In the notice of initiation, the Commission invited all interested parties to comment on its proposal to use Norway as a market economy third country for the purpose of establishing normal value in respect of the PRC. Norway was used as an analogue country in the original investigation. In the absence of comments from any parties on this aspect, it was concluded that Norway should be selected again as an analogue country to establish the normal value for the PRC in accordance with Article 2(7)(a) of the basic Regulation.

In accordance with Article 2(2) of the basic Regulation it was first examined whether the total volume of domestic sales of the like product to independent customers made by the cooperating producers in Norway was representative in comparison with the total export volume from the PRC to the Union, namely whether the total volume of such domestic sales represented at least 5 % of the total volume of export sales of the product concerned to the Union. On that basis, it was found that the domestic sales in the analogue country were representative.

It was also examined whether the domestic sales of the like product could be regarded as being made in the ordinary course of trade pursuant to Article 2(4) of the basic Regulation. This was done by establishing the proportion of domestic sales to independent customers on the domestic market which were profitable during the RIP.

Normal value was thus based on the actual domestic price, which was calculated as a weighted average price of the profitable domestic sales made during the RIP.

As stated in recital (24) above, the Chinese exporting producers did not cooperate in the investigation. Therefore, the export price was based on the best information available, in accordance with Article 18 of the basic Regulation.

The volume and the import prices were first extracted from the Eurostat import database for the three CN codes listed in recital (18) above, namely with the distinction of the quality. Given that it was considered appropriate to establish the export price on an average basis, the data extracted for CN codes 7202 29 10 and 7202 29 10 90 was adjusted to the silicon content of CN code 7202 21 00. This method is the one proposed in the review request to estimate the total volume of imports on the basis of the quality FeSi75. The volume and import prices of these three CN codes were aggregated and weighted to reflect one average.

Finally, this average import price at CIF level was adjusted by deducting in particular the transportation costs to arrive at the ex-works value. The sales price was thus established in accordance with Article 2(8) of the basic Regulation, on the basis of the price paid or payable reported in Eurostat import statistics.

The comparison between the normal value and the export price was made on an ex-works basis. In order to ensure a fair comparison, account was also taken of differences which affect price comparability in accordance with Article 2(10) of the basic Regulation. In particular, adjustments were made to reflect customs exportation taxes, on the basis of data mentioned in the review request given the lack of cooperation from Chinese exporting producers.

On the basis of above, the dumping margin expressed as a percentage of the free-at-Union-frontier price, before duty, was found to be 165 %.

However, it has to be noted that the total import volume of the product concerned to the Union has drastically decreased after the imposition of the original measures and that the above-mentioned dumping margin was established on the basis of a limited volume of imports (namely less than 2 500 tonnes during the RIP).

Therefore, for the completeness of the analysis, the pricing behaviour of the Chinese exporting producers on the three most important non-Union markets, namely Japan, South Korea and the United States of America (‘the USA’) was also examined.

For that purpose, Chinese export figures were used to establish the price of Chinese exports to Japan, South Korea and the USA. The comparison with the normal value established above also showed the existence of dumping, varying between 86 % to 92 %, depending on the country of destination.

The PRC is by far the world's largest FeSi producing country. The production capacity was estimated to be 10-11 million tonnes per year during the RIP. Therefore, the PRC's industry operated at an estimated 50 % of its production capacity. This means there is a current spare capacity of around 5,5 million tonnes per annum which represents almost seven times the total Union consumption. In spite of this current overcapacity and based on information provided by the applicant, it appears that capacity in the PRC is still expanding as larger and more efficient furnaces are currently built.

There is no evidence to suggest that the level of consumption on the Chinese domestic market or third country markets would significantly increase and thus absorb increased production in case the spare capacity of the Chinese producers were to be used.

After the imposition of definitive measures in February 2008, imports from the PRC decreased steadily and became marginal, representing less than 1 % of Union consumption during the RIP. After a peak of imports of around 330 400 tonnes in 2007, imports decreased to less than 2 500 tonnes in 2012. However, the EU market for FeSi remains attractive for Chinese exports, based on the observed price levels.

As mentioned above, there is an important production overcapacity in the PRC suggesting a strong incentive to find alternative markets to absorb this excess in production capacity. However, due to several export restrictions imposed by the Chinese government (namely a 25 % export duty, a 17 % non-refundable VAT and export licences), overall Chinese exports have decreased from a peak in 2007 of 1,5 million to just 0,4 million tonnes in 2009. Nevertheless, as from 2010, a rebound was observed in overall exports and the volume of exports increased to 0,8 million tonnes and were estimated at 0,7 million tonnes in 2013. The most recent figures indicate a sustained level of exports, the volume of which is higher than the entire Union consumption.

Despite those export restrictions, Chinese producers exported a significant volume of FeSi to worldwide markets not subject to any import restrictions (namely Japan, South Korea and the USA).

At first sight, the Asian market could be an alternative for absorbing part of the Chinese excess production. However, according to information submitted by the applicant, the recent developments in that market may render it less attractive for Chinese exports.

Indeed, he Asian market will be seriously impacted by the entry into production of two new ferrosilicon projects in Malaysia (Pertama Ferroalloys and Sarawak Ferroalloys plants). It is estimated that Malaysia's annual ferrosilicon output will increase by 420 000 tonnes as from 2014 and will be sold to neighbouring countries in Southeast Asia, especially Japan, which requires 600 000 tonnes of ferrosilicon per year. The output of the Malaysian production facilities will negatively impact Chinese exports to Southeast Asia. In addition, Japanese steel producers and South Korean steel mills already entered into agreements for purchasing significant volumes of ferrosilicon per annum from the new Malaysian producers, thereby making it harder for Chinese exports to enter the market.

In its comments to the disclosure, the exporting producer claimed that Malaysian production was overstated. After verification, this comment was considered appropriated and therefore, Malaysia production was corrected to about 370 000 tonnes.

Therefore, it is expected that the additional Malaysian production will increase competition on this already saturated market where the PRC and Russia today have a significant market share.

The reduced presence of Chinese products on the Union market during the RIP is mainly explained by the exports restriction imposed by the Chinese government mentioned in recital (41) above.

The prices in the EU market would also act as an attraction to absorb the excess capacity of the Chinese producers. Indeed, the average Union market price in 2012 was at least as high as the export prices of Chinese producers to their main countries of destination (Japan, South Korea and USA), further underlining the attractiveness of the Union market when sales to other destinations become more problematic.

It can therefore be concluded that the European market, one of the largest worldwide, remains attractive to Chinese producers.

In accordance with Article 2(2) of the basic Regulation it was first examined whether the total volume of domestic sales of the like product to independent customers made by the cooperating exporting producers was representative in comparison with their total volume of export sales to the Union, namely whether the total volume of such sales represented at least 5 % of the total volume of export sales of the product concerned to the Union.

It was also examined whether domestic sales were sufficiently representative for the purposes of Article 2(2) of the basic Regulation. This examination was made for product types, sold by an exporting producer on its domestic market, which was found to be directly comparable with a product type sold for export to the Union. Domestic sales of a particular product type were considered sufficiently representative when the total volume of that product type sold by the exporting producer on the domestic market to independent customers represented at least 5 % of its total sales volume of the comparable product type exported to the Union.

It was also examined whether the domestic sales of product types could be regarded as being made in the ordinary course of trade pursuant to Article 2(4) of the basic Regulation. This was done by establishing the proportion of domestic sales to independent customers on the domestic market which were profitable for each exported type of the product concerned during the RIP.

For product types where more than 80 % by volume of sales on the domestic market of the product type were above cost and the weighted average sales price of that type was equal to or above the unit cost of production, normal value, by product type, was calculated as the weighted average of the actual domestic prices of all sales of the type in question, irrespective of whether those sales were profitable or not.

Where the volume of profitable sales of this product type represented 80 % or less of the total sales volume of that type, or where the weighted average price of that type was below the unit cost of production, normal value was based on the actual domestic price, which was calculated as a weighted average price of only the profitable domestic sales of that type made during the RIP.

Wherever there were no domestic sales of a particular product type and for product types where the domestic sales were insufficient, the normal value was constructed in accordance with Article 2(3) of the basic Regulation.

When constructing normal value pursuant to Article 2(3) of the basic Regulation, the amounts for selling, general and administrative costs and for profits have been based, pursuant to Article 2(6) of the basic Regulation, on the actual data pertaining to the production and sales, in the ordinary course of trade, of the like product, by the cooperating exporting producers or on facts available.

During the RIP, the Russian group's export sales to the Union were made through RFAI, its associated company (the related importer) which performed all import functions in relation to the goods entering into free circulation in the Union, namely the functions of a related importer.

Therefore, the export price was established in accordance with Article 2(9) of the basic Regulation, on the basis of prices at which the imported products were first resold to an independent buyer, adjusted for all costs, incurred between importation and resale, as well as a reasonable margin for SG&A and for profits. For this purpose, the actual SG&A percentage was used and in the absence of new information from independent importers concerning profits accruing, use was made of the profit rate applied in the original investigation, namely 6 %.

The Russian group claimed that RFAI should be treated as part of the same single economic entity (‘SEE’) as both are controlled and managed by the same persons, and the companies act as a single economic entity. In consequence, when determining the export prices no deduction should be made for SG&A and profit of RFAI.

Whether the association between the Russian group and RFAI took the form of a SEE or not, is irrelevant in the context of an Article 2(9) adjustment for the purposes of constructing the export price.

Therefore, as the Russian group's export sales were made via an associated company (RFAI), the export price had to be adjusted by deducting a reasonable margin for SG&A costs and profit, as expressly provided under Article 2(9) of the basic Regulation. On this basis, the claim has to be rejected.

The exporting producer repeated the claim about the existence of a SEE and that this prevented the adjustments for SG&A and profit under Article 2(9) of the basic Regulation. It also claimed that even if the adjustments were justified, the constructed export price should only include costs related to imports by RFAI, and exclude all SGA costs related to the exports of the SEE. Last, it stated that it disagrees with the finding of non-existence of a SEE in this case.

Regarding the scope of the adjustment, the claim concerning partial deductions of SG&A and profit cannot be accepted, in the absence of relevant evidence submitted by the exporting producer. The adjustments under Article 2(9) of the basic Regulation are those inherent in the construction of an export price in the commonest cases of an association. If the global SG&A and profit were to be only partially adjusted, such modification would have to be based on the evidence provided by the exporting producer in relation to the costs, in particular, as to whether these costs constitute special expenses accrued in relation to any activity not directly related to the import of the product concerned between importation and subsequent resale.

The Russian group also claimed that no deduction of the anti-dumping duty should be made in the calculation of the export price in accordance with Article 11(10) of the basic Regulation, since the duty is duly reflected in resale prices and the subsequent selling prices in the Union.

The investigation has established in particular that the resale prices of the product concerned in the Union did not reflect the duty paid for 99 % of the transactions reported. Therefore, it can be concluded that the anti-dumping duty was not duly reflected in the Russian group's resale prices. As a result, this claim of the Russian group could not be accepted and amount of the anti-dumping duties has been deducted when constructing the export prices in accordance with Article 2(9) of the basic Regulation.

The comparison between the normal value and the export price was made on an ex-works basis. In order to ensure a fair comparison, account was taken of differences which affect price comparability in accordance with Article 2(10) of the basic Regulation.

Adjustments were made for transport costs, insurance costs, terminal and handling costs, credit costs, and commissions, where applicable and justified, in accordance with Article 2(10) of the basic Regulation.

According to Article 2(11) and (12) of the basic Regulation the weighted average normal value was compared with the weighted average export price per product type on an ex-works basis for each cooperating exporting producer which are part of the Russian Group.

The exporting producer concerned made several claims regarding the calculation of the dumping margin.

Firstly, concerning the adjustment of the cost of quartzite purchased by one producing company of the group from the other producing company of the group, the addition of a 5 % profit margin to the revised purchase price was contested. The argument used is that both companies are members of the same single economic entity.

Although the SEE argument is irrelevant in the context of the quartzite cost adjustment, it is acknowledged that transactions between related parties can be made without realization of a profit. In the absence of quartzite sales to external parties, the existence of any profit could also not be demonstrated. As a consequence, the profit mark-up of the adjusted quartzite cost was omitted and the dumping determination revised accordingly.

A second claim concerned the application by the Commission of the recommendations of the WTO Dispute Settlements Body in the Salmon dispute with Norway. In that case, it was recommended that when domestic sales of a particular product type were not representative, the SGA and profit realized on those transactions should nevertheless be used in the construction of the normal value. The exporting producer also claimed that applying the new methodology in an expiry review was not permitted since no substantial change of circumstances would allow for that.

The Commission has explained the Salmon Panel methodology in a hearing to the exporting producer, who continued to see a breach of Articles 2(4) and 2)6) of the basic Regulation in the Panel's recommendation. It is however the Commission's duty to implement such rulings in the framework of its WTO obligations. Such a methodology affects all cases and not only investigations opened on the basis of article 5 of the basic Regulation.

Based on a third claim, the Commission corrected for those instances where the cost of one exporting producer of the group was compared to certain sales of the other exporting producer.

The Commission further confirms that the turnover was adjusted by the same allowances as the cost of production, such as transport costs, insurance and handling, for establishing the profitability test, and packaging costs for determining the dumping margins.

In a fourth claim, the exporting producer considers that the anti-dumping duty in force was unduly deducted from the export price. In order to prove this point, it is stated that export sales prices were more than 100 % higher in the review investigation period than in the original investigation period, allegedly proving that the anti-dumping duty was incorporated in the export prices. Moreover, certain import duties and anti-dumping duties should not have been deducted because they were allegedly prepaid and referred to a future period. Finally, costs for an office in Japan and Swiss Federal and Cantonal income taxes should also not have been taken into account by the Commission.

The evidence provided by the exporting producer is not conclusive in the context of proving that the anti-dumping duty was duly reflected in the export price in this case and for this product. Both resale prices and production costs have increased strongly since the original investigation. Therefore, the increase in export prices cannot be conclusively attributed to the alleged reflection of the duty. To illustrate the inconclusiveness of the submitted evidence, the Commission compared the export prices to the cost of goods, inclusive of the anti-dumping duty, during the review investigation period, and as a result 99 % of the export transactions do not have an export price high enough to cover the anti-dumping duty. Finally, even if the duty is not deducted, this would not be sufficient to eliminate the finding of substantial dumping and it would not affect the conclusion on the likelihood of a continuation of dumping either. Therefore, it would not have any impact on the outcome of the present expiry review investigation.

The Commission observed that the prepayment of import duties and anti-dumping duties is impossible and that such duties are levied upon importation. Moreover, the group used a bonded warehouse, meaning that duties were only due when imports and sales were effectively made. Moreover, based on a comparison of the trial balance of 31 December 2012 and the audited accounts, it was clearly established that the auditors re-qualified the alleged prepaid anti-dumping duties into effectively paid anti-dumping duties as a cost in the profit and loss account.

The costs of Japan office were not related to the product concerned and therefore did not influence the calculation made by the Commission. The claim was therefore rejected. Finally the Swiss taxes mentioned could only have been excluded if they would relate to corporate income tax, which on the basis of the reply to disclosure appears to be the case. The dumping calculation was therefore adjusted accordingly.

The adjusted interest on a loan made by a group company in the British Virgin Islands to another group company was revised by the Commission in response to the claim that such loans can be made below market conditions and in essence would only make sense if the interest on the loan is lower than what can be obtained from a bank. The Commission further confirms that the profit margin for RFAI was applied to the net invoice value in the company's accounting currency, and was not based on CIF to which certain costs were added.

Taking into account the above considerations, and revising the calculation based on the acceptance of the claims on the quartzite intragroup sales, the intragroup loan and the Swiss Federal and Cantonal income taxes, the dumping margin expressed as a percentage of the free-at-Union-frontier price, before duty, was revised and found to be 43 %.

It has to be recalled that the interim review mentioned in recital (4) above, concluded that the Russian group imports were made at dumped prices during the period October 2009 to September 2010.

Russia is the world's second largest FeSi producer. According to the Metal Expert market research company, FeSi production capacity in Russia amounts to some 900 000 tonnes. This includes production by furnaces which can produce FeSi but also other types of ferro-alloys. Indeed, the production equipment of the two producers (i.e. JSC CHEMK and Serov Ferroalloy Plant) allows switching between FeSi and other types of ferroalloys in a short period of time. The equipment of the other Russian producers, however, (i.e. Bratsk Ferroalloy Plant, NLMK and JSC KF) allows only for the production of FeSi.

Following disclosure, the sole cooperating exporting producer claimed that its own information was disregarded from the calculation of the production capacity of Russia. However, as mentioned in recital (52), the primary source of information used was the one provided by this Russian group. Metal Expert report was used to establish the production capacities of other Russian producers. This claim is, therefore not granted.

Furthermore, this exporting producer claimed that JSC CHEMK production was wrongly assessed, as it claims to be virtually impossible, without significant additional costs and time delays, to switch from one ferroalloy production to the other. However, the evidences found during the on-spot verification in the premises of JSC CHEMK show that the JSC CHEMK furnaces can switch from one ferroalloy to another without the time delays described above. This claim is, therefore not granted.

Actual production during the RIP was estimated to be in the region of 633 000 tonnes (basis FeSi75) with spare capacity available up to 267 000 tonnes. Using a conservative approach and taking into consideration the production capacity used for the production of the other ferro-alloys, the spare capacity for FeSi is at least 120 000 tonnes.

The Russian group claimed that the estimation of the Russian spare capacity was wrongly established as the Commission did not consider that the Russian group was operating at 95-100 % capacity of its production capacity. However, as mentioned in the recital above, a conservative approach has been also followed by taking into consideration the actual spare capacity. The claim is, therefore, not granted.

On the basis of the Metal Expert report, the high spare capacity is explained by a significant decrease by 50 % in the domestic demand between 2002 and 2009, and remained stable till 2012. The production capacity is thus largely in excess of demand on the domestic market. Russian producers therefore depend on exports.

Despite the existence of the current measures, the EU market is still attractive to Russian exports. The level of imports observed during the RIP illustrates that Russian imports have to a certain extent been affected by the anti-dumping duties imposed, but were still markedly present during the RIP.

One party claimed that the European Union market for FeSi, would be unattractive for a global supplier, such as the Russian group and that there is a steep overall decline of imports which has so far continued in 2012. It claimed that this trend would not be reversed in the future. An examination of trade data collected from Eurostat and in accordance with Article 14(6) of the basic regulation showed however that Russian imports were rather stable during the period 2010-2012.

Furthermore, when comparing the export prices of the product concerned to the European Union with the prices charged for FeSi on third country markets, it emerges that the Russian group prices to the EU are higher, depending on the country of destination.

Therefore, the allegation that the Union market is not attractive for Russian producers has to be rejected.

One party claimed that the Russian market is becoming more and more attractive in view of several upcoming projects, such as the Olympic Winter Games in 2014, which should boost domestic demand for steel and therefore increase domestic consumption of FeSi. However, it should first be pointed out that this party did not provide any relevant data or estimation concerning the impact of these projects on the domestic consumption of FeSi. In any event, if such situation would indeed materialise, that effect should already have been visible during 2012 and 2013. However, the available data shows that the domestic consumption remained stable. Finally, the effect of these projects would in any case be of limited and temporary nature. Therefore, this argument is disregarded. One party alleged that the overcapacity in Russia is largely absorbed by exports to Asian markets and the USA. Indeed, during the RIP Russian producers exported worldwide more than 73 % of their output. However, as mentioned in recital (93) above, there is still an important production overcapacity in Russia due to decreasing domestic consumption, suggesting a strong need to find alternative markets to compensate for the loss in domestic sales and to absorb the excess in production capacity.

As mentioned in recital (44) above, competition will increase in Asian markets due to new facilities built in Malaysia which will begin production of about 420 000 tonnes in 2014. This situation will make Russian exports for the Asian market more difficult.

As explained in recital (45), the production of Malaysia has been revised to 370 000 tonnes.

Furthermore, in the USA, one of their main export markets, Russian exporters are already dealing with an anti-dumping investigation for which the petition alleged substantial dumping margins.

Therefore, it has to be concluded that Russian exporting producers are largely depending on exports to third countries markets where more competition will take place. This will render the Union market even more attractive for them.