruptions. In 2022, the Union users of PBTC built stocks to anticipate supply shortages, leading to an artificial and temporary rise in consumption

• (195) While the PBTC Union consumption dropped 7 % below 2022 levels in the IP, such evolution in the IP points rather to return to normality, given that 2022 consumption levels are a result of elevated, COVID-19-induced stocking.

• (196) In any event, the overall picture for the period considered shows that the Union consumption has remained relatively stable with variations from one year to the other largely linked to the increase or destocking of the material.

4.3.   Imports from China

4.3.1.   Volume and market share of the imports from China

• (197) Imports of the product concerned are classified under CN code 2931 49 80 . However, this is a residual code for ‘other organo-inorganic compounds’, which includes a broad variety of chemical compounds largely exceeding the product concerned by this investigation. In the absence of granular statistics or other reliable benchmark for estimating the volume of Chinese imports, the Commission used as a basis for the import volumes the export sales data for the period considered, provided by the Chinese exporting producers cooperating with the investigation in their sampling replies. The Commission concluded that the level of cooperation was high in this case, because the reported volumes were higher than the import volumes estimated by the complainant.

• (198) The market share of the Chinese imports was established on the same basis as the import volumes.

• (199) Imports into the Union from China developed as follows:

Table 3

Import quantity and market share

	2022	2023	2024	Investigation period
Quantity of imports from China (tonnes)	6 742	9 318	9 703	9 290
Index	100	138	144	138
Market share (%)	[38 –51 ]	[56 –75 ]	[55 –74 ]	[57 –76 ]
Index	100	146	143	148
Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.

• (200) In absolute terms the imports from China increased during the period considered by over 2 500 tonnes, which is [18–20] % of the total Union consumption in the investigation period. The total market share of the Chinese imports increased from already high [38–51] % in 2022 to a striking [57–76] % in the investigation period. Overall, the imports from China were up by 38 % in the investigation period compared to 2022.

4.4.   Prices of the imports from China, price undercutting and price depression

• (201) The Commission established the prices of imports on the basis of the sampling replies of the Chinese exporting producers cooperating with the investigation. Price undercutting of the imports during the investigation period was established on the basis of the questionnaire replies provided by the sampled exporting producers and the Union producer as well as replies from unrelated importers (for post-importation costs).

• (202) The weighted average price of imports into the Union from China developed as follows:

Table 4

Import prices (EUR/tonne)

	2022	2023	2024	Investigation period
Imports from China	2 134	1 229	1 011	976
Index	100	58	47	46
Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.	Source: Sampling replies of the cooperating Chinese exporting producers.

• (203) The average price of the Chinese imports dramatically decreased from 2 134 EUR/tonne in 2022 to 1 229 EUR/tonne in 2023, to drop even further in 2024 and the IP, namely to 1 011 EUR/tonne and 976 EUR/tonne respectively.

• (204) During the period considered, the average unit price of the dumped imports from China decreased by 54 %. Already at the beginning of the period considered, the imports from China were priced below the observed Union sales prices as shown in Table 4 and Table 8. However, starting from 2023 and uninterruptedly until the end of the period considered, the price gap became even more prominent (for example, in the investigation period, Chinese prices were [35–45] % below the Union sales prices.

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

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

• (b) the corresponding weighted average prices per product type of the imports from the sampled cooperating Chinese 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.

• (206) The price comparison was made on a type-by-type basis for transactions at the same level of trade. The result of the comparison was expressed as a percentage of the Union producer’s theoretical turnover during the investigation period. It showed a weighted average undercutting margin of between 20 % and 40 % by the imports from China on the Union market.

• (207) In addition, the Commission observed that the dumped imports also led to significant price depression (as reflected by the loss of profitability) during the investigation period, when the Union industry sold PBTC below its cost of production.

4.5.   Economic situation of the Union industry

4.5.1.   General remarks

• (208) 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.

• (209) 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 verified response submitted by the sole Union producer. The Commission evaluated also the microeconomic indicators on the basis of data contained in the questionnaire reply from the sole Union producer.

• (210) 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.

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

4.5.2.   Macroeconomic indicators

4.5.2.1.   Production, production capacity and capacity utilisation

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

Table 5

Production, production capacity and capacity utilisation

	2022	2023	2024	Investigation period
Production quantity (tonnes)	[10 600 –14 200 ]	[5 900 –7 800 ]	[7 600 –10 100 ]	[7 200 –9 600 ]
Index	100	55	71	68
Production capacity (tonnes)	[15 700 –21 100 ]	[15 400 –20 600 ]	[15 500 –20 800 ]	[15 500 –20 700 ]
Index	100	98	99	98
Capacity utilisation (%)	[60 –70 ]	[32 –42 ]	[40 –50 ]	[38 –48 ]
Index	100	57	72	69
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (213) The production of the like product in the Union showed a clear downward trend when comparing 2022 with the rest of the period considered, with production decreasing by around 30 %–45 % in 2023-IP. While production levels improved in 2024-IP as compared to 2023, this can be attributed to the fact that consumption picked up after the users consumed in 2023 a large portion of the stocks they had built in 2022. In any event, in 2024-IP, the production levels of the Union industry only reached around 70 % of the production volumes observed at the beginning of the period considered.

• (214) Production capacity remained stable over the period considered, with only a minor 1–2 % decrease in 2023-IP, pointing to the fact that there were no shutdowns nor installation of additional capacities by the sole Union producer.

• (215) Capacity utilisation, in line with the production evolution (see recital (213)), showed a significant fall following 2022 and remained consistently low until the investigation period. The capacity utilisation dropped well below 50 % in 2023 and stayed at a mere [38–48] % in the IP.

4.5.2.2.   Sales quantity and market share

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

Table 6

Sales quantity and market share

	2022	2023	2024	Investigation period
Total sales quantity on the Union market (tonnes)	[6 500 –8 700 ]	[3 700 –5 000 ]	[4 100 –5 500 ]	[3 500 –4 700 ]
Index	100	57	63	54
Market share (%)	[45 –60 ]	[27 –36 ]	[28 –37 ]	[26 –35 ]
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (217) The sales volume of the Union producer shows a significant decrease between the beginning of the period considered (2022) and the rest of the period considered (2023-IP). While the sales volume was at [6 500–8 700] tonnes in 2022, it declined sharply in the years after, with the sales quantities in the IP being only around half of the quantities sold by the Union producer in 2022.

• (218) With respect to the evolution of the market share of the Union industry, the overall adverse trend was clearly visible over the entirety of the period considered, while the loss of market share was most striking on the annualised basis between 2022 and the remainder of the period considered, when the Union industry’s market share decreased from [45–60] % (2022) to [27–35] % in the period 2023-IP.

• (219) The loss of the market share, accompanied by declining production levels and operating rates resulted from the dumped imports of PBTC from China, that gained market share (see recital (200)) at the expense of the sole Union producer.

4.5.2.3.   Growth

• (220) While the Union consumption decreased by 7 % during the period considered, the sales volume of the Union industry in the Union market decreased at a much higher rate, by 46 %. Consequently, the Union industry lost market share to now dominating Chinese imports.

4.5.2.4.   Employment and productivity

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

Table 7

Employment and productivity

	2022	2023	2024	Investigation period
Number of employees	[45 –50 ]	[30 –35 ]	[30 –35 ]	[30 –35 ]
Index	100	69	71	70
Productivity (unit/employee)	[200 –300 ]	[150 –250 ]	[200 –300 ]	[200 –300 ]
Index	100	80	101	97
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (222) During the period considered, employment in the Union decreased by 30 %, while the productivity only dropped by 3 % over the period considered, given that drop in the employment levels essentially corresponded to the decreasing production over the period (with the exception of 2023, when the sharp drop in production was not yet accompanied by the workforce downsizing).

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

• (223) 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 substantial, given the volume and prices of imports from China.

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

4.5.3.   Microeconomic indicators

4.5.3.1.   Prices and factors affecting prices

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

Table 8

Sales prices in the Union

	2022	2023	2024	Investigation period
Average unit sales price in the Union (EUR/ tonne)	[2 300 –3 000 ]	[1 800 –2 300 ]	[1 400 –1 900 ]	[1 400 –1 900 ]
Index	100	78	61	62
Unit cost of production (EUR/ tonne)	[2 300 –3 100 ]	[2 400 –3 200 ]	[1 900 –2 600 ]	[2 000 –2 700 ]
Index	100	102	83	88
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (226) The table above shows the evolution of the unit sales price on the Union market as compared to the corresponding cost of production.

• (227) Average sales prices were lower than the average unit cost of production already in 2022. Following the destocking of the inventories by the user industry and further pressure exerted by the dumped imports, the situation at the Union producer deteriorated even further. Such deterioration resulted in depressed sales prices of the Union producer, with the prices well below the cost of production, notably between 2023-IP.

• (228) This price depression occurred in circumstances where, although the cost of production saw a correction following 2023 once the energy crisis subsided, the sales price decreased even more sharply as shown in Table 8. Overall, in the investigation period and compared to 2022, the cost of production went down by 12 % while the average sales price decreased by a larger margin, namely by 38 %. As a result, the Union producer was operating at a significant loss during period 2023-the investigation period.

4.5.3.2.   Labour costs

• (229) The average labour costs of the Union producer developed over the period considered as follows:

Table 9

Average labour costs per employee

	2022	2023	2024	Investigation period
Average labour costs per employee (EUR)	[64 000 –85 500 ]	[61 000 –81 600 ]	[62 500 –83 600 ]	[63 600 –85 100 ]
Index	100	95	98	99
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (230) Average labour cost per employee was relatively stable throughout the period considered, decreasing by 5 % and 2 % respectively in 2023-2024 compared to 2022 to then essentially return to the 2022 levels in the investigation period.

4.5.3.3.   Inventories

• (231) Stock levels of the Union producer developed over the period considered as follows:

Table 10

Stocks

	2022	2023	2024	Investigation period
Closing stock (tonnes)	[600 –700 ]	[700 –1 000 ]	[800 –1 000 ]	[1 000 –1 300 ]
Index	100	134	140	177
Closing stock as a percentage of production (%)	5	13	10	14
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (232) Year-end closing stocks as a percentage of production increased from 5 % in 2022 to 13 % in 2023 and even 14 % in the investigation period, when the impact of the dumped imports from China was felt the most over the period considered

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

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

Table 11

Profitability, cash flow, investments and return on investments

	2022	2023	2024	Investigation period
Profitability of sales in the Union to unrelated customers (% of sales turnover)	[0 –4 ]	[–24 ]–[–32 ]	[–27 ]–[–36 ]	[–32 ]–[–42 ]
Cash flow (EUR)	[450 000 –550 000 ]	[–3 500 000 ]–[–4 500 000 ]	[–4 000 000 ]–[–5 000 000 ]	[–5 000 000 ]–[–6 000 000 ]
Investments (EUR)	[300 000 –400 000 ]	[240 000 –340 000 ]	[90 000 –130 000 ]	[40 000 – 80 000 ]
Index	100	81	30	16
Return on investments (%)	[–7 ]–[–10 ]	[– 138 ]–[– 184 ]	[– 154 ]–[– 206 ]	[– 200 ]–[– 267 ]
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (234) The Commission established the profitability of the sole Union producer 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. In 2022, the disruption in supply chains affected Chinese exports and tightened the supply of PBTC. In 2022, already being faced with significant import volumes from China, Lanxess posted only a slim profit. Subsequently, starting from 2023, the situation became unsustainable for the Union producer as it experienced declines in sales volumes and prices well below its cost of production, leading to a highly loss-making situation in the period 2023-the investigation period.

• (235) The net cash flow is the ability of the Union producer to self-finance their activities. The net cash flow analysis showed a significant slump in 2023 which persisted until the end of the period considered, in line with the trend observed across other main injury indicators.

• (236) Equally investments showed a declining trend from 2023 onwards. Overall, throughout the period considered, Lanxess’ investments decreased sharply (by 84 %) and were mainly related to maintenance of the machinery. The dramatic decline in investments in 2023-IP mirrored the loss-making development of the Union sales of PBTC.

• (237) The return on investments is the profit in percentage of the net book value of investments. In light of the developments described above, it was continuously decreasing from 2022 until the end of the period considered.

• (238) In terms of ability to raise capital, due to the deteriorating business environment, raising capital has become significantly more expensive and difficult for the Union industry. In any event, the Commission does not consider that the ability to raise capital would in any way affect the injury assessment in this case.

4.6.   Conclusion on injury

• (239) The main macro-indicators showed a negative trend during the period considered: Union production volume dropped by 32 %, capacity utilisation by 31 %, Union sales volume by 46 % and employment by 30 %. The said indicators declined dramatically mainly from 2023 onwards and such negative trend persisted for the remainder of the period considered.

• (240) A similar picture can be drawn for the micro-indicators. Profitability of sales in the Union was (slightly) positive only in 2022 but declined thereafter and the Union industry became loss-making from 2023. Similarly, cash flow that was positive at the beginning of the period considered, became negative from 2023 onwards. Year-end closing stocks as a percentage of production climbed over 10 % from 2023 onwards, when the impact of the increasing imports from China was becoming unsustainable for the Union industry.

• (241) The import volumes from China increased by 38 % over the period considered. In a context of a decrease in annual consumption by over 1 000 tonnes in the period considered, annual imports from China increased by over 2 500 tonnes over the same period, which resulted in the exports from China increasing their share in the market (comprising Lanxess and Chinese exporters) correspondingly, as the Chinese prices significantly undercut the Union industry’s prices over the period considered. During the investigation period, the undercutting margins of the exporters from the country concerned were significant and ranged between 20–40 % (as outlined in recital (206)).

• (242) The low-priced dumped imports from China also caused significant price depression to the Union industry. As a result, the Union industry was unable to sell even at prices covering their cost of production (despite the cost’s decreasing tendency after 2023) and became loss-making from 2023.

• (243) Throughout the period considered net investments decreased by staggering 84 % and the return on investment as well as the cash flow became negative starting from 2023, while the number of employees dropped by 30 % during the period considered. It follows that the Union industry is faced with an existential threat due to the increased flow of dumped imports, with Lanxess already having cut down significantly on its workforce.

• (244) Negative developments of the financial indicators such as profit, cash flow and return on investment affected the ability of the Union industry to make any significant investments, thus impeding its growth.

• (245) On the basis of the above, the Commission concluded at this stage that the Union industry suffered material injury within the meaning of Article 3(5) of the basic Regulation.

5. CAUSATION

• (246) In accordance with Article 3(6) of the basic Regulation, the Commission examined whether the dumped imports from China caused material injury to the Union industry. In accordance with Article 3(7) of the basic Regulation, the Commission also examined whether other known factors could at the same time have injured the Union industry. The Commission ensured that any possible injury caused by factors other than the dumped imports from China was not attributed to the dumped imports. These factors were imports from other third countries, export performance of the Union producer, effects of the variations in the raw material costs and the demand in the Union market.

5.1.   Effects of the dumped imports

• (247) The import quantities from China during the period considered increased by 38 %, from 6 742 tonnes in 2022 to 9 290 tonnes in the investigation period. This material increase, as explained in recital (200), coincided with a 7 % drop in the domestic consumption while the Union producer’s domestic sales fell by 46 % over the same period.

• (248) As a result, in the period considered, Chinese market share increased from [38–51] % to [57–76] %. Meanwhile, the market share of the Union industry decreased by the same proportion (given that the Union market is essentially served only by Lanxess and Chinese exporting producers), going from [45–60] % to a mere [26–35] % in the investigation period.

• (249) Already at the beginning of the period considered, despite the disruptions in supply chains and extraordinary levels of stocking by the buyers, the Union producer had to face significant Chinese imports. The effects of the dumped imports became even more acute from 2023 onwards as those imports kept increasing their market share and increasingly exerting price pressure on the suffering Union industry. While in 2022 the Union producer still managed to achieve modest profits, the pressure from increasing import volumes at dumped prices significantly below the production cost of the Union producer in the subsequent period became unsustainable for the Union industry. The Union industry was unable to increase its sales price to cover the cost of production because it faced unfair competition from Chinese imports of PBTC. To mitigate losses in production volumes and market share, the Union producer was forced to reduce prices at the expense of its profitability. The Union industry became highly loss-making from 2023. Therefore, the dumped imports from China caused the prices of the Union industry to be depressed within the meaning of Article 3(3) of the basic Regulation.

• (250) In view of the above considerations, the Commission provisionally established that the material injury suffered by the Union industry was caused by the dumped imports from China within the meaning of Article 3(6) of the basic Regulation. Such injury had both volume and price effects.

5.2.   Effects of other factors

5.2.1.   Imports from third countries

• (251) Based on the complaint, apart from China, there were immaterial imports (around 0,1 % of the Union consumption) from India in the investigation period. Therefore, the Chinese imports essentially constitute the only alternative source of supply of the product under investigation in the Union. In conclusion, given that the import volumes from third countries are essentially non-existent they could not plausibly affect the causal link between dumped imports and the material injury to the Union industry:

5.2.2.   Export performance of the Union industry

• (252) The volume of exports of the Union producer developed over the period considered as follows:

Table 12

Export performance of the Union producer

	2022	2023	2024	Investigation period
Export volume (tonnes)	[500 –700 ]	[300 –400 ]	[350 –450 ]	[350 –450 ]
Index	100	63	59	61
Average price (EUR/tonne)	[2 400 –3 200 ]	[2 100 –2 800 ]	[1 400 –1 900 ]	[1 400 –1 900 ]
Index	100	88	59	58
Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.	Source: Lanxess.

• (253) Similarly to production volumes and domestic sales, export volumes of the Union industry significantly decreased over the period considered and mainly from 2023 onwards. Furthermore, export prices followed the same trend as prices on the Union market.

• (254) However, exports to unrelated customers were only about [7–10] % of the Union industry’s overall Union sales, accounting for around 5 % of its production in the period considered. Therefore, the Commission provisionally concluded that while the export performance of the Union industry contributed to the material injury, it did not attenuate the causal link between the dumped imports from China and the injury found.

5.2.3.   Demand in the Union

• (255) The Union market indeed contracted by 7 % during the period considered, although remaining largely stable in the years prior to the investigation period. Under normal conditions of competition, in a shrinking market, sales volumes of all the market participants would have gone down more or less equally. However, in the present case, Chinese imports gained an additional [20–25] percentage point market share of the Union market over the period considered to the detriment of the Union industry whose market share decreased to the same extent over the same period. Therefore, the contraction in demand was not found to cause material injury to the Union industry in this case.

5.2.4.   Variations in the raw material costs

• (256) Raw material prices inevitably influence the pricing of any product. In this case, the Union producer was able to increase the sales prices to absorb the rising cost of production and achieve certain levels of profit at the beginning of the period considered. However, starting from 2023 and despite gradual downward movement of raw material prices, Lanxess has been forced to sell PBTC below cost due to increased inflow of aggressively priced Chinese PBTC. The inability to pass on the cost increases and the plummeting profitability was merely a manifestation of the injury caused by dumped imports, rather than by a self-inflicted decline in performance. Fluctuation in raw material costs over the period considered cannot therefore be regarded as a factor attenuating the causal link between the dumped imports and the injury suffered by the Union industry.

5.3.   Conclusion on causation

• (257) A causal link was established between the dumped imports from China on one hand and the injury suffered by the Union industry on the other hand. There was a coincidence in time between the significant increase in volume and market share of the dumped imports and the worsening of the Union industry’s performance, visible in particular from 2023 onwards. In a market with demand contraction, the increased volumes of dumped imports eroded the operating rates of the Union industry and its ability to set prices at the level that could absorb the cost of production, thereby clearly demonstrating the existence of price depression. This situation resulted in a lossmaking situation of the Union producer from 2023 onwards.

• (258) The Commission examined other possible factors that may have had an impact on the situation of the Union industry. The Commission distinguished and separated the effects of these factors on the situation of the Union industry from the injurious effects of the dumped imports.

• (259) Regarding the effects of imports from other third countries, the Commission concluded that, except for immaterial Indian imports, imports from third countries were non-existent (see recital (251)). Therefore, this factor could not have plausibly caused any injury to the Union industry. Similarly, exports to unrelated customers were only limited part of the Union industry’s overall sales (see recital (254)) and while the export performance of the Union industry might have contributed to the material injury, it did not attenuate the causal link between the dumped imports from China and the injury found.

• (260) Finally, neither the fluctuation in raw material prices nor a slight contraction in the Union consumption over the period considered had caused the material injury to occur. The pressure exercised by dumped imports on selling prices reflected in the inability of the Union industry to pass on even the decreasing cost of production. Furthermore, Union Industry’s significant loss of market share in the Union market despite a only moderately declining in demand is rather a demonstration of price depression caused by increasing volumes of low-priced Chinese imports and of the injury suffered as a result of these dumped imports.

• (261) On the basis of the above, the Commission concluded that the dumped imports from China caused material injury to the Union industry and that the other factors (imports from other countries, export performance of the Union industry, fluctuation of raw material costs and contraction in demand), considered individually or collectively, did not attenuate or break the causal link between the dumped imports and the material injury. The injury consists of reduced market share, production, production capacity utilisation, employment levels, profitability, closing stocks, cash flow and return on investments. Furthermore, as explained above in recital (249), the Union industry suffered price depression caused by dumped imports from China.

6. LEVEL OF MEASURES

6.1.   Underselling margin

• (262) The injury would be removed if the Union industry were able to obtain a target profit by selling at a target price in the sense of Articles 7(2c) and 7(2d) of the basic Regulation.

• (263) In accordance with Article 7(2c) of the basic Regulation, for establishing the target profit, the Commission considered the following factors: the level of profitability before the increase of imports from the country under investigation, the level of profitability needed to cover full costs and investments, research and development (R & D) and innovation, and the level of profitability to be expected under normal conditions of competition. Such profit margin should not be lower than 6 %.

• (264) The profit of the sole Union producer throughout the period considered was below 6 % and no substantiated profitability was provided for the period prior to that. None of these years would therefore qualify for providing a target profit in accordance with Article 7(2c) of the basic Regulation. Furthermore, the Union producer made no substantiated claim for investments foregone or R & D and innovation costs. In view of those facts, the Commission resorted to the use of the minimum 6 % target profit which was added to the Union industry’s actual cost of production to establish the non-injurious price

• (265) Furthermore, as no substantiated claims were made pursuant to Article 7(2d) concerning current or future costs which result from multilateral environmental agreements and protocols thereunder or from the listed ILO Conventions, no further costs were added to the non-injurious price thus established.

• (266) The Commission then determined the underselling margin level on the basis of a comparison of the weighted average import price of the sampled cooperating exporting producers in China, as established for the price undercutting calculations, with the weighted average non-injurious price of the like product sold by the Union producer on the Union market during the investigation period. Any difference resulting from this comparison was expressed as a percentage of the weighted average import CIF value.

• (267) The underselling margin for ‘other cooperating companies’ and for ‘all other imports originating in country concerned’ is defined in the same manner as the dumping margin for these companies and imports in Section 3.5.

Company	Underselling margin (%)
Jiyuan Qingyuan Water Treatment Co., Ltd.	105,6
Nantong Uniphos Chemicals Co., Ltd.	119,0
Shandong Taihe Technologies Co., Ltd.	104,9
Cooperating non-sampled exporting producers	109,7
All other Chinese exporting producers	119,0

• (268) In the present case, the complainant claimed the existence of raw material distortions within the meaning of Article 7(2a) of the basic Regulation. Thus, to conduct the assessment on the appropriate level of measures, the Commission first established the amount of duty necessary to eliminate the injury suffered by the Union industry in the absence of distortions under Article 7(2a) of the basic Regulation. Then it examined whether the dumping margin of sampled exporting producers would be higher than their underselling margin.

6.2.   Raw material distortions

• (269) The complainant has provided sufficient evidence in the complaint that there are raw material distortions within the meaning of Article 7(2a) of the basic Regulation in China with regard to the product concerned. According to the evidence in the complaint, phosphorus trichloride (‘PCl3’), accounting for more than 17 % of the cost of production of the product concerned, is subject to 0 % VAT refund in China.

• (270) Therefore, as announced in the Notice of Initiation, in accordance with Article 7(2a) of the basic Regulation, the Commission examined the alleged distortion and any other distortions covered by Article 7(2a) of the basic Regulation in China.

• (271) The Commission first identified the main raw materials used in the production of the product concerned by each of the sampled exporting producers. The three sampled exporting producers do not use PCl3 as raw material to produce PBTC. Instead, they buy DMPI, which is a chemical produced from PCl3 and methanol. PCl3 is thus an upstream raw material for PBTC, as it is a raw material embedded in DMPI, which is the main raw material of PBTC. Therefore, even if the sampled exporting producers do not buy PCl3, they benefit from any potential raw material distortion affecting PCl3.

• (272) The raw materials concerned by the distortions in Article 7(2a) were defined as those accounting for at least 17 % of the cost of production of the product concerned. The Commission first identified for each sampled exporting producer their factors of production. First the Commission established how much PCl3 is needed to produce one tonne of DMPI by using data provided by the complainant on its own production process of DMPI including raw materials, energy, labour and overhead. Then, the Commission determined, on the basis of the consumption ratios provided by the sampled exporting producers and using undistorted prices in Brazil for each production factor, what share DMPI represented in the cost of production of PBTC for each of the sampled exporting producers. Finally, the Commission applied the percentage of PCL3 in the cost of production of DMPI to the percentage of DMPI in the cost of production of PBTC. As a result, the Commission found that PCl3 represented more than 17 % of the cost of production of PBTC for each of the three sampled exporting producers.

• (273) The Commission then examined whether the price of PCl3 is distorted by one of the measures listed in Article 7(2a) of the basic Regulation: dual pricing schemes, export taxes, export surtax, export quota, export prohibition, fiscal tax on exports, licensing requirements, minimum export price, value added tax (VAT) refund reduction or withdrawal, restriction on customs clearance point for exporters, qualified exporters list, domestic market obligation, captive mining. For this purpose the Commission used a website on Chinese VAT rates [^ntr118-L_202601045EN.000101-E0118] which confirmed that PCl3 was subject to 13 % VAT and export VAT refund was 0 % during the IP.

• (274) Next, the Commission compared the price of PCl3 to prices in the representative international market. As none of the sampled exporting producers purchased PCl3, the Commission used publicly available data on Chinese chemical prices [^ntr119-L_202601045EN.000101-E0119] which showed that Chinese prices for PCl3 during the IP were on average 5 714 CNY. The Commission compared this price to the GTA import statistics of imports of PCl3 from all countries to all countries in the IP which showed a weighted average price of 11 136 CNY. As Chinese prices for PCl3 were 51 % of international import prices, the Commission concluded that the prices in China were significantly lower than prices in representative international market.

• (275) The Commission concluded that PCl3 was subject to a distortion within the meaning of Article 7(2a) of the basic Regulation.

6.2.1.   Union interest under Article 7(2b) of the basic Regulation

• (276) In accordance with Article 7(2b) of the basic Regulation, the Commission examined whether it could clearly conclude that it was in the Union interest to determine the amount of provisional duties in accordance with Article 7(2a) of the basic Regulation. The determination of the Union interest was based on an appreciation of all pertinent information to this investigation, including the spare capacities in the exporting country, competition for raw materials and the effect on supply chains for Union companies.

• (277) The Commission actively sought information from interested parties, that would enable to determine, whether paragraph 2 or 2a of the basic Regulation shall apply. All interested parties were invited to provide the pertinent information in the Notice of Initiation. A specific questionnaire was addressed to the Chinese government, and information was also requested via the questionnaires available to all interested parties upon initiation of the case.

6.2.1.1.   Spare capacities in the exporting country

• (278) Exporting producers have a spare capacity on PBTC in excess of 25 kt, which was almost double the Union consumption in the IP. Therefore, there is a potential and incentive for the dumped imports of PBTC from China to continue entering the Union market in significant quantities even if the level of duties is set pursuant to Article 7(2a) of the basic Regulation.

6.2.1.2.   Competition for raw materials

• (279) The assessment of raw material competition focused on phosphorus trichloride (PCl3). The raw materials needed to produce PCl3 are yellow phosphorus (P4) and chlorine (CL2). The key input used in the production of PCl3 is yellow phosphorus, which is an upstream input in the production of PBTC both in the Union and in China. It is, in fact, on the level of the yellow phosphorus that a strong competition for raw materials exists. Yellow phosphorus is produced only in a few regions worldwide where there are available phosphate reserves i.e. in China, Kazakhstan and the United States.