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Upon the application by Zigong Honghe Chemical Industry Share-Limited Company (hereinafter referred to Honghe Company) and Zhejiang Quhua Fluorine Chemical Co., Ltd. (hereinafter referred to Quhua Company) for anti-dumping investigation, and in accordance with the Anti-Dumping and Countervailing Rules of the People's Republic of China, the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to the MOFTEC), after consulting with the State Economic and Trade Commission (hereinafter referred to the SETC), officially announced the filing of the case on December 20, 2000, and decided to carry out the anti-dumping investigation on the imported dichloromethane produced in the United Kingdom, the United States, the Netherlands, France, Germany and Republic of Korea. The SETC has investigated the industrial damage and the extent thereof, and hereby makes the final ruling as follows in accordance with the Anti-Dumping Rules of the People's Republic of China (hereinafter referred to the "Rules"): I. INVESTIGATION PROCEDURES (I) Initial Investigation After the case was filed, the SETC formed the Team for Anti-dumping Investigation of Dichloromethane (hereinafter referred to the Investigation Team), and investigated the damage caused by the imported dichloromethane produced in the United Kingdom, the United States, the Netherlands, France, Germany and Republic of Korea to the relevant industry inside the territory of China. The SETC separately distributed the "Questionnaire to Domestic Producers" and the "Questionnaire to Domestic Importers" to the relevant producing enterprises and importers inside the territory of China on February 13, 15 and March 17, 2001, and distributed the "Questionnaire to Foreign Producers" to the relevant foreign producers on March 21. It took back 3 questionnaires from the domestic producers, 2 questionnaires from the domestic importers and 5 questionnaires from the foreign producers within the specified time limit. In April 2001, the Investigation Team carried out the on-the-spot check separately on Quhua Company and Honghe Company. (II) Initial Ruling On July 11, 2001, the SETC made the "Initial Ruling of the State Economic and Trade Commission of the People's Republic of China on the Damage Caused by the Imported Dichloromethane Produced in the United Kingdom, the United States, the Netherlands, France, Germany and Republic of Korea to Chinese industry" upon its careful investigation and study. On August 16, 2001, the MOFTEC promulgated the No. 11 announcement in 2001, and promulgated the "Initial Ruling on the Anti-Dumping Investigation on the Imported Dichloromethane Produced in the United Kingdom, the United States, the Netherlands, France, Germany and Republic of Korea" made by the MOFTEC and the SETC. (III) Written Comments Proposed by the Interested Parties Within one month after the initial ruling was made, the SETC received written comments of the relevant companies involved from the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea regarding the initial ruling, and no other interested party proposed any written comment. (IV) Further Investigation From September 2001 to January 2002, the Investigation Team carried out further investigation and collected further evidence with regard to the interested parties' written comments and the relevant circumstances after the initial ruling, and the relevant issues. The SETC has carefully analyzed the application letters and the evidence attached thereto, the questionnaires taken back, the result on the on-the-spot check, the interested parties' written comments and the result of further investigation after the initial ruling, and has fully considered the opinions of the interested parties in accordance with the law. (V) Period for Investigation of the Industrial Damage The SETC has determined the period for investigation of the industrial damage in this case to be from January 1, 1998 to December 31, 2000, and the year 1997 to be the basic period for contrasting the data from the investigation on industrial damage. II. TERMINATION OF THE ANTI-DUMPING INVESTIGATION ON THE DICHLOROMETHANE EXPORTED FROM FRANCE TO CHINA After the initial ruling, the French Atofina Co., Ltd. proposed that the quantity of the dichloromethane exported from France to China was less than 3% of China's total quantity of imported dichloromethane, which should be negligible. The investigation by the Investigation Team indicated that during the period for the dumping investigation (July 1, 1999 --- June 30, 2000), the quantity of dichloromethane exported from France to China occupied 2.67% of China's total quantity of imported dichloromethane, which was lower than 3%, and could be negligible. In accordance with Article 27 and Paragraph 2 of Article 9 of the Rules, the SETC has decided to terminate the anti-dumping investigation on the dichloromethane exported from France to China. III. THE INVESTIGATED PRODUCT, THE DOMESTIC PRODUCTS OF THE SAME CATEGORY AND THE REPRESENTING QUALIFICATION OF THE APPLICANTS The investigated product in this final ruling was dichloromethane produced in the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea. The English name of "¶þÂȼ×Íé" is dichloromethane or methylenechloride, and its molecular formula is CH2Cl2. The HS number of dichloromethane in the "Customs Import and Export Tariff of the People's Republic of China" is 29031200. There is no difference between the domestic products of the same category and the investigated product in respect of physical nature. Both are colorless transparent liquid, and have the odor and sweet taste similar to those of aether; both are easy to volatilize, and can produce carbon monoxidie, carbon dioxidie, hydrogen chloride and phosgene if burned; both are slightly soluble in water, soluble in ethanol and aether; both can dissolve many kinds of resin and fat well; their melting point is -97.6¡ãC, and their boiling point is 39.8¡ãC; their relative density is 1.33, and their saturated vapour pressure is 30.5kPa (10¡ãC). There is no difference between the investigated product and the domestic products of the same category in respect of package and specifications, and the purity of both is higher than 99% kept in zinc plating or paint baking iron buckets. The uses of the domestic products of the same category are basically the same as those of the investigated product. They are mainly used as coating solvents, metal degreaser, smog propellent, polyurethane foaming agent and to produce safe film strips, poly-carbonic acid, anticorrosive materials, as well as used in midbody extraction in medicine production. The investigated product has no substitutable product. Within the period of investigation, the total output of dichloromethane of Quhua Company and Honghe Company, the domestic applying enterprises, accounted for more than 90% of the total output of dichloromethane of the whole country, which meets the requirement in Article 11 of the Rules that "the producers whose total output accounts for the large part of the aggregate output of the domestic products of the same category" constitute a domestic industry. Therefore, these two companies may represent the domestic dichloromethane industry. After the initial ruling of this case was made, the relevant foreign interested parties proposed that the dichloromethane with the purity to be higher than 99.9% could not be produced within China, and that, for this product, there were no products of the same category within China, either; therefore, this part of dichloromethane should be excluded from the investigated product. Meanwhile, they held that if anti-dumping measures were taken against this part of product, the demands in and development of the downstream medicine industry would be impacted. Upon investigation, the SETC held that there is sufficient evidence indicating that the relevant Chinese domestic enterprises are able to produce dichloromethane with the purity exceeding 99.9%, and they can meet the demands in domestic medicine industry. The amount of Chinese domestic dichloromethane used in the medicine industry is about 15 - 20% of the total sales quantity of dichloromethane. Moreover, up to now, there is no enterprise in the medicine industry giving the opinion that the anti-dumping measures taken against dichloromethane will cause bad impacts to its production. Therefore, the dichloromethane with the purity exceeding 99.9% should be included in the investigation. IV. CUMULATIVE EVALUATION ON THE INVESTIGATED PRODUCT WHICH HAS CAUSED DAMAGE TO THE DOMESTIC INDUSTRY After reviewing the relevant evidence, the SETC holds that the competition conditions for the investigated product imported from the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea are the same as those between such investigated product and the Chinese domestic products of the same category, and that the import quantity and dumping margin of the product may not be negligible. In accordance with Article 9 of the Rules, the SETC holds that it is appropriate to have a cumulative evaluation on the impacts of the dichloromethane imported from the above said five countries on the domestic industry. After the initial ruling of this case was made, the UK Ineos Chlor Ltd. proposed that the price of dichloromethane exported from the United Kingdom to China did not decrease obviously, and the export quantity was in a decreasing tendency, and the market share was also decreasing. However, it is indicated in the data from investigation that, within the period of investigation on the industrial damage, the quantity of dichloromethane exported from the United Kingdom to China was increasing, and the increase margin reached 29.82% in 2000 compared with that within the basic period; meanwhile, the price of the dichloromethane exported from the United Kingdom to China was in a decreasing tendency, which decreased by 6.93% in 2000 compared with that within the basic period. Although the market share of the dichloromethane exported from the United Kingdom to China was in a decreasing tendency in China, this decrease was caused due to the sharp increase of the consumption quantity in China market. The SETC holds that it is appropriate to have a cumulative evaluation on the dichloromethane imported from the United Kingdom and on the import quantity of other countries. V. INDUSTRIAL DAMAGE AND THE EXTENT THEREOF The SETC has investigated the damage suffered by the industry inside the territory of China and the extent of the damage. The existing evidence indicates as follows: (I) The Import Quantity of the Investigated Product and the Tendency of Market Share According to the statistics by the customs of China, the total quantity of the dichloromethane exported from the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea to China was separately 19649.16 tons, 43798.27 tons and 54869.17 tons in 1998, 1999 and 2000, which increased separately in each year by 27.11%, 122.90% and 25.28%, with the average annual increase to be 52.54%. As a whole, it has an increasing tendency year by year. The quantity increased by 39411.11 tons in 2000 compared with that within the basic period, with the increase margin reaching 254.96%. What is connected with the above increase is that the share occupied by the investigated product in China market also had an increasing tendency year by year. The share occupied by the dichloromethane imported from the said five countries in 1998, 1999 and 2000 in the domestic market of China was separately 42.23%, 39.78% and 51.56%, which increased separately in each year by 8.07%, -2.45% and 11.78%. (II) The Import Price of the Investigated Product and Its Impacts on the Price of Domestic Products of the Same Category As a whole, the price of the dichloromethane exported from the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea to China had a decreasing tendency. Compared with that within the basic period, the price decreased by 6.93% for the dichloromethane from the United Kingdom, decreased by 27.28% for that from the United States, decreased by 18.30% for that from the Netherlands, decreased by 41.29% for that from Germany, and decreased by 37.12% for that from Republic of Korea in 2000. The decrease of the price of the investigated product had restrained the price of the domestic products of the same category. From 1998 to 2000, the domestic applying enterprises' sales price of dichloromethane decreased separately in each year by 9.61%, 23.82% and 4.77%, with the average annual decrease margin to be 10.37%. (III) Impacts of the Investigated Product on Chinese Domestic Industry 1. The increase of output in the domestic industry was restrained. In 1998, 1999 and 2000, the total output of dichloromethane of the domestic applying enterprises increased separately in each year by 5.46%, 23.83% and 55.49%, with the rate of average annual increase to be 26.63%. The output increased by 103.06% in 2000 compared with that within the basic period. During the same three years, the quantity of domestic demands of dichloromethane increased separately in each year by 2.8%, 136.6% and -3.3%, with the rate of average annual increase to be 32.97%. The said quantity increased by 135.10% in 2000 compared with that within the basic period. The above data indicate that although the output in the domestic industry had an increasing tendency year by year, the overall increase margin was obviously lower than the increase margin of the quantity of domestic demands so long as the whole investigation period was concerned. Meanwhile, the increase of domestic output was even lower than the increase in import of the investigated product. It may be ascertained that the increase of the output in the domestic industry was restrained by the large import quantity of the investigated product within the investigation period. 2. The increase of the sales quantity and sales income was inadequate. In 1998, 1999 and 2000, the total sales quantity of the applying enterprises increased separately in each year by -14.83%, 22.31% and 74.65%, with the rate of average annual increase to be 22.08%. The said quantity increased by 81.93% in 2000 compared with that within the basic period. In 1998, 1999 and 2000, the total sales income of the applying enterprises increased separately in each year by -23.02%, -6.83% and 66.32%, with the rate of average annual increase to be 6.06%. The said income increased by 19.29% in 2000 compared with that within the basic period. Within the investigation period, although the sales quantity and sales income in the domestic industry had an overall increasing tendency, such increase was obviously inadequate compared with the increase of the quantity under domestic demands. Meanwhile, the total increase margin of the sales quantity and sales income was also obviously lower than the increase margin of the output. This indicates that within the investigation period, the storage and the price index in the domestic industry were deteriorating. 3. The domestic industry ran at heavy loss. In 1998, 1999 and 2000, some applying enterprises turned from being profitable into being loss-making, and some others' loss aggravated. Although the output and the sales quantity of the applying enterprises had an increasing tendency, the total pre-tax profits of the applying enterprises decreased separately in each year by 56.35%, 230.56% and 86.24%, with the average annual decrease to be 45.20%. The said output and sales quantity decreased by 206.15% in 2000 compared with those within the basic period. 4. The market share decreased. In 1998, 1999 and 2000, the total domestic sales quantity of the applying enterprises separately occupied 21.51%, 11.12% and 20.08% of Chinese domestic market share, which decreased separately in the first two years by 4.45% and 10.39%, and increased in the last year by 8.97%. The share of dichloromethane occupied by the applying enterprises in the domestic market decreased by 5.88% in 2000 compared with that within the basic period. 5. The operating rate was comparatively low all along. In 1998, 1999 and 2000, the average operating rate of the domestic applying enterprises was separately 61.18%, 66.66% and 76.18%. At the time when the domestic demands increased obviously, the operating rate in the domestic industry was kept in a low level all along. 6. The return on investment (ROI) decreased year by year. In 1998, 1999 and 2000, Honghe Company's return on investment of dichloromethane decreased separately in each year by 48.67%, 28.21% and 5.11%; while Quhua Company's return on investment of dichloromethane decreased separately in each year by 0.38%, 0.3% and 3.07%. 7. The dumping margin was comparatively large. In the initial ruling of this case, the MOFTEC ascertained that the dumping margin of dichloromethane imported from the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea ranged from 7% to 75%. The bad impacts caused by the great dumping to Chinese domestic industry were very heavy. 8. The storage at the end of the year increased obviously. In 1998, 1999 and 2000, the total storage at the end of the year of the applying enterprises increased separately in each year by 173.30%, 85.31% and -0.77%, with the rate of average annual increase to be 71.29%. The said storage increased by 402.55% in 2000 compared with that within the basic period. 9. The per capita annual wage decreased year by year. In 1998, 1999 and 2000, the per capita annual wage of the applying enterprises decreased separately in each year by 13.57%, 11.86% and 6.68%, with the average annual decrease margin to be 8.83%. The said wage decreased by 28.91% in 2000 compared with that within the basic period. 10. The labor productivity decreased. Within the investigation period, the labor productivity of dichloromethane decreased obviously, and Honghe Company's actual labor productivity only reached 50% of the planned labor productivity. 11. The capacity of raising funds and that of investment decreased. The large quantity of low-price imports of the investigated product caused obvious bad impacts to the domestic dichloromethane producing enterprises' capacity of raising funds and that of investment. Honghe Company had been frustrated in issuing shares and borrowing banking loans. Meanwhile, the reduction of profits also led to the obvious reduction of the applicants' investment activities, and some investment plans had to be given up. 12. The increase in domestic industry was slow. Within the investigation period, although there was certain increase in respect of the production capacity of Chinese domestic dichloromethane industry, the increase rate was far lower than that of the quantity under domestic demands. Meanwhile, the increase of domestic investment of dichloromethane was also lower than that of the quantity under domestic demands. Therefore, it can be ascertained that the increase in domestic industry was slow. The Investigation Team also investigated the applying enterprises' indexes of employment and cash flow, related to dichloromethane. The applying enterprises proposed that dichloromethane and other methane chlorides were usually produced by the same producing equipment, that some production and operation indexes could not be clearly separated from other relevant products, and that part of the indexes were hard to be calculated or be calculated not accurately enough. The SETC holds that their reasons are justifiable. On the basis of the existing evidence of this case, the SETC holds that it may be ascertained that the domestic dichloromethane industry has been suffering from the material damage caused by these countries due to their low-price dumping of dichloromethane. (IV) Possible Further Impacts of the Investigated Product from the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea on Chinese Dichloromethane Industry In recent years, both the United States and the Europe Union promulgated the relevant laws on restricting the use of dichloromethane. These US laws mainly include the "Clean Air Act", the "Safe Drinking Water Act", the "Resource Conservation and Recovery Act" and the "Comprehensive Environmental Response, Compensation, and Liability Act", and the "Emergency Planning and Community Right-to-Know Act", while the Europe Union's legislation in this aspect is mainly the "Directive on the Limitation of Emissions of Volatile Organic Compounds (VOC) Due to the Use of Organic Solvents in Certain Activities and Installations" (Directive 1999/13/EC). The Europe Union stipulated that its member countries should reduce 67% of dichloromethane emissions within 9 years as of 1999. The change in the policies of the United States and the Europe Union and their corresponding legislation were the important reasons leading to the export of large quantity of dichloromethane. Such reasons have not disappeared, and will also continue to cause effects. The total production capacity of the 4 foreign producers, whose questionnaires have been taken back (not including the French Atofina Co., Ltd.), from 1998 to 2000 decreased by 7.51%, their total output increased by 8.37%, their export quantity increased by 3.81%, among which the quantity of dichloromethane exported to China increased by 23.53%, and their total storage at the end of the period was basically kept unchanged. It can be proved that the capacity of these relevant countries to produce dichloromethane is still very large, and their export capacity was still very strong. Moreover, the quantity of export to China takes an obvious increasing tendency. Therefore, there still is a possibility with the above said five countries to continue exporting dichloromethane to China in a low price. VI. CAUSALITY BETWEEN THE DUMPING AND THE DAMAGE (I) The existing evidence indicates that the large quantity of low-price export of dichloromethane by the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea to China is the reason that has caused material damage to Chinese domestic dichloromethane industry. The investigation indicates that from 1998 to 2000, the import quantity of dichloromethane from the above said five countries increased in a large margin, which had greatly exceeded the increase rate of the output of domestic dichloromethane. The proportion of the import quantity of dichloromethane from the above said five countries in the Chinese domestic total import quantity was continuously increasing, and the share of the said dichloromethane in Chinese domestic market was getting larger and larger. Meanwhile, since the quality of dichloromethane from the above said five countries was equivalent to that of the Chinese domestic products of the same category, and the competition was intense, the continuous decrease of their export price had directly restrained the sales price of the domestic products of the same category, thus making the latter's sales income and pre-tax profits unable to increase simultaneously with the output, which lead to the deterioration of the main operation indexes of Chinese domestic industry and the material damage to Chinese domestic industry. (II) The investigation on other information indicates that the following factors did not cause any damage: 1. Change in domestic demands. In recent years, with the development of China's economy, the quantity of domestic demands in dichloromethane in China takes an increasing tendency year by year, and the increase margin is very large. Therefore, the possibility that the change in domestic demands has caused bad impacts to the development of the domestic industry may be excluded. 2. Change in consumption modes. Up to now, there isn't any product in China which could be used to substitute dichloromethane, and there isn't any policy change which limits the use of dichloromethane. Therefore, there has not been any circumstance under which the domestic dichloromethane market shrinks due to other substitutable products. 3. Change in the applicants' operation and management. The domestic applying enterprises have been in good management conditions, their management of costs and quality has been strict, and there hasn't been any sign of bad operation or management. 4. Practice of foreign or domestic producers on restricting trade. The domestic applying enterprises haven't met with any practice of foreign or domestic dichloromethane producers on restricting trade within the investigation period, thus they were not impacted in this respect. 5. Factors of technical progress. With respect to producing equipment in the dichloromethane industry, China and the five countries including the United Kingdom are basically at the same technical level, and thus the damage suffered by the domestic industry was not caused by technical underdevelopment. 6. Impacts by the export of domestic products of the same category. Within the investigation period, the dichloromethane produced by the domestic applying enterprises had no export records, nor was there any change with the export performance, thus it had no impacts on the domestic industry. 7. The quantity of the products of the same category imported from other countries or regions. Due to the continuous increase of the domestic demands in China, the quantity of dichloromethane imported from other countries or regions took an increasing tendency, however, the proportion of the quantity of dichloromethane imported from such countries or regions in the total import quantity took an overall decreasing tendency. The said proportion decreased by 16.13% in 2000 compared with that within the basic period. 8. Force majeure. The Chinese applying enterprises in the dichloromethane industry did neither suffer from natural disasters nor other force majeure events within the investigation period, and their production and operation went on normally, instead of being impacted unexpectedly. (III) Conclusion On the whole, the SETC holds that the damage suffered by Chinese domestic dichloromethane industry was caused by the low-price export of the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea, and there is a causality between the dumping and the damage. VII. FINAL RULING On the basis of the above evidence and analysis of the investigation, the SETC finally rules: the low-price export by the United Kingdom, the United States, the Netherlands, Germany and Republic of Korea of large quantity of dichloromethane to China has caused material damage to Chinese dichloromethane industry and the threat of material damage will continue to exist, and there is a causality between the dumping and the damage. In accordance with the Rules, it is necessary to immediately take anti-dumping measures. |
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