Analysis of the request for investigation into the dumping of epoxy resin imports from China, Korea, Taiwan and Thailand into the EU

The European Commission (hereinafter referred to as “the Commission”) has received a complaint pursuant to Article 5 of Regulation EU 2016/1036 of the European Parliament and of the Council of 8 June 2016 on anti-dumping of imports from non-member countries of the European Union( ) (the “Basic Regulation”). The complaint alleges that imports of epoxy resins originating in the People's Republic of China (“China”), the Republic of Korea, Taiwan and Thailand, are being dumped and are thereby causing injury ( ) to the EU industry.

1. Request for investigation

The request for investigation was submitted on 6 June 2024 by an Ad Hoc Coalition of Epoxy Resin Producers (“hereinafter referred to as the Complainant”). The request for investigation is made on behalf of the European Union (EU) epoxy resin industry within the meaning of Article 5(4) of the Basic Regulation.

An open version of the request for investigation and an analysis of the extent of support from EU producers for the complaint are available for inspection by interested parties.

2. Products covered by the request and investigation:

The products covered by this investigation are products containing more than 35% by weight of epoxy resins, also known as epoxide resins or polyepoxides, which are polymers or prepolymers containing reactive epoxy groups, based on epichlorohydrin ('ECH') and an aliphatic or aromatic alcohol component (such as BPA), in solid, semi-solid or liquid form, of a specific purity, molecular weight or molecular structure, with or without denaturants, curing agents or additives, provided that the curing agent has not reacted chemically to cure the epoxy resin or convert it into another product that no longer contains epoxy groups (“the product under investigation”).

The following products are excluded:

(1) Certain paint and coating products, being mixtures or other formulations of epoxy resins, hardeners and pigments, in any form, packed in one or more containers, in which: The pigments constitute at least 10 per cent of the total weight of the product, The epoxy resin constitutes up to 80 per cent of the total weight of the product and The hardener constitutes from 5 per cent to 40 per cent of the total weight of the product.

(2) Pre-impregnated fabrics or fibres, commonly referred to as 'pregs', are composite materials consisting of fabrics or fibres (usually carbon or glass) impregnated with epoxy resin.

(3) Epoxy resin mixtures with other materials, currently classified under other CN codes 2910 90 00, 3824 99 92, 3824 99 93 and 3907 30 00.

All interested parties wishing to submit information on the product range must do so within 10 days from the date of publication of this Notice ( ).

3. Alleged Dumping in the Complaint

The products alleged to be dumped are those under investigation, originating from the People's Republic of China, the Republic of Korea, Taiwan (China) and Thailand, currently classified under CN codes ex 2910 90 00, ex 3824 99 92, ex 3824 99 93 and ex 3907 30 00 (TARIC codes 2910 90 00 05, 3824 99 92 96, 3824 99 93 10, 3907 30 00 05, 3907 30 00 20 and 3907 30 00 80).

The CN and TARIC codes are provided for informational purposes only and do not affect subsequent changes in tariff classification.

The scope of this investigation depends on the definition of the product under investigation as set out in Section 2.

a) China:

The Party submitting the request for investigation (the Complainant) considers that the use of domestic prices and costs in China is inappropriate due to a significant deviation from the meaning of point (b) of Article 2(6a) of the EU Basic Regulation. In order to substantiate the allegations of significant deviations, the Complainant has relied on information contained in the Commission Staff Working Paper, Significant Distortions in the Economy of the People's Republic of China for the Purposes of a Trade Remedy Investigation ( ) dated 10 April 2024.

In particular, the Complainant considers that the production and consumption of the product under investigation appear to be affected by the factors referred to in the Report. Further evidence confirms that the chemical industry, and in particular epoxy resin manufacturers, are closely linked to the Government of China ('GOC'), notably including excerpts and links to the websites and financial statements of those manufacturers.

The Complainant also provides evidence that with significant intervention and support from the Chinese government, the government has significantly increased capacity for ECH, a key input in the production of epoxy resins.

Furthermore, the Complainant demonstrates how the Chinese government's incentives have distorted the glycerin industry and how the glut of glycerin has affected the ECH market. Since most of China's epoxy resin production is derived from ECH which uses glycerin in its production, any 'distortion' of the upstream glycerin market will 'distort' the downstream markets, including ECH and epoxy resins.

Finally, the complainant relies on the Commission's conclusions in a number of recent anti-dumping investigations. For example:

+ Commission Implementing Regulation (EU) 2021/983 of 17 June 2021 imposing provisional anti-dumping duties on imports of aluminium foil originating in the People's Republic of China (OJ L 216, 18.6.2021, p. 142).

+ Commission Implementing Regulation (EU) 2019/1198 of 12 July 2019 imposing definitive anti-dumping duties on imports of ceramic tableware and kitchenware originating in the People's Republic of China following the expiry of the review pursuant to Article 11(2) of Regulation (EU) No 2016/1036 (OJ L 189, 15.7.2019, p. 8);

+ Commission Implementing Regulation (EU) 2019/687 of 2 May 2019 imposing definitive anti-dumping duties on imports of certain organically coated steel products originating in the People's Republic of China following the expiry of the review pursuant to Article 11(2) of Regulation (EU) 2016/1036 of the European Parliament and of the Council (OJ L 116, 3.5.2019, p. 5);

+ Commission Implementing Regulation (EU) 2019/1693 of 9 October 2019 imposing provisional anti-dumping duties on imports of steel wheels originating in the People's Republic of China (OJ L 259, 10.10.2019, p. 15);

+ Commission Implementing Regulation (EU) 2021/2011 of 17 November 2021 imposing definitive anti-dumping duties on imports of optical fibre cables originating in the People's Republic of China (OJ L 410, 18.11.2021, p. 51).

Pursuant to Article 2(6a)(a) of the Basic Regulation, the allegation of dumping is based on a comparison of the normal value, which is based on the costs of production and sales reflecting an undistorted price or standard, with the export price (ex-works) of the product under investigation when sold for export to the EU. The dumping margin calculated on the basis of this comparison is of great importance to the country concerned.

Based on the information available, the Commission considers that there is sufficient evidence under Article 5(9) of the Basic Regulation tending to indicate that, due to significant distortions affecting prices and costs, the use of domestic prices and costs in the relevant country is inappropriate, and therefore an investigation is initiated on the basis of Article 2(6a) of the Basic Regulation. The country report in this case is available for inspection by interested parties and on the website of DG Trade( ).

b) Korea, Taiwan and Thailand

Due to the lack of reliable data on domestic prices for Korea, Taiwan and Thailand, the dumping allegation is based on a comparison of the costs of production at normal value, selling, general and administrative expenses ('SG&A') and profits, on the basis of the volume of the EU epoxy resin industry for each factor of production and the costs per unit established in the respective domestic market. These constructed normal values ​​are compared with the export price (ex-works) of the product under investigation when sold for export to the EU.

The dumping margin calculated on the basis of this comparison is significant for Korea, Taiwan and Thailand.

4. Alleged injury and causality

4.1. Injury

The Complainant has provided evidence that imports of the product under investigation from the countries concerned have increased overall in absolute terms and in market share. The evidence provided by the Complainant shows that the volume and price of the imports under investigation have, among other things, had a negative impact on the sales volume, prices and market share of the epoxy resin industry in the EU, causing significant adverse effects on the overall performance and financial position of the EU industry.

4.2. Alleged price distortion of raw materials

In its request for investigation, the Complainant provided sufficient evidence that there may be price distortion of raw materials in China related to the product under investigation. According to the evidence in the complaint, epichlorohydrin ('ECH'), which accounts for 30-40% of the production cost of the product under investigation, may be distorted in China in the form of subsidy through VAT policy in the domestic market.

Based on a comparison of prices in representative international markets, in particular ECH prices in Northeast Asia, North America and Western Europe as reported by Tecnon Orbichem, with prices in China, the Complainant determined that the price distortion of raw materials resulted in prices being significantly lower than those in representative international markets pursuant to Article 7(2a), paragraph 2 of the Basic Regulation. Therefore, under Article 7(2a) of the Basic Regulation, the investigation should consider the alleged distortions in order to assess whether, where appropriate, a duty lower than the margin of dumping is sufficient to remove the injury. If other deviations referred to in Article 7(2a) of the Basic Regulation are identified during the investigation, the investigation may also include a determination of these deviations.

5. Proceedings

After determining that a request for an investigation has been submitted on behalf of the EU epoxy resin industry and that there is sufficient evidence to warrant the initiation of proceedings, the Commission shall proceed with an investigation pursuant to Article 5 of the Basic Regulation.

The investigation shall determine whether the products under investigation originating in the countries concerned are being dumped and whether the dumped imports are causing injury to the EU industry. If the conclusion is positive that dumping has occurred, the investigation will consider whether the application of anti-dumping measures would be beneficial to the EU under Article 21 of the Basic Regulation. In determining whether Article 7(2a) applies, the investigation will also consider the EU's interests under Article 7(2b) of the Basic Regulation.

5.1. Investigation period and review period

The investigation into dumping and injury is conducted on the basis of data collected for the period from 1 April 2023 to 31 March 2024 (the “investigation period”). The review of trends relating to the assessment of injury has a broader time scope, including data for the period from 1 January 2020 to the end of the investigation period (the “review period”).

5.2. Comments on the request for investigation (complaint) and initiation of the investigation

All interested parties wishing to comment on the request for investigation and the contents of the complaint (including issues relating to injury and causality) or any aspect of the initiation of the investigation (including the extent of support for the complaint) should do so within 37 days from the date of publication of this Notice.

5.3. Dumping determination procedure

Exporters ( ) of the product under investigation from the countries and territories concerned are invited to participate in the Commission's investigation.

5.3.1. Investigation of exporting producers

(a) Sampling

Given that a large number of exporting producers in the countries and territories concerned may participate in the proceedings and in order to complete the investigation within the statutory time limit, the Commission may limit the number of exporting producers under investigation to a reasonable number by selecting a sample (a process also known as 'sampling'). Sampling shall be carried out in accordance with Article 17 of the Basic Regulation.

To assist the Commission in deciding whether sampling is necessary and, if so, how to select the sample, all exporting producers or their representatives must provide the Commission with information on their company(ies) within 7 days of publication of this Notice. This information must be provided via TRON.tdi (‘TRON’) at the following address: https://tron.trade.ec.europa.eu/tron/tdi/form/AD711_SAMPLING_FORM_FOR_EXPOR TING_PRODUCER.

In order to obtain the information necessary for the selection of the sample of exporting producers, the Commission has also contacted the competent authorities of the countries and territories concerned and may contact any known associations of exporting producers.

If sampling is necessary, the Commission may select the exporting producer based on the largest representative volume of exports to the EU and may investigate it in a reasonable manner within the time available. All known exporting producers, the competent authorities of the countries and territories concerned and the associations of exporting producers shall be notified by the Commission of the companies selected for the sample, through the competent authorities of those countries and territories, as appropriate.

Upon receipt of the information necessary for the selection of the exporting producers, the Commission shall notify the parties concerned of its decision as to whether they are included in the sample. The selected exporting producers shall submit their completed responses to the Commission's questionnaire within 30 days of notification of the decision to include them in the sample, unless otherwise specified.

The Commission shall add a note reflecting the selection of the sample to the file for inspection by interested parties. Any comments on the selection of the sample shall be received within 3 days of notification of the decision to select the sample. A copy of the questionnaire for exporting producers is available for inspection by interested parties and on the DG Trade website https://tron.trade.ec.europa.eu/investigations/case-view?caseId=2733. The questionnaire will also be made available to any known associations of exporting producers and to the authorities of those countries and territories.

Without prejudice to the applicability of Article 18 of the Basic Regulation, exporting producers who agree to cooperate in the investigation but are not selected as part of the sample will still be considered to have cooperated ('non-sample cooperating exporters'). Without prejudice to paragraph 5.3.1(b) below, the anti-dumping duty that may be imposed on imports from non-sampled cooperating exporters shall not exceed the weighted average dumping margin established for the exporting producers in the sample.

(b) Individual dumping margins for exporting producers not included in the sample

Pursuant to Article 17(3) of the Basic Regulation, cooperating exporting producers not included in the sample may request the Commission to establish their own individual dumping margins. Exporting producers wishing to request individual dumping margins must complete a questionnaire and return it duly completed within 30 days of the date of notification of the selection of the sample, unless otherwise provided. A copy of the questionnaire for exporting producers is available for inspection in the file for interested parties and on the website of DG Trade https://tron.trade.ec.europa.eu/investigations/caseview?caseId=2733.

The Commission will examine whether these exporting producers can be granted an individual duty under Article 9(5) of the Basic Regulation. However, these producers should note that the Commission may decide not to determine their individual dumping margins if the number of exporters under investigation is so large that determining individual margins for each would be unduly burdensome and impede the progress of the investigation.

5.3.2. Additional procedures relating to significant distortions in the producer and export prices of imports from China:

Under the provisions of this Notice, all interested parties are invited to express their views, submit information and provide supporting evidence on the application of Article 2(6a) of the Basic Regulation.

Unless otherwise provided, this information and supporting evidence must reach the Commission within 37 days of the date of publication of this Notice. In particular, the Commission invites all interested parties to express their views on the inputs and Harmonized System (HS) codes provided in the complaint, to suggest appropriate representative countries and to provide the identity of the producers of the products under investigation in those countries. The information and supporting evidence must reach the Commission within 15 days of the publication of this Notice.

Pursuant to paragraph (e) of Article 2(6a) of the Basic Regulation, the Commission shall, as soon as practicable after initiation, inform the parties to the investigation of the relevant data sources, including, where appropriate, the selection of an appropriate representative third country, which it intends to use for the purposes of determining normal value pursuant to Article 2(6a) by placing a note on the file for inspection by the interested parties. The parties to the investigation shall have 10 days to comment on the note, pursuant to paragraph (e) of Article 2(6a).

With a view to selecting an appropriate representative third country, the Commission will examine whether the countries are at a similar level of economic development to China, whether the production and sale of the product under investigation in those third countries and territories are appropriate and whether the data available are relevant. Where more than one representative third country is involved, priority will be given to countries with appropriate levels of social and environmental protection. According to the information available to the Commission, the appropriate representative third country in this case is Thailand. The Commission also invites all producers in China to provide information on the materials (raw and processed) and energy used in the manufacture of the product under investigation within 15 days of the publication of this Notice. This information must be provided via TRON.tdi at the following address: https://tron.trade.e c.europa.eu/tron/tdi/form/AD711_INFO_ON_INPUTS_FOR_EXPORTING_PRODUCER_FORM.

Furthermore, any submission of factual information for the purpose of determining costs and prices pursuant to point (a) of Article 2(6a) of the Basic Regulation must be submitted within 65 days from the date of publication of this Notice.