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This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COUNCIL REGULATION (EC)No 2450/98
of 13 November 1998
imposing a definitive countervailing duty on imports of stainless steel bars originating in India and
collecting definitively the provisional duty imposed
(OJ L 304, 14.11.1998, p. 1)
Amended by:
Official Journal
No page date
►M1Council Regulation (EC) No 2049/1999 of 27 September 1999 L 255 8 30.9.1999
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COUNCIL REGULATION (EC)No 2450/98
of 13 November 1998
imposing a definitive countervailing duty on imports of stainless
steel bars originating in India and collecting definitively the provi-
sional duty imposed
THE COUNCIL OF THE EUROPEAN UNION,
Havingreg ard to the Treaty establishingthe European Community,
Having regard to Council Regulation (EC) No 2026/97 of 6 October
1997 on protection against subsidised imports from countries notmembers of the European Community (
1), and in particular Article 15
thereof,
Havingreg ard to the proposal submitted by the Commission after
consultingthe Advisory Committee,
Whereas:
A.PROVISIONAL MEASURES
(1)By Commission Regulation (EC) No 1556/98 (2) (hereinafter
referred to as ‘the provisional duty Regulation')provisional coun-tervailingduties were imposed on imports into the Community ofstainless steel bars (hereinafter referred to as ‘SSB' or ‘theproduct concerned') fallingwithin CN codes 7222 20 11,7222 20 21, 7222 20 31 and 7222 20 81 originating in India. Themeasures took the form of ad valorem duties varyingbetween 0
and 25,0 % with a residual duty of 25,0 %.
(2)Pursuant to Article 12(1) of Regulation (EC) No 2026/97 (herein-after referred to as the ‘basic Regulation'), provisional anti-dumping duties originally imposed by Commission Regulation(EC) No 1084/98 (
3) were reduced by the provisional duty Regu-
lation. This amendment of the anti-dumpingduties was necessaryin order to avoid that the product would be subject to bothanti-dumpingand countervailingduties for the purpose of dealingwith one and the same situation arisingfrom dumpingor fromexport subsidisation.
B.SUBSEQUENT PROCEDURE
(3)Followingthe adoption of the Reg ulation imposingprovisional
duties, several interested parties submitted comments in writing.The parties who so requested were granted an opportunity to beheard by the Commission.
(4)The Commission continued to seek and verify all information itdeemed necessary for its definitive findings.
(5)Parties were informed of the essential facts and considerations onthe basis of which it was intended to recommend the impositionof a definitive countervailingduty and the definitive collection ofamounts secured by way of the provisional duty. They were alsogranted a period to make representations subsequent to thisdisclosure.
(6)The oral and written comments submitted by the interestedparties were considered, and, where appropriate, definitive find-ings were changed accordingly.
(1) OJ L 288, 21. 10. 1997, p. 1.
(2) OJ L 202, 18. 7. 1998, p. 40.
(3) OJ L 155, 29. 5. 1998, p. 3.
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C.PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT
(7)The product concerned by the investigation is stainless steel bars
and rods, not further worked than cold-formed or cold-finished,containingby weig ht 2,5 % or more of nickel, of circular cross-section as well as of other cross sections.
(8)Followingthe adoption of the Reg ulation imposingprovisionalduties, some Indian exportingproducers arg ued that the productsexported to the Community and those sold on the domesticmarket in India were not comparable, for instance in terms ofchemical characteristics, and consequently could not be consid-ered to be a like product.
(9)This claim could not be accepted since it was found that SSBproduced and sold domestically in India as well as Indian SSBsold on the Community market had the same basic physical,technical and chemical characteristics and uses.
(10)One exportingproducer claimed that products correspondingtothe standard DIN 1013 fell within the scope of the current anti-subsidy proceedingand should therefore be taken into considera-tion. It was found, however, that these products were hot rolledbars and therefore not covered by the scope of the investigationas set out in the notice of initiation(
1) and the provisional duty
Regulation. In addition, it was noted that they do not fall withinthe relevant CN codes subject to measures. Consequently, thisclaim was not accepted.
(11)As no other arguments were presented, the findings set out inrecitals 8 to 11 of the provisional duty Regulation are confirmed.
D.SUBSIDIES
1.Passbook scheme (PBS)
(12)The Government of India (GOI) claimed that this scheme, which
is described in recitals 16 to 24 of the provisional duty Regula-tion, was not countervailable since it was a permitted drawbacksystem within the meaningof Annex I(i) and Annexes II and IIIto the basic Regulation. Furthermore, it alleged that there was norequirement under Annex I(i) that imported inputs are used forexport production.
However, Annex I(i) clearly states that imported inputs must
either be consumed in the production of the exported product (i.e.a drawback scheme as provided for within the meaningof AnnexII) or the imported inputs must have the same quantity and thesame quality and characteristics as home market inputs (i.e. asubstitution drawback scheme as provided for within the meaningof Annex III). The PBS in fact allows the importation of goodsfree of duty which are not inputs used in producingg oods forexport or inputs havingthe same quantity and the same qualityand characteristics as home market inputs actually incorporatedin the exported product. It is therefore considered that the PBS isnot a permitted drawback or substitution drawback scheme underthe provisions of the basic Regulation.
(13)Four Indian exportingproducers have arg ued that the schemeoperates in practice as a legitimate duty drawback scheme, andthat this is proved by the fact that adjustments to normal valuehave been granted in respect of the PBS in the parallel anti-dumpingproceeding . However, such an allowance is not relevantin the assessment of the countervailability of the PBS, which hasbeen established on the basis of the provisions of the basicRegulation, for the reasons stated in recital 12. Once such acountervailable subsidy is found to exist, the benefit to the reci-pient is the full amount of import duty not paid by the exporting
(1) OJ C 264, 30. 8. 1997, p. 2.
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producer on all import transactions. In this regard, it is not
adequate to reconstruct the PBS in order to determine whichproducts are physically incorporated and which are not.
(14)The GOI further referred to the existence of a verification proce-dure, based on ‘Standard input/output norms' as described inrecital 19 of the provisional duty Regulation. These norms wereissued for exported products and set out quantities of normallyimported raw materials required to produce one unit of thefinished product. The GOI argued that the system was in place toensure that there was no excess drawback of import duties asrequired by Annex I(i) and Annexes II and III to the basicRegulation and that, furthermore, the Commission had the oppor-tunity to verify all actual transactions to determine whether therewas an excess drawback.
This argument cannot be accepted as the issue of excess remis-
sion only arises in the context of assessingproperly constituteddrawback/substitution drawback schemes and it has been estab-lished that the PBS is not such a drawback or substitution draw-back scheme within the meaningof Annex I(i) and Annexes IIand III to the basic Regulation.
(15)The GOI argued that the element of minimum value addition(MVA) in the Standard input/output norms does not render thePBS an import substitution subsidy since there was no minimumprescribed domestic input requirement and the MVA could alsobe achieved by the use of, for example, imported inputs.
As the PBS is already considered countervailable on the basis
that it is contingent upon export performance within the meaningof Article 3(4)(a) of the basic Regulation, it is not necessary tomake a further findingon the issue of an import substitutionsubsidy.
(16)The GOI claimed that the benefits under the PBS should not becountervailed since the PBS had been abolished as from 31March 1997 and only a limited number of companies couldcontinue to avail themselves of credits previously granted. TheGOI made reference to Article 17 of the basic Regulation, whichprovides that a countervailingmeasure remains in force only aslongas, and to the extent that, it is necessary to counteract thecountervailable subsidies which are causinginjury, and alsoreferred to previous Community practice. Four Indian exportingproducers claimed that it is highly questionable that a schemewhich is no longer in force may be deemed countervailable.
In response to this point, it should be noted that even though the
PBS has been abolished, companies can still claim credits underthis scheme for export transactions made up to 31 March 1997,and duringthe investig ation it was established that they may usethese credits up to 31 March 2000. Substantial benefits under thisscheme could, therefore, continue to be granted until that timeand they constitute countervailable subsidies. With regard to thecontinuingcountervailability of benefits, it is considered that theprinciple stated in Article 5 of the basic Regulation applies, i.e.that the amount of countervailable subsidies shall be calculated interms of the benefit conferred on the recipient in the investigationperiod. Duringthe investig ation period, the PBS was, as stated bythe GOI, abolished and replaced by its successor, the Duty Enti-tlement Passbook Scheme (DEPBS), which is also consideredcountervailable (see recital 34 of the provisional duty Regula-tion). Since benefits will continue to be granted in the futureunder the DEPBS it is considered necessary to impose measuresbased on the total benefits received duringthe investig ationperiod under both the PBS and the DEPBS because, as prescribedby Article 17 of the basic Regulation, it will still be necessary tocounteract the countervailable subsidies which are causinginjury.
(17)Subsequent to the above claim, the GOI provided informationthat, followingan instruction in July 1998 from the Ministry ofCommerce, Indian producers had only until 30 September 1998at the latest to claim passbook credits, and not 31 March 2000 as
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previously provided for (see recital 16). The GOI asked, there-
fore, that this development be taken into consideration in makinga final determination.
It should first be noted that since it was presented very late in this
investigation, it is not possible to verify the practical applicationof this instruction. Furthermore, as explained above, as the PBShas been replaced by a successor scheme, the DEPBS (which isalso considered to be a countervailable subsidy), and that benefitswill continue to be granted in future under the DEPBS, it is notappropriate to disregard benefits which accrued to exportersunder the PBS duringthe investig ation period. Therefore, meas-ures should be imposed on benefits received duringthe invest-igation period under both the PBS and the DEPBS. Any otherapproach would enable subsidisingg overnments to escape fromcountervailingmeasures simply by chang ingthe name of ascheme duringthe investig ation period.
(18)Four Indian exportingproducers claimed that the credits receivedon the export turnover for the period of investigation for theproducts concerned should have been used for calculatingthesubsidy, instead of the debits made from the passbook. Theyargued that basing the amount of benefit on the debits had led inthis case to an exaggerated amount of subsidy in relation to theactual volume of exports to the European Community, which wasbrought about by the timing of the use of the benefit.
It should be noted that the subsidy amount is determined on the
basis of the benefit to the recipient company duringthe period ofinvestigation. It is only when the debit is made in the passbookthat the credit obtained on the basis of previous export volume isactually used; consequently it is only at this moment that therecipient receives a benefit in terms of a relief from import dutywhich should otherwise have been paid.
(19)Four Indian exportingproducers alleg ed that double countinghadoccurred when the provisional dumpingmarg ins and amounts ofsubsidisation were established. In particular, they alleged that thepart of the PBS benefits for which no allowance was granted inthe anti-dumpingproceedinghad been double-counted with thesubsidy amount and that the dumpingmarg in should have beenreduced.
In reply to this point, it should first be noted that the question of
allowances in an anti-dumpingproceedingand the extent ofcountervailability in an anti-subsidy proceedingrequire differentanalysis, since each procedure is based on separate basic Regula-tions. Article 2(1)(a)(ii) of the basic Regulation provides that theexemption of an exported product from duties/charges shall notbe deemed to be a subsidy provided that it is granted in accord-ance with the provisions of Annexes I to III to the basic Regula-tion. The PBS is considered countervailable for the reasonsexplained in recital 25 in the provisional duty Regulation, and thecountervailable benefit to the exporters has been calculated onthe basis of the amount of customs duty normally due on allimports made duringthe investig ation period but which remainedunpaid under the PBS. Consequently, the establishment of thesubsidy amount and the dumpingmarg in is the product of twoseparate exercises.
In addition, it should be recalled that, since all of the investigated
schemes were found to constitute export subsidies within themeaningof Article 3(4)(a) of the basic Reg ulation, the provi-sional anti-dumpingduties were reduced by the amount of coun-tervailingduty.
(20)Finally, the GOI claimed that the inclusion of an amount forinterest in arrivingat the total benefit to companies which availedthemselves of this scheme is not provided for under the Agree-ment on subsidies and countervailingmeasures (ASCM) of theWorld Trade Organisation (WTO). The GOI also claimed that itwas not the Community’s normal practice to include such an
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amount in calculatingthe amount of benefit to companiesavailingthemselves of such subsidy schemes.
With regard to this claim, the interest element is added in order to
reflect the benefit to the recipient obtained by the subsidised firmby not havingto raise an equivalent amount of money fromcommercial sources. Indeed, Article 6 of the basic Regulation(which reproduces Article 14 of the ASCM) makes it clear thatthe benchmark for the calculation of the subsidy is the equivalentcost of funds on the commercial market. The Community’s estab-lished practice in this area since the entry into force of the WTOAgreement is to add an amount for interest in calculating the totalbenefit; this has been done in a number of recent cases. Thisclaim is therefore rejected.
2.Export Promotion Capital Goods Scheme (EPCGS)
(21)The GOI has made a number of claims regarding the Export
Promotion Capital Goods Scheme (EPCGS), which is describedin recitals 36 to 39 of the provisional duty Regulation. Theseconcern the qualification of the scheme as a subsidy and thecalculation of the subsidy amount.
(22)It was argued that there is no requirement under the law thatcapital goods purchased under this scheme should be exclusivelyused for the manufacture of export goods and that, consequently,the exemption from import charges of goods imported under thisscheme cannot be considered as a countervailable subsidy.
In regard to this claim, the investigation has shown that to avail
itself of the EPCGS, a company must make a commitment toexport a certain value of goods within a certain time period. Thisscheme is therefore contingent in law upon export performancei.e. the benefit cannot be obtained without a commitment toexport goods. As such, it is deemed to be specific under theprovisions of Article 3(4)(a) of the basic Regulation and, there-fore, countervailable. In the light of these facts, the question ofwhether capital goods are used exclusively or not for the manu-facture of goods for export is of no relevance.
(23)It is further argued that the scope of the term ‘input' underparagraph (i) of Annex I (the illustrative list of export subsidies)of the basic Regulation also covers capital goods and that, underthis paragraph, the remission of any duty cannot per sebe consid-
ered as a subsidy unless there is an excess remission.
However, it is considered that capital goods do not constitute
‘inputs'within the meaningof the basic Reg ulation because theyare not physically incorporated into the exported products.
(24)The GOI contested the fact that, for calculatingthe subsidyamount per unit, in the provisional findings, benefits from thescheme had been allocated only over export turnover. It claimedthat as capital goods imported under the EPCGS are used forproducingg oods for both the export and domestic markets, bene-fits under the scheme should be spread over total turnover.
In reply to this, it has been determined that this scheme is
contingent solely upon export performance (see recital 22). Inconformity with Article 7(2) of the basic Regulation, it is consid-ered appropriate that the benefit for this scheme should be spreadover export turnover only since the subsidy is granted by refer-ence to a certain value of exports of goods within a certain timeperiod. The claim, therefore, that benefits under the schemeshould be allocated over total turnover is rejected.
(25)One Indian exportingproducer submitted that the depreciationperiod used in the provisional findings (i.e. 15,5 years asmentioned in recital 42 of the provisional Regulation) is incor-rect, and that a depreciation period of 21 years, correspondingtothe period the company uses to write off its fixed assets, shouldhave been used.
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In reply to this claim, it should be noted that in the provisional
findings, the normal depreciation period of capital goods in thestainless steel industry concerned was used i.e. 15,5 years, whichis an average based on information provided by the cooperatingIndian exportingproducers. This is in accordance with therequirements of Article 7(3) of the basic Regulation which statesthat where a subsidy can be linked to the acquisition of fixedassets, the amount of the countervailable subsidy shall be calcu-lated by spreadingthe subsidy across a period which reflects thenormal depreciation of such assets in the industry concerned. Inview of this provision, it is not appropriate to use the company’sspecific depreciation periods. The claim is therefore rejected.
(26)One Indian exportingproducer claimed that the benefit on somemachinery should not have been counted, since it had not beencommissioned duringthe period of investig ation. Havingfurtherexamined this matter, it is clear that the company has in factobtained a benefit under this scheme, in the form of an exemptionfrom import duty which would normally have been payableduringthe period of investig ation. The fact that the machinerymay not have been fully operational duringthe period of invest-igation does not affect this conclusion.
(27)Finally, the GOI claimed that the inclusion of an amount forinterest in arrivingat the total benefit to companies which availedthemselves of this scheme is not provided for under the ASCM ofthe WTO. The GOI also claimed that it is not the Community’spractice to include such an amount in calculatingthe amount ofbenefit to companies availingthemselves of such subsidyschemes.
This argument is rejected for the reasons explained in recital 20.
3.Income tax exemption scheme
(28)The rate of corporate income tax in India, which is described in
recitals 44 to 48 of the provisional duty Regulation, has beenreduced since the 1996/97 tax year (i.e. the period on which theCommission made its provisional findings for this scheme). It isconsidered that account should now be taken of the reduced ratein calculatingany benefit to the Indian exportingproducersconcerned.
In this regard, it is noted that Article 5 of the basic Regulation
provides that the amount of countervailable subsidies shall becalculated in terms of the benefit conferred on the recipientwhich is found to exist duringthe investig ation period for subsi-disation. As stated above, in the case of the provisional findings,the Commission calculated the benefit on the basis of the tax year1996/97 (i.e. 1 April 1996 to 31 March 1997) which corre-sponded most closely to the investigation period. During this taxyear, the rate of corporate tax applied was 43 %. For the subse-quent tax year (i.e. from 1 April 1997 to 31 March 1998), the rateof tax to be applied was reduced to 35 %. It is considered that, aspart of this latter tax year falls within the investigation period ofthis proceeding, it is appropriate to make the calculation of theamount of countervailable subsidies on the basis of a pro rataof
the two tax rates which applied in the investigation period.Appropriate adjustments have accordingly been made to theamount of subsidy for the companies which availed of thisscheme.
(29)The GOI has claimed that, in the provisional findings, the addi-tion of an amount for interest in arrivingat the total benefit tocompanies which availed of this scheme was in violation ofprevious Community practice as well as both the ASCM and thebasic Regulation.
In response to this argument, it is considered that the amount of
tax which remained unpaid by a company in the tax year corre-spondingmost closely to the investig ation period was the mostreasonable indicator on which to base the benefit to a company
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under this scheme. This amount is considered to equate to a
one-time grant which is available to a company during the invest-igation period. An amount is added to this grant for interest forthe reasons set out in recital 20 and the GOI claim has accord-ingly to be rejected.
4.Amount of countervailable subsidies
(30)Takingaccount of the definitive finding s relatingto the various
schemes as set out above, the amount of countervailable subsidiesfor each of the investigated exporting producers is as follows:
Passbook DEPB EPCGS Income tax Total
Bhansali Bright Bars 13,7 % 0,7 % 14,4 %
Facor (Ferro Alloys Corp.) 84,5 % 1,1 % 85,6 %
Grand Foundry 84,5 % 84,5 %
Isibars 38,7 % 1,1 % 1,2 % 41,0 %
Mukand 18,1 % 0,1 % 1,4 % 19,6 %
Parekh 0,4 % 0,4 %
Panchmahal Steel 0,2 % 0,7 % 0,9 %
Raajratna Metal Industries 44,2 % 2,7 % 46,9 %
Venus Wire Industries 22,9 % 1,8 % 24,7 %
Viraj Impoexpo 25,6 % 1,4 % 27,0 %
(31)The subsidy amount definitively established for Indian companies
other than those cooperatingin this investig ation, expressed as apercentage of the net, free-at-Community-frontier price, is88,3 %, which is the sum of the highest amount granted to anycooperatingexporter under each scheme.
(32)One exportingproducer, Chandan Steel Ltd, cooperated in theanti-dumping proceeding, where an individual dumping marginand an individual injury margin was provisionally established,but did not cooperate fully in the anti-subsidy proceeding. In thecontext of this proceeding, Article 28 of the basic Regulation isapplicable for the determination of the subsidy amount, which forthis company, expressed as a percentage of the net, free-at-Community-frontier price, is 88,3 %. However, it is consideredthat account should be taken of the cooperation of this companyin the anti-dumpingproceeding , and that the definitive counter-vailingduty should be based on the injury elimination levelestablished for this company’s exports of the product concernedto the Community duringthe period of investig ation in the anti-dumpingproceeding , since it is lower than the subsidy amount.
(33)For the exporter mentioned in recital 6 of the provisional anti-dumpingduty Reg ulation (Sindia Steel Ltd), it was consideredappropriate that the weighted average subsidy amount found forthe cooperatingIndian companies should apply for this company.The subsidy amount definitively established for this company,expressed as a percentage of the net, free-at-Community-frontierprice, is 34,5 %.
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E.INJURY
1.Community industry
(34)After additional verification it was found that the cumulated
production volume of the Community industry of SSB does notaccount for 45 % of total Community production, as erroneouslyset out in the provisional duty Regulation, but for 38 % of totalCommunity production. This percentage suffices to comply withthe conditions in Articles 9(1) and 10(8) of the basic Regulation.
2.Consumption in the Community, market shares and
import volumes from India
(35)Followingthe disclosure, no comments were received as reg ardsconsumption of SSB in the Community, the market shares andthe volume of imports from India. Consequently, the findingsmade in recitals 53 to 56 of the provisional duty Regulation areconfirmed.
3.Prices of subsidised imports from India and undercutting
(a)Calculation of the undercutting margins
(36)As explained in the provisional duty Regulation (recitals 57 to
65), a detailed undercuttinganalysis was carried out for each ofthe Indian producers concerned showingsig nificant undercuttingmargins. The undercutting margins were calculated by comparingper product type, the weighted average export prices atCommunity frontier level with the weighted average ex-factorysales prices of the Community industry to unrelated parties.Indian product types for which no matchingCommunity producttype was found were excluded from the calculation after it hadbeen established that the remainingtransactions were sufficientlyrepresentative. If exports were made through related companiesthe export prices were duly adjusted for costs betweenimportation and resale to the first independent customer in theCommunity as well as for profits accruing. An adjustment wasmade to the Community industry’s sales prices for transport costswithin the Community. Whereas the Indian exporters sold exclu-sively to traders, the Community industry sold to end-users andtraders. Consequently, the Community industry’s sales to end-users were adjusted to a trader level. In addition, the Indianexport prices were adjusted for handlingcharg es at Communityborder level.
(37)Several Indian producers reiterated their requests for an adjust-ment concerningdifferences in Indian and Community lead timesbetween order and delivery and concerningdifferences in relia-bility of delivery time. They claimed in particular that theyregularly had to issue credit notes to their customers due to latedeliveries. However, credit notes for late deliveries do not indi-cate that longer Indian lead times or unreliability of deliverytimes affected the sales price when the price negotiations tookplace. Consequently, the claim for this adjustment cannot begranted. In this respect, it was also taken into account that thecontractual delivery times of the Indian producers often variedbetween four and six months without this havingan effect on theagreed sales price.
(38)All Indian producers also repeated their request for an adjustmentfor quality differences. In particular, they alleged that SSBproduced by the Community producers had a higher machina-bility which would reduce cycle times in further transformationprocesses of the SSB. In this respect, it was noted that someCommunity producers did indeed sell a certain proportion ofproducts under a trade mark indicatinghig her machinability.However, it was found that there was no consistent price patternindicatingthat the products with hig her machinability were soldat higher prices and would thus have a higher market value.Consequently, an adjustment could not be granted, since an effecton prices and price comparability was not established. In addi-
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tion, it was noted that all Indian producers had made an identical
claim for an adjustment, disregarding potential quality differencesamongst their products.
(39)One Indian company claimed that the sales price of theCommunity industry consisted of a base price and a so-called‘alloy surcharge',i.e. a price element for alloys contained in SSB.The company requested that the alloy surcharge be excludedfrom the Community sales prices for the purpose of the undercut-tingand undersellingcalculations. This request could not begranted since the alloy surcharge was part of the sales price thatwas paid by the customers. In this respect, it was noted that theIndian sales prices also contained an alloy element, even if thiswas not expressly referred to in the invoice.
(40)Takinginto account the corrections described above, the under-cuttingmarg ins amount to:
— Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt
Ltd, Mumbai: 14,5 %
— Chandan Steel Ltd, Umbergaon: 14,9 %— Facor (Ferro Alloys Corp. Ltd), Nagpur: 13,0 %— Grand Foundry Ltd, Mumbai: 13,2 %— Isibars Ltd, Mumbai: 19,4 %— Mukand Ltd, Mumbai: 17,8 %— Panchmahal Steel Ltd, Baroda: 13,9 %— Parekh Bright Bars Pvt Ltd, Thane: 5,8 %— Raajratna Metal Industries Ltd, Ahmedabad: 15,8 %— Venus Wire Industries Ltd, Mumbai: 12,8 %— Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai: 15,7 %
(41)The weighted average undercutting margin calculated for Sindia
Steel Ltd (see recital 33) amounted to 16,8 %. It was concludedthat these undercutting margins were significant.
(b)Allegation of anti-competitive behaviour
(42)In their comments followingthe disclosure, the Indian companies
continued to argue that the calculation of undercutting margins aswell as the findings on other injury factors, causality andCommunity interest would be meaningless in the context of thisinvestigation in view of the Commission Decision(
1)i nt h e
competition case IV/35.814, ‘Alloy Surcharge'. This Decisionstated that Community producers of stainless steel flat productshad modified ‘in a concerted fashion the reference values used tocalculate the alloy surcharge, a practice having the object andeffect of restrictingand distortingcompetition within thecommon market'.
(43)In this respect it is recalled that the Decision related to stainlesssteel ‘flat products' as opposed to stainless steel bars whichbelongto the categ ory of longproducts. Moreover, the producersof flat products and the producers of SSB are, to a large extent,not identical and the number of SSB producers is significantlyhigher than that of the flat steel producers.
(44)The Indian producers have, however, repeated their allegationthat a concerted practice existed for SSB. Some of these compa-nies have also lodged a formal complaint with the Commission,pursuant to Article 3 of Regulation (EEC) No 17/62 (
2),
concerningSSB. In order to support their alleg ation, the Indiancompanies submitted that one of the national steel associations inthe Community circulated to all of its members on a monthlybasis a list of the alloy surcharges applied by the most important
(1) OJ L 100, 1. 4. 1998, p. 55.
(2) OJ 13, 21. 2. 1962, p. 204/62.
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producer in this country. In addition, they submitted that this
producer applied the same coefficient (so-called yield factor) inorder to calculate the alloy surcharge for SSB on the basis of thealloy surcharge for flat products as a trader in a different MemberState. They alleged that the information provided conclusiveevidence of a concerted practice in the SSB market.
(45)In this respect it is important to note that the application of analloy surcharge system as such including the use of a yield factoris not illegal. The alloy surcharge system allows a stainless steelproducer — in a legal manner — to reflect the price variations ofthe market prices for alloy elements in the sales prices to itscustomers and thus to protect itself against the risk of significantfluctuations in the cost of production. It was also noted that theuse of an alloy surcharge is common to other steel marketsoutside the Community and has, with a short interruption, beenapplied in the Community for many years. In addition, for ECSC-products, Article 60 of the ECSC Treaty and the implementingCommunity legislation requires the Community producers toinform the Commission and anyone interested of the applicablesurcharge (Article 6(b) of Decision No 37/54 (
1)).
(46)Consequently and in accordance with the Commission Decisionin Case IV/35.814, the application of an alloy surcharge systemcould only be illegal if the alloy surcharge system were appliedin a concerted, i.e. anti-competitive, manner. However, noconclusive evidence of this was found in the course of the invest-igation.
(47)In addition, it was found that the price of the Community produ-cers for identical products to comparable customers in identicalperiods varied, resultingin different levels of profitability for theCommunity industry.
(48)In the light of the above it was concluded that the findings oninjury and Community interest, includingthe calculation ofundercutting margins, were not meaningless as alleged by theIndian companies. Consequently, the Indian request that theinvestigation be terminated forthwith could not be granted. Simi-larly, it was not possible to suspend the anti-dumpinginvest-igation until the Commission had concluded its investigationrelatingto the alleg ed anti-competitive behaviour because anti-dumpinginvestig ations have to be concluded within a maximumof 13 months from initiation accordingto Article 11(9) of thebasic Regulation.
(49)However, it was noted that the Commission is continuingitsinvestigation regarding the alleged anti-competitive behaviour.Should the Commission find that a concerted practice existed, theconditions to initiate a review ex officio would be fulfilled. Such
a review would be carried out expeditiously, i.e. within maximum12 months, in order to investigate whether and to what extent therelevant findings on injury, causation and Community interest areaffected by such an anti-competitive practice.
4.Situation of the Community industry
(50)Followingthe adoption of the Reg ulation imposingprovisional
duties no comments were received as regards the situation of theCommunity industry in respect of production volume, capacityand capacity utilisation, sales volume, market share, sales prices,profitability, employment and stocks. Consequently, the findingsas laid down in recitals 67 to 78 of the provisional duty Regula-tion are confirmed.
However, the Government of India questioned the conclusions
drawn from these findings, in particular it was alleged that thedrop in the Community production figures cannot be blamed on
(1) OJ 18, 1. 8. 1954, p. 470/54.
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the decreasingIndian imports. This arg ument concerns causality
which is dealt with below. Finally, the Government of Indiaclaimed that the Community industry increased their sales torelated parties from 1994 to the IP12 (see recital 52 of theprovisional duty Regulation). This does, however, not invalidatethe findings and conclusions on total sales (in particular a nega-tive development of the market share since 1994) and on sales tounrelated parties which are also used for the purpose of priceundercuttingcalculations.
5.Conclusions
(51)On the basis of the above it was concluded that the Community
industry is sufferingmaterial injury as set out in recital 79 of theprovisional duty Regulation.
F.CAUSATION
(52)Followingthe adoption of the Reg ulation imposingprovisional
duties, some Indian companies questioned whether the injurysuffered by the Community industry was caused by the subsi-dised imports from India. In particular, it was alleged that theinjury was caused by other factors, namely low priced importsfrom other countries. In addition, it was alleged that otherCommunity producers had not followed the same trend as theCommunity industry.
(53)In this respect, it is worth notingthat Indian imports were presentin significant volumes throughout the period considered andpeaked at a level of 9,1 % market share in 1996. It has also beenestablished that these imports were made at prices significantlyundercuttingthe Community industry’s prices. Account wasfurther taken of the fact that a number of traders buy SSB bothfrom Indian and Community sources, which leads to the marketbeingtransparent and price sensitive.
It was noted that the above trends established for the Indian
imports coincided with the deterioration of the Community indus-try’s situation, in particular its loss of market share and thedepression of its prices since 1995. In the presence of subsidisedimports of SSB orig inatingin India duringthe investig ationperiod, the Community industry had to lower its prices signifi-cantly, regardless of the consequences for profitability. Conse-quently, a causal link between subsidised imports and materialinjury suffered by the industry was found to exist.
(54)It was also investigated whether factors other than the subsidisedimports could have contributed to the injury suffered by theCommunity industry. In this respect, it was noted that importsfrom other countries were made either in quantities below orclose to the thresholds set out in Article 14(4) of the basicRegulation and/or at higher prices than Indian imports. Conse-quently these imports cannot have broken the causal link betweenthe subsidised imports from India and injury suffered by theCommunity industry.
(55)In addition, the allegation by some Indian producers that thesituation of other Community producers was significantly betterthan that of the Community industry was investigated. In thisrespect, it should be recalled that detailed and verified data isonly available for the Community industry. Takinginto accountthe transparency and the price sensitivity of the SSB market inthe Community, it seemed however, not unreasonable toconclude that other Community producers are likely to havefollowed a trend similar to that of the Community industry, inparticular as regards prices.
(56)Finally, it was argued that the decrease in the SSB sales prices ofthe Community industry since 1995 was the result of a decreasein alloy prices. In this respect, it was however noted that anychange in the world market prices for the alloys applies equallyto the Indian producers and consequently has no influence on the
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undercuttingfound. In addition, it was noted that the Community
industry had also significantly lowered its base prices.
(57)In the light of the above, the findings set out in the provisionalduty Regulation (recitals 80 to 88) are confirmed, i.e. that the lowpriced subsidised imports from India have, when taken in isola-tion, caused material injury to the Community industry.
G.COMMUNITY INTEREST
(58)Followingthe adoption of the Reg ulation imposingprovisional
duties, no substantiated comments were received as regards theCommunity interest analysis set out in recitals 89 to 94 of theprovisional duty Regulation.
(59)Consequently, it is concluded that the imposition of measureswill lead to a reinstatement of effective competition that willenable the Community industry to regain the lost market shareand improve its profitability.
(60)In the absence of a reaction from the users and importers, it wasassumed that the impact of any expected price increase would belimited, also takinginto account the level of the duty proposed.As regards the upstream industry, it was concluded that a rein-statement of fair trade would lead to an improvement in itscompetitiveness.
(61)Summarising, it was concluded that the findings set out in recitals89 to 93 of the provisional duty Regulation can be confirmed. Inparticular, there are no compellingreasons to suppose that itwould be not in the interest of the Community to impose meas-ures.
H.COUNTERVAILING MEASURES
(62)Based on the above conclusions on subsidisation, injury, causal
link and Community interest, it was considered what form andlevel the definitive countervailingmeasures would have to take inorder to remove the trade-distortingeffects of injurious subsidiesand to restore effective competitive conditions on the CommunitySSB market.
(63)Accordingly, as explained in recitals 96 to 98 of the provisionalduty Regulation a non-injurious level of prices was calculatedwhich would allow the Community industry to cover its cost ofproduction and obtain a reasonable return for sales of the productconcerned.
(64)One Indian company argued that the calculation of the non-injur-ious price level was incorrect since the profit margin for allproduct types was identical. It should be noted that the non-injur-ious price level was calculated on the basis of the average salesprices per product type minus the actual weighted average profitmargin of the Community industry plus a reasonable profit, asexplained above. This approach was deemed to be the mostappropriate for the purpose of this investigation.
(65)The comparison of the non-injurious price levels with the exportprices of the Indian producers led to the followinginjurymargins, expressed in relation to the free-at-Community-frontierprice level:
— Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt
Ltd, Mumbai: 18,4 %
— Chandan Steel Ltd, Umbergaon: 19,0 %— Facor (Ferro Alloys Corp. Ltd), Nagpur: 16,5 %— Grand Foundry Ltd, Mumbai: 16,6 %— Isibars Ltd, Mumbai: 25,5 %— Mukand Ltd, Mumbai: 25,3 %— Panchmahal Steel Ltd, Baroda: 17,6 %
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— Parekh Bright Bars Pvt Ltd, Thane: 7,5 %
— Raajratna Metal Industries Ltd, Ahmedabad: 19,8 %— Venus Wire Industries Ltd, Mumbai: 16,1 %— Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai: 20,2 %
(66)For Sindia Steels Ltd the weighted average of the injury margins
of the cooperatingIndian companies is applied. This resulted inan injury margin of 22,1 %.
(67)In accordance with Article 15(1) of the basic Regulation, the dutyrate should correspond to the subsidy amount, unless the injurymargin is lower. This led to the following rates of duty for thecooperatingproducers:
— Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt
Ltd, Mumbai: 14,4 %
— Chandan Steel Ltd, Umbergaon: 19,0 %— Facor (Ferro Alloys Corp. Ltd), Nagpur: 16,5 %— Grand Foundry Ltd, Mumbai: 16,6 %— Isibars Ltd, Mumbai: 25,5 %— Mukand Ltd, Mumbai: 19,6 %— Panchmahal Steel Ltd, Baroda: 0,0 %— Parekh Bright Bars Pvt Ltd, Thane: 0,0 %— Raajratna Metal Industries Ltd,Ahmedabad: 19,8 %— Venus Wire Industries Ltd, Mumbai: 16,1 %— Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai: 20,2 %
(68)For Sindia Steels Ltd the duty rate should be 22,1 %.
(69)In order to avoid granting a bonus for non-cooperation and to
ensure that no circumvention of the countervailingmeasurestakes place, it was considered appropriate to establish the dutyrate for the non-cooperatingcompanies at the level of the hig hestduty rate imposed, i.e. 25,5 % since there was a high level ofcooperation from Indian exportingproducers.
I.UNDERTAKINGS
(70)At a late stage of the investigation several Indian companies
offered undertakings. The companies offered not to avail them-selves in the future of the export subsidies found to be counter-vailable as regards their exports to the Community. According tothe companies, the undertakingwould have the effect that exportprices would rise significantly.
This offer could not be accepted. In the first place these compa-
nies would continue to receive countervailable subsidies based onexports to countries other than the Community and concerningimports of raw materials and capital goods used in the productionof products other than SSB. Thus, there would appear to beinsurmountable difficulties to monitor such an undertakingleavingopen the likelihood that circumvention would occur.
Secondly, the undertakingdid not provide for any measure of
price discipline and thus it is considered that the injurious effectsof the subsidised imports would not be removed by the accep-tance of such an undertaking.
After expiry of the deadline to submit proposals for undertakings
another exportingproducer submitted a proposal for an under-taking. This company offered to respect certain minimum prices.This offer was examined and it was found that due to the largevariety of the product types concerned and the significant pricefluctuations for the product concerned it would be difficult to setprices which would eliminate the injurious effects of subsidised
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imports. Consequently, the offer for this undertakingcould also
not be accepted.
J.COLLECTION OF THE PROVISIONAL DUTIES
(71)In view of the magnitude of the countervailable subsidies found
for the exportingproducers and in lig ht of the seriousness of theinjury caused to the Community industry, it is considered neces-sary that the amounts secured by way of provisional counter-vailingduty pursuant to Reg ulation (EC) No 1556/98 be defin-itively collected to the extent of the amount of definitive dutiesimposed, unless the provisional duty rates are lower in whichcase the provisional duty rate should prevail,
HAS ADOPTED THIS REGULATION:
Article 1
1. A definitive countervailingduty is hereby imposed on imports of
stainless steel bars fallingwithin CN codes 7222 20 11, 7222 20 21,7222 20 31 and 7222 20 81 originating in India.
2. Products manufactured by the companies listed below shall be
subject to the followingrates of duty applicable to the net, free-at-Community-frontier price:
ManufacturerRate of duty
(%)Taric addi-
tional code
Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet
Pvt Ltd, Mumbai14,4 8226
Chandan Steel Ltd, Umbergaon 19,0 8593
Facor (Ferro Alloys Corp. Ltd), Nagpur 16,5 8400
Grand Foundry Ltd, Mumbai 16,6 8401
Isibars Ltd, Mumbai 25,5 8402
▼M1
— Meltroll Engineering Ltd, Mumbai 5,5 A021
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Mukand Ltd, Mumbai 19,6 8403
Panchmahal Steel Ltd, Baroda 0 8404
Parekh Bright Bars Pvt Ltd, Thane 0 8594
Raajratna Metal Industries Ltd, Ahmedabad 19,8 8405
Sindia Steels Ltd, Nashik ►M112◄8406
Venus Wire Industries Ltd, Mumbai 16,1 8407
Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai 20,2 8410
All other companies 25,5 8900
3. Unless otherwise specified, the provisions in force concerning
customs duties shall apply.
Article 2
The amount secured by way of provisional countervailingduty pursuant
to Regulation (EC) No 1556/98 shall be definitively collected at the rateof the provisional duty if this is lower than the definitive rate. In all
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other cases it shall be collected at the duty rate definitively imposed.Amounts secured in excess of the definitive duty rate shall be released.
Article 3
This Regulation shall enter into force on the day following its publica-
tion in the Official Journal of the European Communities .
This Regulation shall be binding in its entirety and directly applicable in
all Member States.