2002R1338 — EN — 19.03.2004 — 001.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COUNCILREGULATION(EC)No1338/2002
of22July2002
imposingadefinitivecountervailingdutyandcollectingdefinitivelytheprovisionalcountervailing
dutyimposedonimportsofsulphanilicacidoriginatinginIndia
(OJ L 196, 25.7.2002, p. 1)
Amended by:
Official Journal
No page date
►M1Council Regulation (EC) No 492/2004 of 8 March 2004 L 80 6 18.3.2004
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COUNCILREGULATION(EC)No1338/2002
of22July2002
imposingadefinitivecountervailingdutyandcollectingdefinitively
the provisional countervailing duty imposed on imports of sulpha-
nilic acidoriginatinginIndia
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 2026/97 of 6 October
1997 on protection against subsidised imports from countries notmembersof the European Community (
1), and in particular Article 15
thereof,
Having regard to the proposal submitted by the Commission after
consulting the Advisory Committee,
Whereas:
A.PROVISIONALMEASURES
(1)The Commission by Regulation (EC) No 573/2002 (2) (‘provi-
sional Regulation’) imposed a provisional countervailing duty
on imports of sulphanilic acid originating in India. The Commis-
sion by Regulation (EC) No 575/2002 (3) (‘provisional anti-
dumping Regulation’) also imposed a provisional anti-dumpingduty on importsof s ulphanilic acid originating in the People'sRepublic of China and in India.
B.SUBSEQUENTPROCEDURE
(2)Subsequent to the disclosure of the essential facts and considera-
tions on the basis of which it was decided to impose a
provisional countervailing duty, a number of interested parties
submitted comments in writing. All interested parties whorequested a hearing were granted an opportunity to be heard bythe Commission.
(3)The Commission continued to seek and verify all information
deemed necessary for the definitive findings.
(4)All parties were informed of the essential facts and considera-
tionson the bas isof which it wasintended to recommend theimposition of a definitive countervailing duty and the definitivecollection of amounts secured by way of the provisional counter-
vailing duty. They were also granted a period within which they
could make representations subsequent to this disclosure.
(5)The oral and written argumentss ubmitted by the partiesweretaken into account.
(6)Having reviewed the provisional findings on the basis of theinformation gathered since then, the main findings as set out inthe provisional Regulation are confirmed.
C.PRODUCTCONCERNEDANDLIKEPRODUCT
1.Productconcerned
(7)Subsequent to the publication of the provisional Regulation, a
number of interested parties claimed that the definition of theproduct concerned wasincorrect. They argued that the technicaland purified grades of sulphanilic acid were substantiallydifferent in termsof their purity and had different propertiesand applications. It was claimed that the two grades of sulpha-2002R1338 — EN — 19.03.2004 — 001.001 — 2
(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 87, 4.4.2002, p. 5.
(3) OJ L 87, 4.4.2002, p. 28.
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nilic acid could not be considered as a homogeneous product and
should therefore have been treated as distinct products for thepurposes of the investigation. In support of this assertion, it was
argued that there wasins ufficient interchangeability between the
two grades of sulphanilic acid. Whilst it was accepted that thepurified grade could be used in all applications, the same couldnot be said of technical grade sulphanilic acid because of thelevel of impurities it contained, most notably aniline residues.
These impurities consequently made technical grade sulphanilic
acid unsuitable for use in the production of optical brightenersand food dyes.
(8)It is recalled that purified grade sulphanilic acid results from thepurification of technical grade sulphanilic acid in a processwhich removes certain impurities. This purification process doesnot alter the molecular propertiesof the compound or the way in
which it reactswith other chemicals . Therefore, technical and
purified grades share the same basic chemical characteristics.The fact that interchangeability may only be in one direction insome applications because of concerns about impurities is there-fore not considered to be sufficient justification that purified andtechnical grades constitute different products which should be
treated separately in two different investigations. Whilst
accepting that the purification process adds certain additionalcosts to the production process, it is recalled that these weretaken into account when making a fair comparison between thedifferent grades produced by the Community industry and thoseimported from the country concerned for the purposes of calcu-
lating the level of price undercutting and the injury elimination
level.
(9)Consequently, it was not considered that the comments made byinterested parties concerning the definition of the productconcerned were sufficient to alter the findings on this issue thathad been reached at the provisional stage. It is therefore defini-tively concluded that both grades of sulphanilic acid should be
treated as one single product for the purpose of the present
proceeding.
2.Likeproduct
(10)No new elementswere brought to the attention of the Commis -
sion that would lead it to alter the conclusions reached at theprovisional stage, namely that sulphanilic acid produced andsold by Community producers and that produced in India and
exported to the Community are like products.
(11)The provisional findings concerning the like product as set out inrecital 13 of the provisional Regulation are hereby confirmed.
D.SUBSIDY
(12)The findingsmade in the provis ional Regulation concerning the
countervailable subsidies obtained by the exporting producersare hereby confirmed, unless it is otherwise expressly statedbellow.
1.Export Processing Zones (EPZ)/Export Oriented Units
(EOU)
(13)No new commentswere received under thisheading. The find-
ings as set out in recitals 18 to 28 of the provisional Regulation
are hereby confirmed.
2.Duty Entitlement Passbook Scheme (DEPB) — post-
export
(14)The Government of India (‘GOI’) claimed that the Agreement onsubsidies and countervailing measures (ASCM) is infringed bothin spirit and letter by the Commission not investigating the prac-tical utilisation of the DEPB in each case. They argued that the2002R1338 — EN — 19.03.2004 — 001.001 — 3
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Commission's assessment of the benefits under these schemes
was incorrect since only the excess duty drawback could beconsidered a subsidy in accordance with Article 2 of Regulation
(EC) No 2026/97 (‘basic Regulation’). Therefore, in order to
establish whether a subsidy exists, an examination as to whetheran excess exists must be undertaken.
(15)The Commission used the following approach in order to estab-lish whether the DEPB on post–exportbasis constitutes acountervailable subsidy and if so, to calculate the amount ofbenefit.
(16)Pursuant to Article 2(1)(a)(ii) of the basic Regulation, it isconcluded that thiss cheme involvesa financial contribution bythe GOI since government revenue (i.e. import duties onimports) otherwise due is not collected. There is also a benefitconferred, within the meaning of Article 2(2) of the basic Regu-lation, to the recipient since the exporting producers were
relieved of having to pay normal import duties. The DEPB
subsidy is contingent upon export performance and is thus coun-tervailable under Article 3(4) of the basic Regulation unless oneof the exceptions provided for by the basic Regulation applies.
(17)Article 2(1)(a)(ii) providesfor s uch an exception for, inter alia ,
drawback and substitution drawback schemes which conform tothe strict rules laid down in Annex I item (i), Annex II (defini-tion and rulesfor drawback) and Annex III (definition and rulesfor substitution drawback).
(18)The analysis revealed that DEPB on post-export basis is not adrawback or a substitution drawback scheme. This scheme lacksa built-in obligation to import only goodsthat are cons umed inthe production of the exported goods(Annex II of the bas ic
Regulation) which would ensure that the requirements of Annex
I item (i) were met. Additionally, there is no verification systemin place to check whether the importsare actually cons umed inthe production process. It is also not a substitution drawbackscheme because the imported goods do not need to be of the
same quantity and characteristics as the domestically sourced
inputsthat were us ed for export production (Annex III of thebasic Regulation). Lastly, exporting producers are eligible forthe DEPB benefitsregardles sof whether they import any inputsat all. In order to obtain the benefit, it isenough for an exporterto simply export goods without showing that any input material
wasimported. Thus , exporting producerswhich procure all of
their inputslocally and do not import goodswhich can be us edas inputs are still entitled to the DEPB benefits. Hence, theDEPB on post-export basis does not conform to any of theprovisions of Annexes I to III. Since the above exception to the
subsidy definition does not therefore apply, the countervailable
benefit is the remission of total import duties normally due onall imports.
(19)From the above it clearly follows, according to the basic Regula-
tion, that the excess remission of import duties is the basis for
calculating the amount of the benefit only in the case of bonafide drawback and substitution drawback schemes. Since it isestablished that the DEPB on post-export basis does not fall inone of these two categories, the benefit is the total remission of
import duties, not any supposed excess remission, since all duty
remission is deemed to be in excess in such cases.
(20)For the above reasons, the claim of the GOI cannot be acceptedand the provisional findings regarding the countervailability of
this scheme and the calculation of the benefit, as set out in reci-
tals35 to 40 of the provis ional Regulation, are confirmed.
3.IncomeTaxExemptionScheme(ITES)
(21)The cooperating company claimed that when calculating the
benefit under thiss cheme, the actual amount of tax paid by thecompany wasnot fully taken into account becaus e only the2002R1338 — EN — 19.03.2004 — 001.001 — 4
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Minimum Alternative Tax (MAT) wasincluded in the original
calculation and not the prepaid income taxesof previousyears .
(22)Thisclaim wasfound to be valid. The benefit to the companywasrecalculated and wasfound to be negligible.
4.Advance Licence — Advance Release Orders (ARO)
Scheme
(23)The GOI submitted that the ARO is merely a legitimate exten-sion of a legitimate substitution drawback scheme (AdvanceLicence). According to the GOI thisisproved by the fact thatthere isan unbreakable link between the licencesgained (evenif subsequently exchanged for AROs) and the importation ofthe necessary inputs for the manufacture of exported goods.
Furthermore, the system is organised and administered by the
GOI in such a way as to prevent there being any possibility ofexcess drawback occurring.
(24)In this respect, the GOI argued that a substitution drawbackscheme does not require that a company obtaining duty draw-back benefits against imported inputs need consume those exactinputsin the production of the relevant exported goods .According to the GOI, the company may consume domesticallyprocured inputsin the manufacture of the exported product
provided they are consumed in equivalent volumes as the inputs
on which the benefit of remission of import duty is taken. TheGOI further argued that a user of an ARO may only exchangeit for the input product (procured indigenously) indicated on theadvance licence and that the advance licence wasobtained byreference to an exported product which hasalready cons umed a
matching quantity of the same input.
(25)When addressing these arguments, it should be recalled that
advance licencesare available to exporters(manufacturer-expor-
ters or merchant-exporters) to enable them to import inputs used
in the production of exports, duty-free. The advance licencesmeasure the units of authorised imports either in terms of theirquantity or in terms of their value. In both cases the rates usedto determine the allowed duty free purchases are established, formost products including the product covered by this investiga-
tion, on the basis of the Standard Input Output Norms (SION).
The input itemss pecified in the advance licencesare itemsused in the production of the relevant exported finished product.
(26)The advance licence holder intending to source the inputs from
indigenous sources, in lieu of direct import, has the option to
source them against AROs. In such cases the advance licencesare validated as AROs and are endorsed to the supplier upondelivery of the itemss pecified therein. In accordance with the‘export and import policy’ document, the endorsement of the
ARO entitles the supplier to the benefits of deemed export such
asdeemed exportsdrawback and refund of terminal excis e duty.
(27)In this case, the cooperating company made very limited use ofadvance licences to import duty-free inputs. Instead, the
company converted the licencesinto AROsand endors ed them
to local suppliers obtaining commercial benefits. The commer-cial benefitsof the AROscorres pond to the amount of dutiesthat the AROsenable the s upplier to forgo under the deemedexport drawback facility.
(28)It is acknowledged that duty drawback systems can allow for therefund or drawback of import chargeson inputswhich areconsumed in the production process of another product andwhere the export of the latter product containsdomes tic inputs
having the same quality and characteristics as those substituted
for the imported inputs. It would for instance be allowed for acompany, in case of a shortage of duty-free inputs, to usedomestic inputs and incorporate these in the exported goods,and then, at a later stage, import the corresponding quantity ofduty-free inputs. In this context, the existence of a verification2002R1338 — EN — 19.03.2004 — 001.001 — 5
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system or procedure is important because it enables, in this case,
the GOI to ensure and demonstrate that the quantity of inputs forwhich drawback isclaimed doesnot exceed the quantity of
similar products exported, in whatever form, and that there is
not drawback of import charges in excess of those originallylevied on the imported inputsin ques tion.
(29)As stated in the provisional Regulation, the verification estab-
lished that there was no system or procedure in place to
confirm whether and which inputs, sourced against AROs, areconsumed in the production process of the exported product orwhether an excess benefit of import duties occurred within themeaning of item (i) of Annex I and AnnexesII and III of the
basic Regulation. In particular, the exporter is under no obliga-
tion to actually consume the inputs sourced against AROs inthe production process. Since the remission of import duties isnot limited to that payable on goodscons umed in the productionprocess of the exported products, the condition that only goodsactually consumed in the production process of the exported
products may benefit from such remission is not fulfilled. It is
therefore concluded that the ARO element of the AdvanceLicence scheme is not a permitted remission/drawback schemewithin the meaning of the basic Regulation.
(30)In addition, the AROscannot be cons idered asa duty drawbackscheme, since there appears to be no requirement of importinginputs. In this context, a scheme could only be considered as abona fide duty drawback scheme in cases where an importelement exists, i.e. when there is a link between the importedinputsand the exported goods . The quantity of imported inputs
should be corresponding to exported goods.
(31)For the above reasons, these claims cannot be accepted and the
provisional findings as regards the countervailability of thisscheme and the calculation of the benefit are confirmed.
5.PackageSchemeofIncentives(PSI)oftheGovernmentof
Maharashtra
(32)As stated in the provisional Regulation, the PSI scheme is onlyavailable to companies having invested in certain designatedgeographical areaswithin the juris diction of the State of Mahar-ashtra. It is not available to companies located outside theseareas. The level of the benefit is different according to the area
concerned. The scheme is therefore specific in accordance with
Article 3(2)(a) and Article 3(3) of the basic Regulation.
(33)The GOI and the company concerned claimed that thiss cheme isa non-countervailable subsidy since it meets the criteria of
Article 4(3) of the basic Regulation, and thus qualifies as a
‘green-light’ regional subsidy granted within the State of Mahar-ashtra.
(34)Under thisArticle, in order not to be s ubject to countervailing
measures, subsidies to disadvantaged regions within the territory
of the country of origin and/or export would have to complywith certain criteria; most notably, they would have to be: (i)pursuant to a general framework of regional development, (ii)the regionsconcerned would have to be clearly des ignatedcontiguousgeographical areaswith a definable economic and
administrative identity, and (iii) be regarded as disadvantaged
on the basis of neutral and objective criteria which must beclearly spelled out by law or other official document. Thesecriteria shall include a measurement of economic developmentwhich shall be based on at least one of the following factors:
income per capita, or household income per capita, or GDP per
capita (in each case, not above 85 % of the average for the terri-tory of the country of origin or export concerned), orunemployment rate asmeas ured over a three-year period (atleast 110 % of the average for the territory of the country oforigin or export concerned).2002R1338 — EN — 19.03.2004 — 001.001 — 6
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(35)The Government of Maharashtra has in a letter to the Ministry of
Commerce and Industry of the GOI stated that the PSI applies to
the entire contiguousregion outs ide the relatively advancedregion comprised in the Mumbai-Thane belt of the State ofMaharashtra, and that the disadvantaged region outside this beltischaracteris ed by a per capita income which isbelow the Stateaverage. Figureswere provided which s howed that per capita
income for the region to which the PSI applieswas74,54 % of
the figure for the whole Maharashtra State in 1982/83 and74,81 % by 1998/99. However, these figures were not substan-tiated by supporting evidence.
(36)In any event, the examination of the green-light claim hasrevealed that the per capita income in the State of Maharashtra,asmeas ured over a period of three years(1996/97 to 1998/99), ismore than 60 % higher than the national average of India. Itshould be clear that the 85 % benchmark is measured againstthe per capita income for the whole of the country of origin or
export and not that of a particular State or region. On this basis,
it isclear that the income per capita of the eligible region inMaharashtra, although less than 85 % of the regional average,iswell above the national average income per capita, and theregion therefore doesnot fall into the green-light category on
the basis of this criterion. As regards the unemployment
criterion, no information wasprovided by the Indian authorities .
(37)On the basis of the above, it is concluded that, in this case, thisscheme does not meet the criteria of Article 4(3) of the basicRegulation. The provisional findings as regards the countervail-
ability of thiss cheme are, therefore, confirmed.
(38)Concerning the calculation of the subsidy amount as set out in
recitals72 to 74 of the provis ional Regulation, the GOI and thecompany concerned claimed that the amount of benefit obtained
under the tax deferral incentive should be allocated over the total
sales during the investigation period (‘IP’) rather than over thetotal domestic sales during the IP as it was provisionally allo-cated, because it is a benefit to the company as a whole andshould for this reason not solely be attributed to its domesticsales.
(39)In addition, they brought to the attention of the Commissioncertain factorsby which the calculationsof the benefit obtainedby the company concerned under the sales tax exemption incen-tive were inflated.
(40)The claim concerning the basis of allocation of the benefitobtained under the tax deferral incentive wascons idered validand the Commission amended the calculations of the subsidyamount accordingly.
(41)In relation to the sales tax exemption incentive, after taking intoaccount the commentsof the interes ted partiesand after adetailed review of the provisional findings, the provisional calcu-lations were adjusted resulting in an overall reduction of theamount of subsidy.
(42)On the basis of the revised calculations described above, theamount of subsidy that the company has obtained under thisscheme is 0,8 %.
6.Amountofcountervailable subsidies
(43)The amount of countervailable subsidies, calculated in accor-
dance with the provisions of the basic Regulation, expressed ad
valorem , is7,1 %, for the inves tigated exporting producer.
(44)The level of cooperation for India washigh (above 80 %). In
view of the high level of cooperation, it wasdecided to s et theresidual subsidy margin at the level of the subsidy found for thecooperating exporting producer, i.e. 7,1 %.2002R1338 — EN — 19.03.2004 — 001.001 — 7
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Type of
subsidyEOU (*) DEPB (*) EPCGS ITESAdvance
Licence/
ARO
(*)Mahar-
ashtra State
schemeTOTAL
Kokan
Synthetics
and
Chemicals
Private
Limited1,4 % 1,7 % 0 0 3,2 % 0,8 % 7,1 %
All others 7,1 %
(*) Subsidies marked with an asterisk are export subsidies.
E.COMMUNITYINDUSTRY
(45)Following the publication of the provisional Regulation, a
number of interested parties queried the definition of theCommunity industry and its standing in terms of Article 10(8)
of the basic Regulation. In particular, it was suggested that the
complainant producer, Sorochimie Chime Fine, did not have thesupport of the second Community producer, Quimigal S.A.,when it lodged itscomplaint.
(46)It isrecalled that whils t Quimigal wasnot a party to the originalcomplaint, it did express it support for the proceeding at theinitiation stage and has fully cooperated in the investigation. Inresponse to the claims of certain interested parties, it has alsoreiterated its support for the proceeding during the course of the
investigation. Therefore, as no new elements were brought to the
attention of the Commission that would lead it to alter its earlierfindings, the provisional findings concerning the definition of theCommunity industry and its standing as detailed in recital 78 ofthe provisional Regulation are hereby confirmed.
F.INJURY
1.Preliminaryremarks
(47)Several interested parties questioned the way in which the
Commission had established figures for imports of sulphanilicacid into the Community, Community consumption and market
shares. They claimed that there had been insufficient disclosure
of the Commission's findings regarding imports, in both volumeand value terms, and that consequently their rights of defencehad been impeded. It wasnoted that s ome of thisinformationwas also missing from the public version of the complaint withthe result that the complaint did not meet the standards detailed
in Article 10(2) of the basic Regulation.
(48)It isto be noted that according to Article 29(1) of the bas ic
Regulation, information which iss ubmitted in confidence by
parties to an investigation shall be treated as such by the investi-
gation authority so long as the information concerned warrantssuch treatment. It is recalled that sulphanilic acid is manufac-tured by a relatively small number of producers around theworld. Consequently, it was not possible for reasons of confiden-
tiality to disclose precise information relating to imports of the
product into the Community, especially for those countrieswhere there isonly one exporting producer. Therefore, for thepurposes of disclosure, indexed figures and an explanatory narra-tive were made available to interested parties concerning thisand related items.
(49)As none of the interested parties which raised the issue of insuf-ficient disclosure were able to demonstrate that the informationmade available to them in a summarised form did not enable2002R1338 — EN — 19.03.2004 — 001.001 — 8
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them to defend their rights, their arguments in this respect had to
be rejected.
2.Importsconcerned
(50)One interested party suggested that the figure for the increase in
imports noted in the provisional Regulation was misleading. It
wasclaimed that asa number of other producershad withdrawn
from the market, users in the Community were obliged topurchase sulphanilic acid on the world market, thereby leadingto the sharp rise in import volumes. This claim had to berejected for a number of reasons. In the first instance, no addi-tional evidence concerning the level of importswass ubmitted
so as to alter the findings reached at the provisional stage on
thispoint. Similarly, whils t it wasacknowledged in recital 161of the provisional Regulation that imports from India wereexpected to continue to play a significant role in meetingdemand in the Community, it wasals o noted that had theCommunity industry not been subject to the injurious effects of
the subsidised imports, it would have been able to put into effect
certain expansion plans, thereby satisfying a larger part ofCommunity demand. In the light of the above, the provisionalfindingsconcerning importsinto the Community from India andthe level of price undercutting asnoted in recitals81 to 85 of the
provisional Regulation are confirmed.
3.SituationoftheCommunityindustry
(51)In accordance with Article 8(5) of the basic Regulation, the
examination of the impact of the subsidised imports on the
Community industry included an evaluation of all relevanteconomic factorsand indiceshaving a bearing on itss tate.
(52)Subsequent to provisional disclosure, a number of interestedparties questioned the manner in which the Commission hadreached itsprovis ional determination concerning injury ascertain indicators were showing positive developments. In parti-cular, it was suggested that the increase in the Community
industry's production, sales and capacity utilisation during the
analysis period (1 January 1997 to 30 June 2001) proved that ithad not suffered injury. One interested party also claimed thatthe Commission had failed to make a proper assessment ofwage costs as required by the Article 8(5) of the basic Regula-tion.
(53)It isrecalled that according to Article 8(5) of the bas ic Regula-tion, none of the economic factorsor indiceslis ted in the
aforementioned article shall necessarily be decisive in the deter-
mination of injury. It isindeed true that certain indicatorsrelating to quantitiesproduced and s old by the Communityindustry showed positive developments. However, this shouldbe seen in the light of the fact that Community consumption ofsulphanilic acid increased by some 13 % during the analysis
period and that there hasbeen a reduction of the number of
suppliers on the market due to the closure of certain Communityproducers.
(54)More importantly, it should be recalled that the Communityindustry suffered injury in the form of price depression and pricesuppression. In particular, its average selling price declinedsharply between 1997 and 1998 as the pressure exerted by theincreasing volume of imports on the market became evident.
Subsequently, although the Community industry was able to
increase its average selling price as demand on the Communitymarket also increased, it failed to achieve a level which wouldenable it to cover its full cost of production and losses continuedto be incurred in the IP.
(55)With regard to the argument raised concerning wages, it is notedthat although the number of workersemployed by Sorochimiedecreased during the analysis period, the average employment2002R1338 — EN — 19.03.2004 — 001.001 — 9
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cost per employee increased. This is due to the fact that there
wasa change in the mix of employee during the period andalso to general wage inflation. With regard to Quimigal, it is to
be noted that in the base year for the index (1998) the company
wasnot producing s ulphanilic acid. When it began production in1999, the workerswere engaged full time in thisactivity with anextra day being worked from 2000 onwards. Neither companynoted that the wages of those employed in sulphanilic acid activ-
itieshad been effected by the importsconcerned. Therefore,
wageswere not cons idered to be an indicator of injury.
(56)In view of the above, the provisional findings that the Commu-nity industry suffered material injury within the meaning ofArticle 8 of the basic Regulation, as detailed in recitals 88 to
107 of the provisional Regulation, are confirmed.
G.CAUSATION
1.General comments on the Commission's conclusions
regardingthecausationofinjury
(57)Certain interested parties argued that the Community industrywas itself partly responsible for the injury it had suffered.Several partiesques tioned the quality of Sorochimie'smanage-
ment, product and customer service, and highlighted the fact it
had itself imported sulphanilic acid during the analysis period.One party also alleged that the injury suffered by Sorochimieshould be attributed to its other business activity (glue) whichexperienced significant difficulties during the IP. With regard to
the situation of Quimigal, the second company forming part of
the Community industry, it was argued that its decision to enterthe market with a low price strategy during its start-up phase hadalso contributed to the alleged injury. Finally, it was alsoclaimed that the Community industry had to meet stringentenvironmental regulationsand had higher labour and trans port
costs than exporting producers in India with the implication that
importsoriginating in that country had a competitive advantageand were not made at injuriousprices .
(58)The investigation showed that Sorochimie, despite its financialdifficulties linked to the excessively low prices prevailing on
the market, was able to gain new customers during the analysis
period and to adapt itsproductsto meet their needs . Thecompany wasobliged to purchas e certain quantitiesof theproduct concerned during the analysis period in order to meetexisting customer requirements while its production equipmentwas undergoing essential repairs. It cannot thus be considered
that Sorochimie contributed to itsown injury. Similarly, it is
recalled that any exceptional costs relating to the company'sdifficulties in its glue business have been excluded from thecurrent investigation as they are not linked to the productconcerned and thusare not reflected in the injury indicators
described in the provisional Regulation.
(59)It wasnoted in recital 118 of the provis ional Regulation that
Quimigal'sdecis ion to enter the market wastaken at a timewhen pricesfor s ulphanilic acid on the Community marketwere higher. Quimigal was able to establish itself on the marketat a time of both increasing demand in the Community and
changes in the number of suppliers of sulphanilic acid both in
the Community and outside. It was also noted that the companywas obliged to offer prices similar to those of the dumped andsubsidised imports in order to establish itself on the market andgain market share in 1999 and 2000 in that its relatively small
size meant that it was a price taker rather than a price setter.
Nevertheless, its market share decreased slightly in the IP asimportsfrom India increas ed in volume. No indication hasthere-fore been found that the deterioration of the situation of theCommunity industry is due to excessive intra-Communityindustry competition.2002R1338 — EN — 19.03.2004 — 001.001 — 10
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(60)With regard to the allegedly higher costs that the Community
industry is obliged to meet in terms of complying with environ-
mental regulations and other items, it should be recalled that thecompetitive advantage of the importsconcerned wastaken intoaccount in the determination of normal value. Consequently, theprovisional findings concerning causation as set out in recitals121 to 123 of the provisional Regulation are confirmed.
H.COMMUNITYINTEREST
(61)Following the publication of the provisional Regulation, one
interested party questioned how the Commission could deter-mine, in the light of Sorochimie being in administration, thatthe Community industry was viable and competitive. It isrecalled that Sorochimie wasobliged to s eek protection from itscreditors following certain difficulties in its glue business and
other pressures in its sulphanilic acid activities. The Commercial
Court of Charleville Mézièreshasappointed an adminis trator tooversee the company's trading activities and has granted thecompany a period of time in which to prepare a restructuringplan. Thisperiod of time hasrecently been extended until 31
January 2003. In the absence of other unforeseen events, the
company should continue to be in existence for the immediatefuture and therefore be in a position to benefit from the imposi-tion of definitive measures. Consequently, the provisionalfindings that the imposition of measures is in the interest of theCommunity industry as noted in recital 134 of the provisional
Regulation are confirmed.
(62)A number of interested parties claimed that the Commission had
failed to make an objective assessment of the situation of usersin not taking into account any increase in the Community indus-
try's prices that would likely follow the imposition of measures.
It was also claimed that measures were against the Communityinterest as the production capacity of the Community industrywas insufficient to meet Community demand and as a possibleduopolistic situation based on the two Community producerscould result from the closure of the market to imports from India
and also from the PRC, which is itself subject to the parallel
anti-dumping investigation.
(63)In respect of the claim that the Commission failed to takeaccount of the variousinteres tsin an objective manner when
determining the imposition of measures, it is recalled that at the
provisional stage, the Commission made a detailed analysis ofeach of the main user sectors (optical brighteners, concrete addi-tives, dyes and colorant producers). This analysis included anassessment of the impact of measures on their costs on the basisthat the pricesof the importsconcerned would increas e in line
with the proposed measures. At the same time, due allowance
was made in this calculation for a maximum possible increasein the price of sulphanilic acid sold by the Community industryof 10 % on the basis that its prices would increase to a levelsimilar to that of the imports concerned following the imposition
of measures taking into account that it was already operating at a
fairly high rate of capacity utilisation in the IP. As such, no newelements were submitted by interested parties which would alterthe provisional findings concerning the possible increase in themanufacturing costs of the different user industries.
(64)Regarding the supply and competition situation on the Commu-nity market, it isto be noted that the current production capacityof the Community industry could satisfy in the region of 50 % ofCommunity demand. The purpose of the measures is in anyevent not to close the market to imports from India but to ensure
that they are made at non-subsidised and non-injurious prices. It
istherefore expected that importsfrom third countriesincludingIndia will continue to enter the market. At the same time,measures should ensure continued sulphanilic acid production inthe Community with the result that users will have more choicebetween domestic and foreign suppliers and competition between2002R1338 — EN — 19.03.2004 — 001.001 — 11
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all suppliers should be maintained. It should also be stressed that
the Community industry has plans to increase its output byinvesting in new facilities if the capital expenditure can be justi-
fied. For this to occur, the injurious effects of the subsidised
importsneed to be removed.
(65)In the light of the above, the provisional findings that the impo-sition of measures is not contrary to the interest of theCommunity asnoted in recital 164 of the provis ional Regulationisconfirmed.
I.ANTI-SUBSIDYMEASURES
1.Injuryeliminationlevel
(66)In the absence of any new submissions on this point, the metho-
dology used to establish the injury margin as set out at recitals
165 to 167 of the provisional Regulation is hereby confirmed.
2.Definitive measures
(67)As the injury elimination level is higher than the subsidy margin
established, the definitive measures should be based on thelatter. The following duty therefore applies:
India (all companies): 7,1 %.
3.Definitivecollection ofprovisionalduties
(68)In view of the magnitude of subsidisation found and in the light
of the seriousness of the injury caused to the Communityindustry, it is considered necessary that the amounts secured byway of the provisional countervailing duty shall be definitivelycollected at the rate of the duty definitively imposed. Amounts
secured under the provisional duty in excess of the definitive
duty shall be released.
J.UNDERTAKING
(69)Subsequent to the imposition of provisional measures, the sole
cooperating exporting producer in India offered a price under-taking in accordance with Article 13(1) of the basic Regulation.By doing so, it agreed to sell the product concerned at or aboveprice levelswhich would have the effect of eliminating the injur-
ious effects of subsidisation. The company will also provide the
Commission with regular and detailed information concerning itsexportsto the Community, meaning that the undertaking can bemonitored effectively by the Commission. Furthermore, the salesstructure of the exporting producer is such that the Commission
considers that the risk of circumventing the agreed undertaking
islimited.
(70)In view of this, the offer of an undertaking was accepted by theCommission in Decision 2002/611/EC (
1).
(71)In order to ensure the effective respect and monitoring of theundertaking, when the request for release for free circulationpursuant to the undertaking is presented to the relevant customsauthority, exemption from the duty should be conditional uponpresentation of a commercial invoice containing the informationlisted in the Annex to this Regulation. Where no such invoice is
presented, or when it does not correspond to the product
concerned presented to customs, the appropriate rate of counter-vailing duty should instead be payable.
(72)It should be noted that in the event of a breach or withdrawal ofthe undertaking or a suspected breach, a countervailing duty maybe imposed pursuant to Article 13(9) and (10) of the basic Regu-lation,2002R1338 — EN — 19.03.2004 — 001.001 — 12
(1) See page 36 of thisOfficial Journal.
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HAS ADOPTED THIS REGULATION:
Article 1
1. A definitive countervailing duty ishereby impos ed on importsof
sulphanilic acid, falling within CN code ex 2921 42 10 (TARIC code2921 42 10*60) and originating in India.
2. The rate of the definitive countervailing duty applicable to the
net, free-at-Community-frontier price, before duty shall be 7,1 %.
4. Unless otherwise specified, the provisions in force concerning
custom duties shall apply.
Article 3
The amounts secured by way of the provisional countervailing duty
imposed pursuant to Regulation (EC) No 573/2002 shall be definitivelycollected at the rate of duties definitively imposed. Amounts secured inexcess of the definitive rate of countervailing duty shall be released.
Article 4
ThisRegulation s hall enter into force on the day following that of its
publication in the Official Journal of the European Communities .
ThisRegulation s hall be binding in itsentirety and directly applicable
in all Member States.2002R1338 — EN — 19.03.2004 — 001.001 — 13
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