Industry awaits WTO verdict on fatty alcohol duties

Cosmetics and toiletries companies eye ruling on Indonesia’s appeal against EU anti-dumping duties, as Liz Newmark reports

European Union (EU) cosmetics and toiletries companies are awaiting with interest the results of the World Trade Organisation’s Appellate Body’s decision on Indonesia’s claim that the EU’s anti-dumping duties have been unfairly placed on imported fatty alcohols from the Southeast Asian economic giant.

Fatty alcohol is made from kernel oil and is used to make cosmetics, detergents and surfactants. Responding to complaints from European manufacturers of this ingredient, the EU imposed the duties on the imports and their blends originating in Indonesia – also in India and Malaysia – from November 2011 to November 2016. They have since been renewed and are still in place – although additional countervailing (anti-subsidy) duties levied by the EU have lapsed.

The protective duties were imposed following a Commission anti-dumping investigation, which concluded that alcohols exported by Indonesian producer PT Musim Mas were sold in the EU at less than their cost price. The complainants involved were Germany-based producers Cognis, now part of BASF, and Sasol Olefins & Surfactants. The two fatty alcohol producers accounted for more than 27% of total EU alcohol production, according to the Commission. Other producers include the German wing of Malaysian KLK Oleo and Procter & Gamble’s P&G Chemicals Europe.

Source: Eurostat

A WTO spokesperson told SPC that the WTO panel’s ruling on Indonesia’s complaint was circulated on 16 December 2016. On 10 February 2017, Indonesia filed its appeal challenging the fairness of the EU’s comparison between the export price of fatty alcohols sold in Europe and the normal price of Indonesia-made supplies sold on the domestic market.

Indonesia said the Commission erred when basing some of its conclusions about unfair pricing on imports received by Ecogreen Oleochemicals (Singapore) Pte Ltd. This hike was justified as the Indonesian and Singaporean companies were closely related entities, argued Jakarta in pleadings at the WTO. “For Indonesia, the mark-up was not a difference affecting price comparability,” a WTO note said.

The protective duties were imposed following a commission anti-dumping investigation, which concluded that alcohols exported by Indonesian producer PT Musim Mas were sold in the EU at less than their cost price

According to the latest figures provided by EU statistical agency Eurostat, the EU imported t35.09m worth of industrial fatty alcohols in 2015, with the import value increasing substantially to t48.85m for the January- December 2016 period. Before the duty was imposed these imports were far higher, the agency figures make clear. The EU imported some t60.6m worth of fatty alcohols in 2010 and a substantial t72.97m worth in 2011.

The value of EU industrial fatty alcohol exports to Indonesia dropped from t2.23m for January-December 2015 to t1.88m in 2016. “The WTO’s Appellate Body is currently reviewing the appeal,” the WTO spokesperson continued. He also told SPC that Indonesia had not indicated if it would impose “retaliatory measures on EU imports if or when it wins the case”, adding: “It’s really too early for that.”

The spokesperson said that depending on the ruling’s result (which may be released by this December), the EU would be given “a reasonable period of time – normally 15 months – to implement the WTO ruling, although it could be longer or shorter”.

A Commission spokesperson said that similar claims objecting to the duties had also been rejected in previous proceedings at the European Court of Justice (ECJ) in an October (2016) ruling in a case bought by the Indonesian exporter PT Musim Mas.