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"B COMMISSION DECISION No 284/2000/ECSC
of 4 February 2000
imposing a definitive countervailing duty on imports of certain flat rolled products of iron or non-alloy steel, of a width
of 600 mm or more, not clad, plated or coated, in coils, not further worked than hot-rolled, originating in India and
Taiwan and accepting undertakings offered by certain exporting producers and terminating the proceeding concerning
imports originating in South Africa
(OJ L 31, 5.2.2000, p. 44)
Amended by:
Official Journal
No page date
"M1 Commission Decision No 2071/2000/ECSC of 29 September 2000 L 246 32 30.9.2000
Corrected by:
"C1 Corrigendum, OJ L 119, 20.5.2000, p. 39 (284/2000)2000S0284 — EN — 05.02.2000 — 000.001 — 1
COMMISSION DECISION No 284/2000/ECSC
of 4 February 2000
imposing a definitive countervailing duty on imports of certain flat rolled
products of iron or non-alloy steel, of a width of 600 mm or more, notclad, plated or coated, in coils, not further worked than hot-rolled,
originating in India and Taiwan and accepting undertakings offered by
certain exporting producers and terminating the proceeding concerning
imports originating in South Africa
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Coal and Steel
Community,
Having regard to Commission Decision No 1889/98/ECSC of 3 September
1998 on protection against subsidised imports from countries not members ofthe European Coal and Steel Community (
1), and in particular Articles 13, 14
and 15 thereof,
After consulting the Advisory Committee,Whereas:
A. PROCEDURE
1.Initiation
(1) On 8 January 1999, the Commission announced by means of a notice
(hereinafter referred to as the ‘Notice of Initiation’) published in theOfficial Journal of the European Communities (
2) the initiation of an
anti-subsidy proceeding with regard to imports into the Community of
certain flat rolled products of iron or non-alloy steel, of a width of600 mm or more, not clad, plated or coated, in coils, not further worked
than hot-rolled, originating in India, South Africa and Taiwan.
(2) The proceeding was initiated as a result of a complaint lodged by
Eurofer on behalf of Community producers representing a majorproportion of the total Community production of the product
concerned within the meaning of Articles 9(1) and 10(7) Decision
(EC) No 1889/98/ECSC (hereinafter referred to as the ‘BasicDecision’). The complaint contained evidence of subsidisation of the
product concerned and of material injury resulting therefrom, which
was considered sufficient to justify the initiation of a proceeding.
2.Investigation
(3) The Commission officially advised the exporting producers in the
exporting countries (hereinafter referred to as the ‘exporting pro-
ducers’) and importers as well as their representative associations
known to be concerned, the representatives of the exporting countriesand the complaining Community producers of the initiation of theproceeding. The Commission sent questionnaires to all these parties
and to those who made themselves known within the time limit set in
the Notice of Initiation. Pursuant to Article 11(5) of the BasicDecision, the Commission also gave the parties directly concerned the
opportunity to make their views known in writing and to request a
hearing.
(4) Certain exporting producers, complaining Community producers and
importers submitted comments in writing.
All interested parties who requested a hearing within the time limit set
and who indicated that they were likely to be affected by the result ofthe proceeding and that there were particular reasons why they should
be heard, were granted such a hearing.
(5) All parties were informed of the essential facts and considerations on
the basis of which it was intended to recommend:!B
(1) OJ L 245, 4.9.1998, p. 3.
(2) OJ C 5, 8.1.1999, p. 2.2000S0284 — EN — 05.02.2000 — 000.001 — 2
(i) the imposition of definitive countervailing duties on imports from
India and Taiwan,
(ii) the acceptance of an undertaking offered by exporting producers
in India and
(iii) the termination of the proceeding against imports from South
Africa.
Parties were also granted a period within which they could make
representations subsequent to this disclosure.
(6) The oral and written comments submitted by the parties were
considered and, where appropriate, the definitive findings have beenmodified accordingly.
(7) The Commission sought and verified all the information it deemed
necessary for the purpose of a definitive determination.
Verification visits were carried out at the premises of the following
companies:
—Complaining Community producers
— Aceralia Corporacion Sid., Madrid, Spain
— British Steel Plc, London, United Kingdom
— Cockerill Sambre SA, Brussels, Belgium
— Hoogovens Steel BV , IJmuiden, Netherlands
— IL V A Spa, Genoa, Italy
— Sidmar NV , Gent, Belgium
— Salzgitter AG, Salzgitter, Germany
— Stahlwerke Bremen GmbH, Bremen, Germany
— SOLLAC, Paris, France— Thyssen Krupp Stahl AG, Duisburg, Germany
—Exporting producers
(a) India
Essar Steel Ltd, Hazira
Tata Iron & Steel Company Ltd, Calcutta
Steel Authority of India Ltd, New Delhi
(b) South Africa
Iscor Ltd, Pretoria
Highveld Steel & Vanadium Corp. Ltd, Witbank
(c) Taiwan
China Steel Corp., Kaohsiung
Yieh Loong Enterprise Co. Ltd, Kaoshiung,
—Unrelated importer — user company in the Community
Marcegaglia SpA, Gazoldo degli Ippoliti, Italy,
—Importers related to the exporting producers
South Africa: Macsteel International UK Ltd, London, United King-
dom
Macsteel International Belgium NV , Antwerpen, Bel-
gium
Macsteel International Stahlhandel GmbH, Düsseldorf,
Germany.!B2000S0284 — EN — 05.02.2000 — 000.001 — 3
(8) The investigation of subsidy covered the period from 1 January 1998 to
31 December 1998 (hereinafter referred to as the ‘investigation period’or ‘IP’). The examination of injury covered the period from 1 January1995 up to the end of the subsidy investigation period (hereinafter also
referred to as the ‘period examined’).
B. PRODUCT CONCERNED AND LIKE PRODUCT
1.Product concerned
(9) The product concerned is certain flat rolled products of iron or
non-alloy steel, of a width of 600 mm or more, not clad, plated orcoated, in coils, not further worked than hot-rolled (hereinafter
‘hot-rolled coils’). This product is currently classifiable within CN
codes 7208 10 00, 7208 25 00, 7208 26 00, 7208 27 00, 7208 36 00,7208 37 10, 7208 37 90 (
1), 7208 38 10, 7208 38 90, 7208 39 10,
7208 39 90.
(10) Hot-rolled coils are generally obtained in steel mills by hot rolling
semifinished steel products after the final rolling pass or after picklingor continuous annealing. Hot-rolled coils are wound into a regular coil.
For steel mills, which produce a great range of flat products of steel,
hot-rolled coils are used as a pre-material for manufacturing other steelproducts (wide and narrow strips, all cold-rolled products, tubes, etc.).
Hot-rolled coils can be of various grades and dimensions. The vast
majority of imports from third countries into the Community consist of‘structural steels’ (such as S235 and S275 according to ‘Euronorm’ EN
10025) and ‘mild steels’ (such as DD11, DD12, DD13 according to
EN 10011 and the ‘Deutsche Industrie-Norm’ DIN 1614/1). Coils areconventionally between 1,5 and 15 mm thick and from 600 to2 050 mm wide. Each of the CN codes listed above corresponds to a
specific product type as differentiated by width and thickness within
the above ranges.
(11) The product concerned is also classified into two distinct categories
according to its finishing: black hot-rolled coils (hereafter referred to
as ‘black coils’) which are the basic product and pickled hot-rolledcoils (hereafter referred to as ‘pickled coils’) which, after beinghot-rolled, go through an additional surface treatment called pickling.
The distinction between black coils and pickled coils is also reflected
in the structure of the Combined Nomenclature as coils classifiedunder the two categories belong to specific and separate CN codes.
(12) Although imports from the countries concerned are mainly black coils,
the investigation showed that imports cover all the CN codes and thusall the different products listed above. Notwithstanding the fact that
each CN code corresponds to a distinguishable type of hot-rolled coil,
it was found that they all have identical or similar physical andtechnical characteristics, uses and applications. Accordingly, all typesof hot-rolled coils form one single product falling under the CN codes
listed in recital 9.
2.Like product
(13) The investigation has shown that the hot-rolled coils imported from the
countries concerned are identical to or comparable to the Community-
produced products, in particular in terms of the grades and the range ofdimensions available.
(14) Some exporting producers claimed that the product concerned which
they produce and sell is not interchangeable and not comparable assuch with the Community-produced product. They claimed that theproduction process of the Community producers was more advanced
and even used different technology, thus producing a higher quality
product. They mentioned that users sometimes had to re-roll theimported products before they could be processed further. They
therefore claimed that their product was not a like product to that of
the complaining Community producers.
(15) Obviously, any difference in the production process resulting in surface
or chemical defects may lead to a lower market value. However, the!B
(1) See corrigendum published in OJ C 107, 16.4.1999, p. 6.2000S0284 — EN — 05.02.2000 — 000.001 — 4
investigation showed that, in general both the Community-produced
product and the imported product still have the same basic physicalcharacteristics and uses, even though the products are not identical, inparticular in terms of quality, across suppliers and across shipments of
a given supplier. This, however, cannot lead to the conclusion that
hot-rolled coil imported from the countries concerned is not a likeproduct to that produced by the Community industry and sold in theCommunity.
(16) The investigation also showed that the grades and dimensions of the
product concerned imported from the countries concerned are identicalor comparable to the products sold on the domestic market of the
countries concerned.
(17) On this basis, it was concluded that hot-rolled coils produced in the
countries concerned, hot-rolled coils exported to the Community fromthese countries and hot-rolled coils produced and sold by the
complaining Community producers on the Community market, are
alike within the meaning of Article 1(5) of the Basic Decision.
C. SUBSIDY
1. INDIA
a)Introduction
(18) On the basis of the information contained in the complaint and the
replies to the Commission’ s questionnaire, the Commission investi-gated the following five schemes, which allegedly involve the granting
of export subsidies:
— Passbook Scheme— Duty Entitlement Passbook Scheme— Export Promotion Capital Goods Scheme
— Export Processing Zones/Export Oriented Units
— Income Tax Scheme.
(19) The first four schemes are based on the Foreign Trade (Development
and Regulation) Act 1992 (effective from 7 August 1992) which
repealed the Imports and Exports Control Act of 1947. The Foreign
Trade Act authorises the Government of India (GOI) to issuenotifications regarding export and import policy. These are summa-rised in ‘Export and Import Policy’ documents which are issued every
five years and updated every year. Two Export and Import Policy
documents are relevant to the investigation period of this case i.e. thefive-year plans relating to the years 1992-1997 and 1997-2002.
(20) The last scheme, the Income Tax Scheme, is based on the Income Tax
Act of 1961 which is amended yearly by the Finance Act.
b)Passbook Scheme (PBS)
(21) One instrument under the Export and Import Policy involving
export-related assistance is the PBS which entered into force on 30May 1995.
Eligibility
(22) The PBS is available to certain categories of exporters i.e. those which
manufacture in India and subsequently export (Manufacturer-ex-
porters) and exporters, whether manufacturers or only traders, granted
an ‘Export House/Trading House/Star Trading House/SuperStar Trad-ing House certificate’. The latter category of exporters, which isdefined in the Export and Import Policy document, has to provide in
particular proof of prior export performance.
Practical implementation
(23) No producer/exporter of the product concerned applied for or made
use of the PBS. There is therefore no need for the Commission to
assess this part of the scheme in the context of the investigation.!B2000S0284 — EN — 05.02.2000 — 000.001 — 5
c)Duty Entitlement Passbook Scheme (DEPB)
(24) Another instrument under the Export Import Policy involving export
related assistance is the DEPB which became effective on 7 April
1997. The DEPB constitutes the successor to the PBS which was
terminated on 31 March 1997. The DEPB is of two types:
— DEPB on pre-export basis— DEPB on post-export basis.
i) DEPB on pre-export basis
Eligibility
(25) The DEPB scheme on pre-export basis is available to manufacturer-
exporters (i.e. every manufacturer in India who exports) or merchant-exporters (i.e. traders) linked with manufacturers. To be eligible under
this scheme, the company must have exported during a three-year
period prior to submitting a claim for a licence.
Practical implementation
(26) Any eligible exporter can apply for a licence. The licence, which is
issued automatically, grants a credit amount that may be used to offsetcustoms duties due on future imports of goods. The value of thelicence is calculated on the basis of 5 % of the average yearly value of
all exports, made by the applicant, during the previous three years.
(27) The licence, which is non-transferable, is valid for a period of 12
months from the date of issue. Once the credit on the licence has beenexhausted, a fee is payable to the relevant authority. The company may
then apply for a further credit amount, again calculated on the basis of
5 % of the average value of exports during the previous three years.
(28) The DEPB on pre-export basis allows duty-free imports of inputs
required for the production of goods in the factory of the company
concerned. Determination of what products may be imported duty free
is made by reference to the inputs listed in the Standard Input-OutputNorm (SION) (
1) and varies dependent upon the product to be
manufactured. Such duty-free inputs may not themselves then be
transferred, loaned, sold, parted with, or disposed of in any manner
whatsoever by the company, other than as a constituent part of thefinished product.
(29) The use of the scheme also carnes with it an export obligation. When
the licence is used for duty-free imports, the holder undertakes to use
the goods as inputs for finished products destined for export. Exportwill attract a benefit based on the type and quantity of finished
product. The benefit is calculated by reference to the SION. Once the
licence holder has made exports of such a value which will entitle himto a benefit equivalent to the credit already given under DEPB onpre-export basis, his obligation is fulfilled.
Conclusion on DEPB pre-export basis
(30) The GOI asserts that the DEPB pre-export scheme is a permitted
remission/drawback or substitution drawback scheme within the
provisions of Annex I(i) to the Basic Decision, and, as such, is
non-countervailable. Annex II and III to the Basic Decision giveguidelines on the determination of whether such schemes are exportsubsidies.
(31) The DEPB pre-export is a value based scheme. The SOGN sets
notional costings based on what are considered to be the value ofinputs that have to be imported to manufacture a particular product.Once the SION rate has been set for a particular finished product,
inputs can be imported duty-free under a DEPB pre-export license.
There is no requirement to import all of the inputs on the SION list.The only limits to the quantity of any particular input that may be!B
(1) For an explanation of the SION programme please see Commission Regulation
(EC) No 1156/98, (OJ L 202, of 18.7.1998, p. 40).2000S0284 — EN — 05.02.2000 — 000.001 — 6
imported under the scheme is the value of the licence granted and the
corresponding commitment to export the finished product.
(32) A company which can obtain its inputs at a lower price than that set in
the SION programme, or which can obtain some of the inputs on thedomestic market, would be able to import excess duty-free inputs thatcould be used in its domestic production. There would appear to be no
provision within the SION programme to prevent such a situation
arising. Neither was evidence found of any other system or procedurein place to confirm either which duty-free inputs are actually
consumed in the production process of the exported finished product
or in what quantities.
(33) Annex II (II)(5) and Annex III (II)(3) of the Basic Decision provide
that, where it is determined that the government of the exportingcountry does not have a verification system in place, a furtherexamination by the exporting country based on actual inputs involved,
or actual transactions, respectively, will normally need to be carried
out in the context of determining whether an excess payment occurred.The GOI did not carry out such an examination.
(34) However, the only Indian exporter in this investigation to use the
scheme has provided to the Commission proof that they received no
excess benefit. The company was able to establish that all benefits
under the DEPB pre-export scheme during the POI were offset by theduty normally payable only on inputs consumed in finished exportedproduct. There was therefore no subsidy conferred on this company.
ii) DEPB on post-export basis
Eligibility
(35) The DEPB on post-export is available to manufacturer-exporters (i.e.
every manufacturer in India who exports) or merchant-exporters (i.e.
traders).
Practical implementation of DEPB post-export basis
(36) Under this scheme, any eligible exporter can apply for credits which
are calculated as a percentage of the value of exported finishedproducts. Such DEPB rates have been established by the Indianauthorities for most products, including the products concerned, on the
basis of the SION. A licence stating the amount of credit granted is
issued automatically.
(37) DEPB on post-export basis allows for the use of such credits for any
subsequent imports (e.g. raw materials or capital goods) not on theNegative List of Imports. Such imported goods can be sold on the
domestic market (subject to sales tax) or used otherwise.
(38) DEPB credits are freely transferable. The DEPB licence is valid for a
period of 12 months from the date of granting of the licence.
(39) When all credits have been used, the company has to pay a fee to the
relevant authority.
Conclusion on DEPB on post-export basis
(40) This scheme is clearly contingent upon export performance. Credit is
automatically calculated on the basis of a formula using SION rates,independent of whether the inputs were imported, whether import duty
was paid on them, or whether the inputs were actually used for export
production or in what quantities. Indeed a company can claim a licenceirrespective of whether it makes any imports or purchases importedgoods from other sources. The scheme cannot therefore be considered
as a duty drawback or substitution scheme, since the remission of
import duties is not limited to that payable on goods consumed in theproduction process and therefore an excess remission is involved, inaccordance with Article 2(1)(a)(ii). It is therefore countervailable
under Article 3(4)(a) of the Basic Decision, since it involves revenue
foregone and is contingent upon export performance.!B2000S0284 — EN — 05.02.2000 — 000.001 — 7
Calculation of the subsidy amount for DEPB post-export basis
(41) The benefit to the exporters has been calculated in two separate ways
according to the use the company has made of the DEPB licences.
(42) In the event that the company used the licences to make duty-free
imports, the benefit was calculated on the basis of the amount of
customs duty normally due on imports made during the investigation
period but which remained unpaid under the DEPB.
(43) In the event the company sold its licences, the benefit was calculated
on the basis of the amount of credit granted in the licence regardless ofthe sales price of the licence. The three exporting producers and the
GOI claimed that the benefit should be limited to the effective sales
price of the licence which is usually less than the face value of thecredits in the licence. However, this claim cannot be granted since thesale of a licence at a price less than the face value is a pure commercial
decision which does not alter the amount of benefit received from the
scheme.
(44) In order to establish the full benefit to the recipient under this scheme,
this amount has been adjusted by adding interest during theinvestigation period. It is normal practice to reflect the benefit to therecipient of one-time grants by adding the annual commercial interest
to the nominal amount of the grant, on the assumption that the grant is
considered to have been made on the first day of the investigationperiod. However, in the present case, it is clear that individual grants
can be made at any time between the first and the last day of the
investigation period. Consequently, instead of adding commercialinterest to the whole amount, it is considered appropriate to assumethat an average grant would have been received at the mid-point of the
investigation period, and therefore the interest should cover a period of
six months, equivalent to half of the commercial rate during the IP inIndia, i.e. 7 %. This amount has been allocated over total exportsduring the IP .
(45) The Government of India and three exporters claimed that this scheme
was wrongly assessed by the Commission in terms of the extent of
subsidy and the amount of countervailable benefit. In particular, they
claim that the Commission’ s assessment of the benefits under theseschemes was incorrect since only the excess duty drawback could be
considered a subsidy in accordance with Article 2 of the Basic
Decision.
(46) Article 2(1)(a)(ii) provides for an exception for, inter alia , drawback
and substitution drawback schemes which conform to the strict ruleslaid down in Annex I(i) and Annex II (definition and rules fordrawback) and Annex III (definition and rules for substitution
drawback).
(47) As the analysis of the Commission revealed that the DEPB post export
scheme is not a properly constituted drawback or a substitution
drawback scheme, the question of any excess duty drawback does notarise, and the full benefit is countervailable. As explained in recital 40,
excess remission of import duties is inherent in the scheme.
(48) Three companies benefited from this scheme during the investigation
period and obtained subsidies of between 4,1 % and 12,3 %.
d)Export Promotion Capital Goods Scheme (EPCGS)
(49) Another instrument under the Export Import Policy involving export
related assistance is the EPCGS introduced on 1 April 1990 andamended on 5 June 1995.
Eligibility
(50) The EPCGS is available to manufacturer/exporters (i.e. every manu-
facturer in India who exports) or merchant/exporters (i.e. traders).
Since 1 April 1997, manufacturers linked with merchant/exporters can
also benefit from the scheme.!B2000S0284 — EN — 05.02.2000 — 000.001 — 8
Practical implementation
(51) To benefit from the scheme, a company must provide to the relevant
authorities details of the type and value of capital goods which are tobe imported. Depending on the level of export commitment which the
company is prepared to undertake, the company will be allowed to
import capital goods at either a zero rate of duty or a reduced rate. Alicence authorising the import at preferential rates is issued auto-matically.
(52) In order to meet the export obligation, goods exported must have been
produced using the imported capital goods.
(53) An application fee is payable to obtain a licence.
Conclusion on EPCGS
(54) The EPCGS is a countervailable subsidy as the payment by an exporter
of a reduced or zero rate of duty constitutes a financial contribution bythe GOI, revenue otherwise due is foregone and a benefit is conferredon the recipient by lowering the duties payable or fully exempting him
from paying the import duties.
(55) The subsidy is contingent in law upon export performance within the
meaning of Article 3(4)(a) of the Basic Decision, since it cannot be
obtained without a commitment to export goods, and is therefore
deemed to be specific.
Calculation of the subsidy amount
(56) The benefit to the exporters has been calculated on the basis of the
amount of unpaid customs duty due on imported capital goods by
spreading this amount across a period which reflects the normal
depreciation of such capital goods in the industry of the productconcerned. This period has been established by using the weighted
average (on the basis of production volume of the products concerned)
of depreciation periods for capital goods actually imported under theEPCGS by each company, resulting into a normal depreciation periodof 15,5 years. The amount so calculated which is attributable to the
investigation period has been adjusted by adding interest during the
investigation period in order to establish the full benefit to therecipient under this scheme. Given the nature of this subsidy, which isequivalent to a one-time grant, the commercial interest rate during the
investigation period in India, i.e. 14 % was considered appropriate.
The amount of subsidy has then been allocated over total exportsduring the investigation period.
(57) The GOI and three exporters claimed that any benefit should be
allocated over total company turnover, on the basis that any machineryimported under the EPCG scheme would be used for both export anddomestic production. It is further claimed that the true purpose of the
scheme is to assist Indian companies to update their technology and to
become more competitive on the international market (as well as toprevent a loss of foreign exchange), and that the scheme should not be
considered as an export subsidy. However, this argument is rejected.
As outlined above, in order to avail of the scheme, an undertaking toexport has to be given. Therefore, the subsidy is deemed to becontingent upon export, and, in accordance with paragraph F(b)(I) of
the Calculation Guidelines (
1), the benefit has then been allocated over
export turnover for the investigation period.
(58) Two companies availed themselves of this scheme during the
investigation period and obtained subsidies of between 0,0 % and
0,8 %.
e)Export Processing Zones (EPZ)/Export Oriented Units (EOU)
(59) Another instrument under the Export Import Policy alleged in the
complaint to involve export-related assistance is the EPZ/EOU
scheme, which was introduced on 22 June 1994.
(60) The Commission established that no producer of the product
concerned was established in an EPZ or was an EOU. There is!B
(1) See OJ C 394, 17.12.1998, p. 6.2000S0284 — EN — 05.02.2000 — 000.001 — 9
therefore no need for the Commission to assess this scheme in the
context of the investigation.
f)Income Tax Exemption Scheme (ITES)
(61) The Income Tax Act 1961 is the legal basis under which the ITES
operates. The Act, which is amended yearly by the Finance Act, sets
out the basis for the collection of taxes as well as various
exemptions/deductions which can be claimed. Among the exemptionswhich can be claimed by firms are those covered by Sections 10A, 10Band 80HHC of the Act.
(62) The Commission established that no producer of the product
concerned made a claim under the ITES during the IP . There istherefore no need for the Commission to assess this scheme in the
context of the investigation.
g)Amount of countervailable subsidies
(63) In view of the above, the total amount of countervailable subsidies for
each of the investigated exporters is as follows.
(%)
DEPB
(Pre-Export)DEPB
(Post-Export)EPCGS Total
Essar Steel Ltd 0,0 4,1 0,8 4,9
Steel Authority of India Ltd 0,0 12,3 0,0 12,3
Tata Iron and Steel Co. Ltd 0,0 8,7 0,0 8,7
2. SOUTH AFRICA
a)Introduction
(64) On the basis of the information contained in the complaint and the
replies to the Commission’ s questionnaire, the Commission investi-gated the following alleged subsidy schemes:
— tax holiday for investments in manufacturing
— loans at preferential interest rates— import duty exemption
— assistance with export marketing
— preferential freight and electricity costs— price rebates on exported secondary steel products.
(65) Three programmes, namely the Regional Industrial Development
Programme (RIDP), the Simplified Regional Industrial DevelopmentProgramme (SRIDP), and the General Export Incentive Scheme, were
not investigated. At the time of the opening of the proceeding, the
Government of South Africa (GOSA) had already provided evidenceshowing that these programmes were discontinued between November1996 and July 1997. The Commission, therefore, accepted that the
exporters concerned could have received no benefit from them during
the investigation period.
b)Termination
(66) For those schemes found to be used by the companies under
investigation, it was determined that the cumulative level of benefit
varied from 0,10 % to 0,48 %. As this would represent a de minimis
level of subsidisation in accordance with Article 14(5) of the BasicDecision, the Commission did not need to further analyse thecountervailability of each individual scheme. Instead, the Commission
decided that this proceeding should be terminated in respect of South
Africa without the imposition of duties.!B2000S0284 — EN — 05.02.2000 — 000.001 — 10
3. TAIWAN
a)Introduction
(67) On the basis of the information contained in the complaint and the
replies to the Commission’ s questionnaire, the Commission servicesinvestigated the following alleged subsidy schemes:
— tax credits and exemptions
— accelerated depreciation
— import duty exemption
— matching funds
— tax credit for investment in scant natural resources areas
— loans at preferential interest rates
— subsidies for companies located in industrial parks and export
processing zones.
(68) Further details of these schemes are set out below.
(69) The first six schemes are based on the Statute for Upgrading
Industries. The last scheme is based on the Statute for the Establish-ment and Administration of Science-based Parks and the Statute for
the Establishment and Management of Export Processing Zones.
b)Tax credits for the purchase of automation and pollution
control equipment
Legal basis
(70) The basic instrument involving economic development of the
Taiwanese industry is the Statute for Upgrading Industries (SUI)which entered into force on 1 January 1991 and was last amended on27 January 1995. The Statute is supplemented by the Enforcement
Rules of the Statute for Upgrading Industries as last amended on 27
January 1995. The tax credits are covered by Article 6 of the SUI.Furthermore, the practical implementation of the scheme is regulatedby the Measures Governing the Application of Tax Deductions
promulgated on 15 April 1991 by the Executive Yuan which was last
amended on 27 February 1995.
Eligibility
(71) The tax credits are available to all manufacturing companies. There is
no specific export requirement nor is availability dependent on certain
product types or minimum production quantity or turnover.
(72) However, pursuant to Article 6 of the SUI, tax exemptions are only
granted for the following limited number of investments:
— investment in equipment for automation of production
— investment in equipment for pollution control.
(73) The SUI states that the investment in the equipment should exceed
TWD 600 000 (New Taiwan Dollars). The tax credits for the different
types of investment can be cumulated. The amount of tax credit is
limited to 50 % of the total amount of tax payable in any current year.
Amount of tax credit
(74) Any eligible company which invests in the abovementioned equipment
types may credit 10 % to 20 % of the purchase amount against the
corporate income tax payable for the current year. In case the amountof income tax payable is less than the deductible amount, the benefitmay be carried over during the next four years.
(75) The amount of tax credit is determined as follows.
For the purchase of domestically manufactured automated equipment
or pollution control equipment, the credit rate is 20 %. For the
purchase of foreign made automated or pollution control equipment,!B2000S0284 — EN — 05.02.2000 — 000.001 — 11
the credit rate is 10 %. For the purchase of technology for automation
production, the permissible credit is at the rate of 10 %.
Practical implementation
(76) In order to obtain the tax credits, a company makes an application for
the issuance of a tax deduction certificate to the IndustrialDevelopment Bureau (IDB) of the Ministry of Economic Affairs
within six months of the date of delivery of the equipment or the date
of completion of the project. Prior to issuing the tax deductioncertificate, the local tax authorities will verify whether the equipment
falls within the criteria of Article 6 of the SUI and has effectively been
installed. Once the certificate is issued, the tax credit can be deductedin the tax declaration for the current year (item 95 on the taxdeclaration).
Countervailability
(77) The tax credits under Article 6 of the SUI constitute countervailable
subsidies in the sense of Article 3(4)(b) of the Basic Decision. The tax
credits constitute subsidies which are contingent upon the use ofdomestic over imported goods. Although the programme provides for atax credit for imported as well as domestically produced equipment,
the subsidy is doubled for the purchase of domestic equipment and
therefore, directly provides an incentive for the purchase of Taiwanesemade equipment. The verification revealed that the Taiwanese
authorities tend to favour the purchase of domestically manufactured
equipment over imported machinery by providing for a differentiatedlevel of benefit (20 % for domestic versus 10 % for importedequipment).
(78) The scheme constitutes a subsidy as the financial contribution by the
Government of Taiwan (GOT) in the form of tax credits confers a
benefit upon exporters. It is a subsidy contingent in law upon the use
of domestic over imported goods and is therefore deemed to bespecific under Article 3(4)(b) of the Basic Decision.
(79) For the abovementioned reasons, it is considered that the tax credits
constitute countervailable subsidies.
Calculation of the benefit
(80) The amount of subsidy should be calculated on the basis of the amount
of tax unpaid during the investigation period (the investigation period
in this proceeding corresponds with a tax year in Taiwan i.e. 1 January1998 to 31 December 1998). The total amount of subsidy should beallocated over total sales since this subsidy benefits both domestic and
export sales.
(81) The GOT and one company claim that the Commission should have
calculated the benefit from the subsidy to be the difference betweenthe two rates i.e. 20 % tax credit for domestically purchased equipmentand 10 % for imported equipment. The Commission countervailed the
full amount of tax credits since the tax credit of 20 % for domestically
purchased equipment cannot be considered as a deviation from astandard tax credit rate of 10 %. The two tax credit rates should beconsidered as separate programmes which are both specific for
domestically purchased equipment and imported equipment respect-
ively. In the absence of the 20 % tax credit for domestically-producedequipment, a company would have received no tax credit, since the
10 % rate only applies to imported machinery; it is not a general rate.
Therefore, the Commission concluded that the amount of the subsidyis the total revenue foregone by the GOT.
(82) One company benefited from this scheme and obtained a benefit of
2,19 %.
c)Tax credits for investment in certain enterprises
Eligibility
(83) Pursuant to Article 8 of the SUI, the tax credit is available to any
investor which buys registered stocks issued by an important!B2000S0284 — EN — 05.02.2000 — 000.001 — 12
technology-based enterprise or an important invested enterprise
designated by the government (invested company). The investingcompany should hold the registered stocks for a period of at least twoyears. There is no precise definition of important technology-based
enterprise. An important invested enterprise may be any enterprise
with a capital of TWD 2 billion providing it has been designated assuch by the GOT.
Amount of tax credit
(84) Any eligible company which invested in the abovementioned enter-
prises may credit 20 % of the price paid for the acquisition of such
stocks against the corporate income tax payable.
Practical implementation
(85) In order to obtain the tax credits, the ‘invested’ company (i.e. the
company in which the investment is made) makes an application forthe issuance of a tax deduction certificate to IDB. Prior to issuing the
tax certificate, IDB will verify whether the company qualifies as a
technology-based enterprise or whether the invested enterprise wasdesignated as an important invested company by the governmentauthorities. Once the certificate is issued to the invested company, the
investor may claim the tax credit which can be deducted in the tax
declaration for the current year (item 95 on the tax declaration).
Countervailability
(86) The tax credits under Article 8 SUI constitute countervailable
subsidies in the sense of Article 3(2)(a) of the Basic Decision. The
GOT has limited access to the subsidy to enterprises which make a
specific investment. The verification revealed that the Taiwaneseauthorities in effect favour investment in certain sectors and enter-prises.
(87) The scheme constitutes a subsidy as the financial contribution by the
GOT in the form of tax credits confers a benefit to exporters. It is a
subsidy which is specific to certain enterprises in Taiwan pursuant toArticle 3(2)(a) of the Basic Decision.
(88) The GOT claims that this programme does not constitute a subsidy
since there is no financial contribution to invested companies. This is
not correct. As explained above, a company which invests in certain
enterprises obtains a tax credit for 20 % of the amount invested. A taxcredit clearly constitutes a financial contribution by the GOT, i.e.revenue foregone in the sense of Article 2(1)(a)(ii) of the Basic
Decision and a benefit is thereby conferred to the investing company.
(89) The GOT and one company claim that this programme is generally
available and therefore non-specific, as it is open to all companies
investing in certain enterprises. The Commission, however, found thatthe access to this programme is explicitly limited to companies which
invest in certain enterprises, since not all investments in stocks are
eligible for tax credits. Only investments in a limited number ofenterprises, i.e. important technology-based or important investedenterprises will qualify for a tax credit. The Commission agrees with
the GOT that the definition of the eligible enterprises, is clear and
objective. However, the definition is not neutral or horizontal onapplication, as required by Article 3(2)(b) of the Basic Decision, sinceit limits the number of investments which may result in a tax credit, on
the basis of the activity of the firms concerned. If the investing
enterprise wishes to obtain the subsidy, its freedom of choice isrestricted on a sector-specific basis. Article 2 of the Criteria for
determining the scope of major technology enterprises with respect to
manufacturing industry and technical-service industry limits the taxcredit to 11 specific type of investments. Consequently, the access tothis programme is dependent upon making investment in certain
enterprises; it is not generally available and is therefore countervail-
able under Article 3(2)(a) of the Basic Decision.
(90) For the abovementioned reasons, it is considered that the tax credits
constitute countervailable subsidies.!B2000S0284 — EN — 05.02.2000 — 000.001 — 13
Calculation of the benefit
(91) The benefit to the exporters should be calculated on the basis of the tax
credit that was effectively granted to the exporters during theinvestigation period. The amount of benefit should be allocated overthe total turnover of the company during the investigation period.
(92) One company benefited from this scheme and obtained a benefit of
1,34 %.
d)Tax credits for R & D and personnel training
Legal basis
(93) The tax credits for R & D and personnel training are covered by Article
6 of the SUI. Furthermore, the practical implementation of the scheme
is regulated by the Measures governing the application of taxdeduction for company investment in R & D, personnel training andestablishing a world-wide brand image (hereinafter referred to as ‘the
Measures’) promulgated on 15 April 1991 by the Executive Yuan
which was last amended on 28 May 1997.
Eligibility
(94) The tax credits are available to all manufacturing industries as well as
agriculture and services. There is no specific export requirement nor is
availability depending on certain product types or minimum
production quantity or turnover.
Amount of tax credit
(95) As regards investments in R & D, if the total expenditure for R & D
reaches TWD 2 000 000 or 2 % of the net business revenue in the
same taxable year, 15 % thereof may be deducted from the corporate
income tax payable for that year. If the total expenditure reaches TWD2 000 000 and exceeds 3 % of the net business revenue, 20 % of theexceeding amount may be deducted from the corporate income tax.
(96) Pursuant to Article 6 of the Measures, if the total expenditure invested
by a company in personnel training reaches TWD 600 000 in the taxyear, 15 % of the investment may be deducted from the corporate
income tax payable.
(97) For both types of tax credit, if the amount of corporate income tax for
the current year is less than the deductible amount, the benefit may becarried over during the next four years.
Practical implementation
(98) In order to obtain the tax credits, a company attaches a special
application to the corporate income tax return. The local taxauthorities will verify whether the expenses fall within the criteria ofArticle 6 of the SUI and Articles 2 and 3 of the Measures and will
determine the amount which can be deducted. Once the local tax
authorities approve the amount, the tax credit can be deducted in thetax declaration for the current fiscal year.
Countervailability
(99) The tax credits for R & D and personnel training under Article 6 of the
SUI do not constitute countervailable subsidies. The tax credits are
generally available for all manufacturing, agricultural and serviceindustries investing in R & D and personnel training. Furthermore, theeligible expenses are described in detail in Article 2 (R & D) and
Article 3 (personnel training) of the Measures, and the eligible
activities are of a type which may be undertaken by firms in all sectorsof the industry. There is no discretion for the tax authorities to
determine which investment is eligible or not. Finally, the verification
revealed that the tax credits have in fact been used by all sectors ofindustry.!B2000S0284 — EN — 05.02.2000 — 000.001 — 14
e)Other tax credits
(100) The following tax credits and exemptions were found to exist but not to
have been used by the exporting producers of the product concerned:
— tax credit for the establishment of internationally recognised
brands,
— five year tax exemption for certain designated enterprises under
Article 8 of the SUI,
— five year corporate tax exemption under Articles 15 and 17 of the
Statute for the Establishment and Administration of a Science-
based park.
(101) Since it was found that these programmes were not used, the
countervailability of the credits has not been examined.
f)Accelerated depreciation
Eligibility
(102) Article 5 of the SUI provides for the acceleration of depreciation if a
manufacturing company invests in certain types of fixed assets. The
eligible fixed assets are equipment for use in R & D, inspection of pilot
products, energy saving or alternative energy purposes.
Practical implementation
(103) A company which has invested in eligible equipment has to make an
application to IDB or the Energy Commission which includes a
description of the machinery and a copy of the catalogue for the
machinery. IDB or the Energy Commission verifies whether themachinery is eligible and issues a certificate. When the corporateincome tax return is filed with the tax authorities, the company submits
the certificate(s) and a list of all items which were approved for
accelerated depreciation. The local tax authorities will verify againwhether the machinery falls within the criteria of Article 5 of the SUIand whether the accelerated depreciation has been applied correctly.
Amount of benefit
(104) Pursuant to Article 51 of the Tax Code, a company can use three
methods to depreciate its assets: the straight-line method, the fixed
percentage on diminishing book-value method or the working-hourmethod. The verification revealed that all exporting producers of the
products concerned used the straight-line depreciation method which
provides for the depreciation of a fixed amount during the service lifeof the equipment. According to the Table of Service Life of FixedAssets, each type of machinery has a fixed service life of between two
and fifty years. For the machinery used in the steel industry, the
depreciation period is seven years on average.
(105) The benefit under the accelerated depreciation provisions consists of a
reduced depreciation period of two years instead of the normaldepreciation period (i.e. seven years on average in the steel industry)
established in the Table of Service Life of Fixed Assets.
Countervailability
(106) The accelerated depreciation provisions under Article 5 of the SUI
constitute a countervailable subsidy. The verification revealed thatdespite the apparently objective criteria set out in Article 5 of the SUI,one company used the provisions for accelerated depreciation to
depreciate all machinery and equipment in a new production line as
well as buildings. This machinery is used for the production of steelproducts and has no direct effect on R & D, pilot products or energysaving. The Energy Commission and the local tax authorities approved
this request. It appears that these investments do not fall within the
criteria of Article 5 of the SUI, i.e. equipment used for energy saving,pilot products or investments in R & D. Therefore, it should beconcluded that the granting authority has discretion in the decision to
grant the benefit of accelerated depreciation, and is able to favour
certain enterprises over others.!B2000S0284 — EN — 05.02.2000 — 000.001 — 15
(107) After disclosure, the GOT claims that the certificate for accelerated
depreciation was granted by the Energy Commission and not IDB.After verification, the Commission services agree with the GOT thatthe certificate was granted by the Energy Commission for the alleged
purchase of energy saving equipment. Nevertheless, the Commission
still has to conclude that the subsidy involved is countervailable in thesense of Article 3(2)(a) of the Basic Decision, since the criteria appearnot to be adhered to by the granting authority in all cases and access to
the subsidy is therefore effectively limited, by means of discretion, to
certain enterprises. The company which made use of this programmeaccelerated its depreciation on a large number of items which can
clearly not be classified as energy savings equipment, such as
buildings. Therefore, the Commission concludes that this programmeconfers a benefit to the product concerned and is countervailable.
(108) One company submits that although it applied the accelerated
depreciation, it did not benefit from the programme since its overall
depreciation amount under accelerated depreciation was less duringthe POI than would have been the case under the normal depreciation
method. In establishing whether a benefit was conferred to this
company, the Commission, in accordance with its normal methodo-logy, took into account only the tax saving incurred by all items whichwere still being depreciated during the POI, comparing the amounts
depreciated under the normal and accelerated schedules. All items
which were, according to the accounts of the company, already fullywritten off and have under standard accountancy principles no value,were excluded from the calculation of the benefit. Therefore, the
company’ s argument is not founded.
(109) It is considered therefore, that the benefit of accelerated depreciation
constitutes a specific and consequently countervailable subsidy in the
sense of Article 3(2)(a) of the Basic Decision.
Calculation of the benefit
(110) As explained above, the benefit to the exporters should be calculated
as the difference between the amount of tax that would have beenpayable in the investigation period if the normal depreciation rate was
used and the amount of tax effectively paid under accelerated
depreciation. The calculation of the difference was made on the basisof all fixed assets (buildings and machinery) which were still beingdepreciated in the investigation period. The amount of benefit should
be allocated over the total turnover of the company.
(111) One company made use of this programme and obtained a benefit of
0,60 %.
g)Import duty exemption
Legal basis
(112) Chapters 84, 85 and 90 of the Customs Import Tariff and Classification
of Import and Export Commodities of the Republic of China
(hereinafter ‘the Customs Code’).
Eligibility
(113) Pursuant to the abovementioned provisions of the Customs Code, a
manufacturing company which imports machinery for the devel-opment of new products, quality upgrading, increase of production,
achievement of energy conservation, promotion of recycling or
improvement of production techniques, which is not yet beingmanufactured locally, is exempt from import duties.
Practical implementation
(114) A company which intends to import machinery or equipment makes an
application to IDB prior to the importation of the machinery. If IDB is
satisfied that the machinery is not produced in Taiwan, it will issue acertificate which is sent to the applicant and the customs department.The customs services will verify whether the imported machinery is
identical to the machinery described in the IDB certificate. This
verification is undertaken on a random basis.!B2000S0284 — EN — 05.02.2000 — 000.001 — 16
Amount of duty exemption
(115) The amount of subsidy is the amount of import duties which would
normally be payable without the benefit of the exemption. The normalduty rate for machinery lies between 2 % and 20 %.
Conclusion
(116) The import duty exemption pursuant to the Customs Code constitutes a
countervailable subsidy. Due to the nature of the subsidy, theprogramme as established will automatically be disproportionatelyused by certain industry sectors. The industry sectors whose machinery
is produced in Taiwan will not be eligible to use this programme.
Consequently, eligibility for the import duty exemption is limited toindustries which are obliged to import machinery since the machineryis not available on the local market. Industries which import machinery
which is also produced in Taiwan cannot obtain the benefit.
(117) The GOT claims that the import duty exemption for imported
machinery does not constitute a subsidy in the sense of Article 2(1)(a)
of the Basic Decision. However, for the Commission, it is clear that an
exemption from import duties constitutes revenue foregone for theGOT whereby a benefit is conferred to the importer of the machinery.
This constitutes a subsidy in the sense of Article 2(1)(a)(ii) of the
Basic Decision. The GOT further claims that if the programme was asubsidy, it is not countervailable under Article 3(2)(a) of the BasicDecision. The Commission is of the view that an import duty
exemption for certain imported machinery which is not produced
domestically provides by definition for a benefit to certain companieswhich are active in an industry where the machinery is not made inTaiwan. If the GOT were to decide to abolish the import duty on such
machines, this would be a different matter. However, as long as the
duty is ‘otherwise due’ and firms are exempted from it, this is asubsidy under Article 2(1)(a)(ii).
(118) One company claims that this programme is outside the scope of the
investigation since the programme was not specifically mentioned inthe complaint which led to the initiation of the investigation. The
Commission notes that the complainant listed the import duty
exemption for machinery and equipment in the complaint (page 9Section B.2.2.2). Although the complainant stated that such aprogramme is available for companies located in tax exempt zones,
science-based industrial parks or bonded factories, the Commission
considers that this information constitutes sufficient evidence tocommence an investigation regarding import duty exemption formachinery. Furthermore, it is the role of the investigating authority to
determine the correct legal basis and practical implementation of any
programme which is alleged in the complaint. For these reasons, theCommission has included this programme in the investigation and the
claim of the exporter cannot be accepted.
(119) Therefore, it is considered that the import duty exemption on
machinery constitutes a countervailable subsidy in the sense of Article
3(2)(a) of the Basic Decision.
Calculation of the benefit
(120) The benefit to the exporters should be calculated as the amount of
import duties payable without the benefit of the exemption under thisscheme. This amount should be allocated over the normal service life
of the machinery in this industry, i.e. seven years.
(121) Two companies made use of this programme and obtained benefits of
0,27 % and 0,32 %.
h)Other subsidies
(122) The complainant alleged that the exporting producers of the product
concerned benefited from a number of other subsidy programmes. Thequestionnaire response and the verification visits at the GOT and at the
exporters revealed that the programmes listed below were not used by
the exporting producers.!B2000S0284 — EN — 05.02.2000 — 000.001 — 17
(123) Loans at preferential interest rates. During the verification visits, it was
established that loans were provided by the Chiao Tung Bank and theMedium Business Bank of Taiwan to one exporter but at normalcommercial conditions.
(124) Benefits for companies in export processing zones (EPZ) and
industrial parks. None of the companies under investigation (nor theirrelated companies) were located in an EPZ or industrial park.
(125) Benefits for companies located in areas with slow development or with
scant natural resources. The verification revealed that none of the
companies was located in an area with slow development or scantnatural resources.
(126) No ‘matching funds’ were provided to the companies concerned.
Import duty exemption for raw materials — It was established that
none of the exporters concerned obtained benefits under thisprogramme.
i)Total amount of subsidy
(127) The amount of subsidy was calculated according to the methodology
set out above. In addition, in order to encompass the full benefit to thecompanies concerned, interest was added at the average commercialinterest rate in Taiwan during the investigation period, i.e. 8 %.
(128) One exporter claims that the addition of an interest amount results in
an overestimating of the subsidy amount. In regard to this claim, theinterest element is added in order to reflect the benefit to the recipientobtained by not having to raise an equivalent amount of money from
commercial sources. Indeed, Article 6 of the Basic Decision makes it
clear that the benchmark for the calculation of the subsidy is theequivalent cost of funds on the commercial market. It should also bestated that the ASCM does not preclude the addition of an amount for
interest for the purpose of calculating the total amount of benefit to a
recipient under a subsidy scheme. Thus, the Community’s consistentpractice in this area since the adoption of revised legislation following
the conclusion of the Uruguay Round, has been to add an amount for
interest in calculating the total benefit in such cases. This claim shouldtherefore be rejected.
(129) The following subsidy rates for the cooperating companies were
established:
(%)
China Steel Corpora-
tionYieh Loong Enterprise
Co. Ltd
Tax credit (automation and pollution control
equipment)2,19 0
Tax credit (investment in certain enterprises) 1,34 0
Accelerated depreciation 0,60 0Import duty exemption 0,27 0,32
Total amount of subsidy 4,40 0,32
(130) For information, it should be noted that the weighted average
country-wide subsidy margin for the two exporting producersinvestigated, which account for about half of the exports to theCommunity originating in Taiwan, expressed as a percentage of the cif
price at Community frontier level is 2,77 %. which is significantly
above the de minimis threshold for Taiwan (i.e. 1 %). In addition, it
cannot be excluded that the country-wide margin would be highertaking into account possible benefits received by non-cooperators.
D. COMMUNITY INDUSTRY
1.Determination of the relevant Community market
(131) For the purposes of establishing whether the Community industry had
suffered injury and, in this context, for determining consumption and!B2000S0284 — EN — 05.02.2000 — 000.001 — 18
the various economic indicators related to the situation of the
Community industry, it had to be examined whether production ofthis industry destined for the captive market should be excluded for thepurposes of this analysis or whether injury and consumption should be
assessed in relation to the entire production of the Community
industry.
(132) There are 16 producers of hot-rolled coils in the Community. Around
70 % of the hot-rolled coils manufactured by these producers are usedin a captive market, i.e. they are further transformed by these
producers in an integrated process (hereinafter referred to as ‘captive
market’). These hot-rolled coils follow an internal process of transfersto downstream processing works, for which no invoices are issued
since the transfers occur within the same legal entity. The remaining
production (hereinafter referred to as ‘free market’) is sold to bothrelated and unrelated parties.
(133) In this respect, the complainant claimed that two separate markets
should be distinguished. It claimed that the hot-rolled coils destined for
a captive market were not in direct competition with subsidised
imports. Consequently, the imports subject to investigation could notaffect this market. In parallel, the complainant has claimed that theremaining production was sold on the free market where competition
with subsidised imports takes place. The main purchasers on the free
market are independent cold-rolling mills such as tube makers, steelservice centres (hereinafter referred to as ‘SSCs’), steel merchants andstockholders. Only the hot-rolled coils sold on the free market are
subject to the complaint.
(134) Exporting producers and importers of hot-rolled coils onto the
Community market claimed that the definition of the productconcerned and the like product covered all hot-rolled coils. They
claimed in particular that there was no clear separation between the
captive and free markets and that the definition of the free marketmade by the complainant was arbitrary. They therefore requested thatthe assessment of the Community market should include the captive
market and the free market taken together.
(135) In support of this claim, reference was made to the Gimelec
judgment (
1) of the European Court of Justice. They stated that in
the abovementioned ruling, the Court referred to the following factorsto rule out the existence of two separate markets:
— the product concerned was sold on the same market and used for
the same purposes,
— the Community producers sold the product concerned both to
related and unrelated customers and charged more or less the sameprice,
— companies on the downstream market used to buy the product
concerned not only from related Community suppliers but also
from importers or other unrelated producers.
(136) Some exporting producers claimed that, in the light of the above
judgement, the legal conditions to separate the markets were not met inthe present case. They considered that Community producers couldchoose, depending on market conditions, to sell alternatively to the
free and captive markets since Community production of the two
categories of hot-rolled coils is alike. It was claimed that the allegedmovements between the two segments of the market legally preventedthe exclusion of part of Community production from the examination
of injury, and in particular from Community consumption.
(137) In this respect the Commission made the following findings:
(a) given the high level of integration existing in the steel industry in
general and in the production of the product concerned inparticular, the Community producers of the product concerned
merely physically transferred, without invoicing, hot-rolled coils
intended for the captive market. No invoices were issued since theparties involved did not have separate legal identities. As a result,there were, within the captive market, no prices for transfers
comparable to those in the free market.!B
(1) Case C-315-90 of 27.11.1991.2000S0284 — EN — 05.02.2000 — 000.001 — 19
(b) the Community industry did not produce for stockpiling hot-rolled
coils which could subsequently be delivered either for captive useor sold on the free market. This is because all users of hot-rolledcoils, including the integrated processes of the Community
industry, have technical constraints for the production of down-
stream products. As a result, movements, if any, of hot-rolled coilsbetween the two markets are insignificant.
(c) the investigation showed that the Community producers did not
purchase the product concerned for the captive market from
independent parties inside or outside of the Community. As aresult hot-rolled coils intended for the captive market were not incompetition with other hot-rolled coils available in the Commu-
nity. Consequently, the captive market can clearly be distinguished
from the free market.
(138) On this basis the Commission considers that the separation between
the free and the captive market is fully in line with the requirements of
the Basic Decision and the Community institutions’ past practice.
(139) For the purposes of establishing the economic indicators relevant for
the injury analysis such as development of sales, profitability, etc., theCommission considered whether sales from Community producers to
related parties having separate legal entities, should in general be
included in the determination of the free market. It was found that suchsales were made at prices more or less the same as those charged to
independent parties. In addition, in line with claims by certain
exporting producers the investigation has confirmed that these relatedparties are free to source their purchases from either related orunrelated suppliers in or outside the Community. Consequently, it was
concluded that sales from Community producers to related parties
having separate legal entities were in competition with sales fromindependent suppliers such as those located in the countries concernedand that these sales should therefore be included in the determination
of sales in the free market.
(140) One Community producer claimed, however, that its sales to related
parties should be considered as belonging to the captive market. It wasargued that the prices invoiced to its related parties were not the market
prices and were significantly different from those applied to indepen-
dent customers. The producer added that the parent company did notallow any related parties to purchase hot-rolled coils from independentparties on the free market. Consequently, hot-rolled coils sold to
related parties were not affected by any direct competition from other
hot-rolled coils. They should therefore be excluded from thedetermination of the free market.
(141) The investigation confirmed that the policy of that group was not to
allow its related parties to purchase hot-rolled coils on the free market.
Furthermore, the analysis of sales prices showed that the pricesinvoiced to these related parties were in many instances significantly
different from market prices charged to independent parties. Moreover,
all the sales were made to related users who used the productscaptively without reselling them onwards, as such. Consequently, theCommission concluded that the sales of the hot-rolled coils concerned
could not be considered as being sold on the free market and should
therefore not be included in the determination of the free market.
(142) In conclusion, hot-rolled coils used by Community producers as
pre-material for further transformation in an integrated process within
one single legal entity were considered to be part of a captive market.
The same applies to sales by the aforementioned Community producerwho could demonstrate that its sales to a related customer did indeedbelong to a captive market. All other sales of the producers in the
Community were considered to be part of the free market.
Consequently, the situation of the Community industry in terms ofthe development of the various economic indicators such asproduction, sales, market share and profitability was examined with
respect to the free market.
(143) It should be noted that the above findings regarding the separation and
the determination of the above markets are reflected in the datacollected in the framework of the ECSC Treaty, in particular for the
surveillance of the steel markets. Indeed, such data differentiates the
use of the hot-rolled coils basically along the same lines.!B2000S0284 — EN — 05.02.2000 — 000.001 — 20
2.Definition of the Community industry
a)Total Community production
(144) Several exporting producers claimed that a number of producers in the
Community should be excluded from the definition of Communityproduction given that they had imported hot-rolled coils from thecountries concerned.
(145) The Commission found that none of the producers investigated had
imported hot-rolled coils from the countries concerned during the
period examined. However, certain SSCs and tube producers related to
these Community producers had made such imports during that period.
(146) In line with the findings on the definition of the relevant Community
markets outlined in recitals 131 to 143, the investigation confirmed,
however, that these related parties had acted independently from theproducers related to them in their operations on the free market.Consequently, the purchases could not affect the status of the said
companies as Community producers of the product concerned.
(147) Accordingly, it was considered that there were no grounds for
excluding any producers from the definition of Community production
of hot-rolled coils. In accordance with Article 9(1) of the BasicDecision all 16 producers operating in the Community marketrepresent total Community production.
b)Community industry
(148) The complaint was lodged on behalf of 11 out of the 16 Community
producers of hot-rolled coils while the remaining 5 supported the
complaint.
(149) The Commission received 10 replies to questionnaires from the
complainant Community producers. One small producer decided not to
provide the Commission with a response.
(150) Two of the 10 Community producers that replied to the Commission’ s
questionnaire, were unable to provide all data requested during the
investigation in a format which would allow its aggregation with thedata available for the other Community producers.
(151) Some exporting producers claimed that at least one Community
producer included in the definition of the Community industry set outabove received preferential treatment in relation to the requirements
imposed on interested parties during anti-subsidy investigations. In
particular they argued that the said Community producer did notprovide the Commission with a reply to its questionnaire within thestatutory deadlines for the imposition of provisional duties. They
considered that this constitutes discriminatory treatment and violates
Article 11(2) of the Basic Decision.
(152) It should be noted that all the Community producers included in the
definition of the Community industry replied to the Commission’ squestionnaire within the deadlines set forth in the Basic Decision andtherefore within the deadline for the imposition of provisional
measures. The Commission considers that all interested parties in
the present proceeding in similar situation were given equal treatment.Consequently, any claims suggesting an infringement to Article 11(2)of the Basic Decision and discriminatory treatment by the Commission
are not founded.
(153) In conclusion, the eight Community producers having fully cooperated
in the investigation make up the Community industry for the purposes
of this proceeding. They fulfil the requirement of Article 10(7) of theBasic Decision, since during the investigation period they accountedfor around 65 % of the total Community production of the product
concerned.
(154) These producers are accordingly considered as the Community
industry and are referred to as such hereinafter as they represent a
major proportion of total Community production within the meaning
of Article 9(1) of the Basic Decision.!B2000S0284 — EN — 05.02.2000 — 000.001 — 21
E.INJURY
1.Apparent consumption
(155) Apparent consumption of hot-rolled coils in the Community was
established on the basis of the total sales made by the 16 Community
producers on the free market and total imports of the product
concerned into the Community as indicated in the Eurostat importstatistics and the exporting producers’ replies to the questionnaires.
(156) From 1995 up to the investigation period, apparent consumption in the
Community increased by 9 %, namely from 18,4 million tonnes to 20,1
million tonnes. In 1995 the free market was characterised byexceptionally high sales prices and good demand, particularly forCommunity-produced hot-rolled coils. The following year, however,
the volume of the market decreased by 11 %.
(157) Between 1996 and the investigation period, apparent consumption
increased steadily. The main growth occurred between 1996 and 1997when the market increased by 22 %. Between 1997 and the
investigation period, it increased by only 0,4 %.
2.Imports from the countries concerned
a)Negligible imports
(158) Based on the provisions of Article 10(10) of the Basic Decision, the
assessment of whether or not imports were negligible was made in
relation to apparent consumption of the product concerned on theCommunity market.
(159) On the basis of Eurostat statistics imports from India were slightly
above the 1 % threshold foreseen in Article 10(10) of the Basic
Decision. Exporting producers in India claimed that their imports werenegligible and that they should be excluded from the scope of theinvestigation. Since India is a developing country, the Commission
also examined in accordance with Article 14(4) of the Basic Decision,
whether imports from India represented less than 4 % of total imports,thede minimis threshold for developing countries. In fact, imports
from India represent 5,4 % of total imports.
(160) In this respect it should be noted that the evidence submitted by the
Indian exporting producers provided no grounds for considering theirimports into the Community as negligible, in particular given themethodology used to determine the relevant Community market set out
in recitals (131) to (143). Indeed, the relevant Eurostat information and
the replies to the Commission’ s questionnaire did not show importsbelow the de minimis threshold Consequently, the imports from India
were considered to be above the de minimis threshold set out in
Articles 10(10) and 14(4) of the Basic Decision.
b)Cumulative assessment of imports
(161) The Commission considered whether imports of hot-rolled coils
originating in India and Taiwan should be assessed cumulatively inaccordance with Article 8(4) of the Basic Decision.
(162) It was therefore examined whether all criteria were met to cumulate
imports from the countries concerned. The results of the examination
showed that:
— the margin of subsidy relating to each country, as shown above,
was more than de minimis ,
— the volume of imports from each country was not negligible when
compared to Community consumption,
— the analysis of the conditions of competition between imported
hot-rolled coils and the conditions of competition betweenimported hot-rolled coils and the like Community product also
indicated that imports from the countries concerned should be
cumulated. Indeed, the exporting countries concerned mainly soldhotrolled coils on the free Community market directly to unrelatedcustomers, such as cold rolling mills, tube makers, SSCs and steel
merchants. Hot-rolled coils were also imported via related sales
companies, which subsequently sold the product concerned to the!B2000S0284 — EN — 05.02.2000 — 000.001 — 22
same categories of customers mentioned above. The investigation
showed that the Community industry was selling the like productthrough the same sales channels and to the same categories ofcustomers. Finally, it was found that a similar pricing policy was
followed for all these sales.
(163) Accordingly, contrary to the suggestion made by some exporting
producers, the Commission concluded that all conditions justifying the
cumulation of the imports from the abovementioned countries weremet.
c)Volume of the imports concerned
(164) Based on Eurostat import statistics, between 1995 and the investigation
period, the volume of imports into the Community from the countries
concerned increased from 8 000 tonnes to 844 000 tonnes. The mainincrease occurred between 1997 and the investigation period (+797 000 tonnes).
(165) The analysis of the developments during the investigation period
indicated that imports from all the countries concerned were made
mainly during the first half of the investigation period (551 000
tonnes); they subsequently dropped by 47 % in the second half ofthe investigation period but were still significantly higher than in the
second half of 1997.
(166) As already mentioned in recital 11, the various types of hot-rolled coils
are commonly classified into two distinct categories: black coils and
pickled coils. The investigation showed that black coils covered around90 % of all hot-rolled coils imported from the countries concerned.
d)Market share of imports
(167) The market share held by the exporting producers increased from
0,01 % to 4,2 % between 1995 and the investigation period. The actual
increases in import volume thus allowed the countries concerned to
gain 4,2 percentage points of the share of the Community market.
(168) The main increases in market share occurred between 1997 and the
investigation period, when the countries concerned gained 4 per-centage points market share.
e)Price undercutting
(169) In order to evaluate any possible price undercutting, prices of
comparable types of hot-rolled coils were, as far as possible, compared
under similar sales conditions on the Community market, in the sameMember State and to the same customers. The prices of the exporting
producer free-at-Community-frontier were compared with the Com-
munity industry’s ex-factory prices. Where necessary, exportingcountries’ sales prices were adjusted to a free at Community-frontierlevel, customs duty paid and including relevant import costs. Similarly,
these prices were also adjusted to ensure comparison at the same level
of trade as that of the Community industry. All adjustments were basedon the evidence collected and verified by the Commission during theinvestigation.
(170) As already mentioned in recital 14 some exporting producers
suggested that the hot-rolled coils they produced and sold on the
Community market were not of a comparable quality to that of the
Community industry.
(171) The Commission found that, in general, a price adjustment for
differences in quality was not justified, particularly as such differenceswere not apparent to users, and as it emerged from the investigation
that any alleged difference in quality does not necessarily affect the use
of the product concerned.
(172) Accordingly, the results of the price comparison expressed as a
percentage of Community industry prices are as follows:
— India: 6,7 %
— ESSAR: 6,1 %
— Tata: 6,1 %!B2000S0284 — EN — 05.02.2000 — 000.001 — 23
— SAIL: 19,1 %
— Taiwan: 4,3 %
— Yieh Long: 3,9 %— CSC: 7,5 %
3.Situation of the Community industry between 1995 and
investigation period
a)Production
(173) The investigation showed that Community industry’ s production
peaked at 12,5 million tonnes in 1997. For the remainder of the
period examined the Community industry’ s production remained stableat around 11,4 million tonnes although a fall in consumption wasobserved in 1996. It should be noted that this production was either
sold on the free market or exported to third countries.
(174) As the production capacity of the Community industry is used for
hot-rolled coils intended for both the free and the captive market, itwas also considered necessary to analyse information on such captive
production in order to ascertain that any drop in the production
intended for the free market was not due to an increased need for thecaptive market.
(175) It was found that between 1995 and the investigation period, this
production increased by 2 %, or by around 0,6 million tonnes. This
indicated a relatively stable captive production. As regards the trends
in captive production between 1997 and the investigation period, thesewere similar to those observed above for the production intended for
the free market.
(176) Consequently, the decrease in production intended for the free market
is not due to a greater need for captive production.
b)Capacity and capacity utilisation
(177) It is to be noted that production facilities can be used for products
destined for both the free and the captive markets, as well as for otherproducts not concerned by this proceeding (including other steelgrades and other steel products). Capacity utilisation related to the
product concerned has therefore been established on the basis of the
capacities officially declared to the Commission within the frameworkof the ECSC Treaty. These capacities are established according tospecific parameters and must not be confused with the gross or
nameplate capacity. The gross or nameplate capacity is the highest
possible capacity achievable without taking into account factors suchas the personnel available, holiday periods, set-up times, maintenance,
etc.
(178) The capacity utilisation rate of the Community industry was 87 %
between 1995 and the investigation period, except in 1997 when theCommunity industry’ s production was at its peak and the rate reached93 %. At that time, both the consumption of hot-rolled coils destined
for the free market and those destined for the captive market were
high.
(179) The high utilisation rates were found to be normal bearing in mind that
in heavy industry, particularly in the steel industry, high capacityutilisation is necessary to reduce the impact of the high fixed costs of
production.
c)Orders received and sales volume
i) Orders received
(180) In order to complement the analysis on sales, the development of the
orders received by the Community industry was examined. For this
purpose, the Community industry submitted data which is also
available under the framework of the surveillance of the Communitysteel market under the ECSC Treaty. Although these data do not reflectexactly the situation with respect to the product concerned but
encompassed a slightly broader category of products, it was found that
this aggregation of data could be considered representative for the!B2000S0284 — EN — 05.02.2000 — 000.001 — 24
situation of the product concerned. These data showed that 1997 was a
year were the level of orders was high as compared to the situationfound during the investigation period. Contrary to the stabledevelopment of the apparent consumption between 1997 and the
investigation period shown above, orders received by the Community
industry declined by 17 % between 1997 and the investigation period.
(181) The above finding suggests that the economic activity of the
Community industry was more regular and evenly spread throughout
the year 1997 when the volume of orders received developed more in
line with sales volume. Furthermore, given the existence of a time lagbetween orders and deliveries, the reduction in the orders received
indicated a reduction of the level of the economic activity, which will
be examined below.
ii) Sales
(182) During the period examined, the volume of sales slightly increased
from 9,6 million tonnes to 9,7 million tonnes, an increase of 1 %.
(183) Within that period, the trend in sales volume broadly reflected the
evolution of consumption. However, between 1997 and the investi-
gation period, the Community industry’ s sales decreased by 12 % whileconsumption increased slightly.
(184) The Community industry submitted that the injury indicator concern-
ing sales set out above has been established on the basis of transactions
delivered and invoiced during the periods specified. In this context, itis important to point out, that the Community industry has organisedits production process in such a way that users’ orders made on a given
date are delivered and invoiced and thus sold to them, with a time lag
of at least three months. Therefore, in order to make a meaningfulassessment of the development, which occurred during any given
period, not only the actual sales but also the orders received during
such a period have to be analysed. It is considered that anydevelopment observed with respect to these orders is bound totranslate into corresponding developments of sales with a time lag
thereafter.
iii) Differentiation of type of sales
(185) The Community industry argued that in order to assess the actual
injury it suffered, the development of sales for different types ofhot-rolled coils under investigation, namely black coils as compared to
pickled coils, should be analysed separately. The claim was that given
the high share of subsidised imported black coils in total imports, thedevelopment of the Community industry’sales volume and sales pricesfor that type of coils would indicate a particularly injurious situation.
(186) Investigation of this particular issue showed that from 1995 up to the
investigation period (1998), the volume of black coils sold by theCommunity industry on the free market decreased by 13 %, whereasthe volume of pickled coils sold increased by 34 %. In absolute terms,
this represents a decrease of around 1 million tonnes in sales of black
coils and an increase of around 0,5 million tonnes in sales of pickledcoils.
(187) It also confirmed that the share between the sales of black coils and
pickled coils for the Community industry was more balanced than that
of the exporting producers. From 1995 up to 1997 the share in salesvolume was 70 % of black coils against 30 % of sales of pickled coils.
During the investigation period this share became 60 % and 40 %
respectively for black and pickled coils. This development in totalsales clearly shows that during the investigation period a shift occurredfrom black to pickled coils, i.e. from a category of products where
imports where more present to one were they where less prominent.
d)Price evolution
(188) During the period examined the Community industry’ s weighted
average sales price decreased by 10 %. In 1995 sales prices were attheir highest for ten years. They continued to follow a decreasing trenduntil 1997 (- 17 % and - 3 % compared to 1995 and 1996 respectively)
but recovered from 1997 up to the end of the investigation period (+
9 %).!B2000S0284 — EN — 05.02.2000 — 000.001 — 25
e)Market share
(189) From 1995 up to the investigation period, the market share held by the
Community industry decreased by 3,7 percentage points, dropping
from 52,0 % in 1995 to 48,3 % in the investigation period.
(190) Between 1995 and 1996 and between 1996 and 1997 the market share
held by the Community industry increased by 1,1 and 1,8 percentagepoints respectively.
(191) Between 1997 and the investigation period, however, the Community
industry lost all the market share previously gained and fell to a lower
level than that in 1995. The losses amounted to 6,6 percentage points.Further analysis of this situation indicated that market share was lostdue to a decrease in sales both to related and unrelated customers on
the Community free market.
f)Profitability
(192) The average return on sales made by the Community industry for the
product concerned from 1995 up to the investigation period decreased
by 39 %. The high profits (20,7 %) achieved in 1995 were the result ofhigh prices on the market at that time. In 1996, despite a downturn in
the market and a reduction in sales prices (15 %), the Community
industry remained profitable. However, the recovery in sales volume in1997 did not allow that industry to increase its profit margin since itssales prices again decreased by 3 %.
(193) During the investigation period profitability recovered slightly from its
1997 level. The increase in sales prices during the investigation period
(9 % compared to 1997) allowed the Community industry to achieve aprofit margin of 12,9 %. The Community industry claimed that this
level of profit was reasonable.
(194) Some exporting producers suggested that the Community industry
achieved an extremely high level of profitability during theinvestigation period and that the development of this indicator aloneshould have warranted immediate termination of the proceeding. They
said that such profit was significantly higher than that considered
reasonable by the Commission in past cases involving steel products.
(195) In this respect it should be noted that the relevant provisions of the
Basic Decision and the WTO Agreement state that the determination
of injury shall be based on positive evidence of
(a) the volume of subsidised imports and the effect of subsidised
imports on prices on the Community market for like products; and
(b) the consequent impact of those imports on the Community
industry. Moreover, they specify that consideration shall be given
to whether there has been a significant increase in the volume of
subsidised imports, either in absolute terms or relative toconsumption in the Community. Furthermore, they also specifythat consideration shall be given to whether there has been
significant price undercutting by subsidised imports or whether
the effect of such imports was to depress prices to a significantdegree or to prevent price increases. No one or more of these
factors can necessarily give decisive guidance. Finally, they state
that the examination of the impact of subsidised imports on thedomestic industry shall include an evaluation of all the relevanteconomic factors and indices having a bearing on the state of the
industry, including the magnitude of the actual margins of subsidy,
actual and potential decline in sales, profit, output, market share,productivity, utilisation of capacity, factors affecting prices, etc.The Basic Decision specifically states that this is list is not
exhaustive, nor can any one or more of these factors necessarily
give decisive guidance.
(196) In the present case, the investigation has shown that imports of
subsidised imports have significantly increased in absolute and relative
terms. In addition, low-priced subsidised imports were found to
significantly undercut the Community industry’ s prices. Furthermore,significant margins of subsidy were found to exist for most of theexporting producers concerned. All the above conditions being met,
the Commission has evaluated the potential and actual developments
of a number of relevant economic factors in its investigation before!B2000S0284 — EN — 05.02.2000 — 000.001 — 26
reaching its definitive conclusions. Accordingly, it is considered that
the suggestion by some exporting producers that only the level ofprofitability should have warranted the termination of the proceedingis clearly against the provisions of the Basic Decision.
(197) Furthermore, the economic situation of the Community industry
during the investigation period, in particular its price and profitabilitysituation, must be seen in the light of the structure of the hot-rolledcoils market and the developments that occurred in the economic
situation of the Community industry during the investigation period, as
set out in point 4 below.
(198) Finally, it is considered that the comparison of a specific economic
indicator pertaining to the Community industry with the same
economic indicator worldwide level is not relevant in the context ofanti-subsidy proceedings.
g)Investments and employment
(199) The investigation showed that investments were made mainly in the
replacement of machinery and equipment. During the investigation
period, the level of investment was similar to the 1995 level.Investments were increased by 32 % as compared to 1995, consistentwith the high demand in 1997.
(200) As regards employment, the Community industry manufactures
various products on the same site and with the same machinery,notably hot-rolled coils. The investigation showed that during theperiod examined employment for the production of the product
concerned decreased by 4 %.
h)Summary of the situation of the Community industry between
1995 and the investigation period
(201) Interested parties suggested that a determination of injury during the
investigation period could not be carried out on the basis of a
comparison of the situation of the Community industry established in
the years 1995 and 1997. They found that, in particular, price andprofitability levels in 1995, production, capacity utilisation, salesvolume and market share levels in 1997 were not representative of
what their levels should be under conditions of fair competition. They
thus argued that on the basis of the other findings over the entire periodexamined, it could not reasonably be concluded that the Community
industry suffered material injury.
(202) In this respect it should be noted that, in the above claim, interested
parties have not stated in which respect some economic indicatorsestablished in 1995 and 1997 could not be considered representative.
They merely stated that prices and profits in 1995 and production,
capacity utilisation, sales volume and market share were notrepresentative. In other words, the above claim suggests that asignificant part of the data established during the investigation carried
out by the Commission should be disregarded in the present
proceeding without any evidence or explanations indicating that theconditions of normal competition were not met in 1995 and 1997.Given that during its investigation the Commission found no evidence
to corroborate the allegation that normal competition was not taking
place on the Community market during the years 1995 and 1997, it isconsidered that there are no grounds to disregard such information.
(203) The Commission thus examined the developments of the economic
situation of the Community industry within the period examined, andits overall economic situation between 1995 and the investigationperiod, on a yearly basis.
(204) The investigation showed that between 1997 and the investigation
period, with a slight increase in apparent consumption, the Communityindustry increased its sales prices by 9 % but was not able to maintainits sales volume, which decreased by 12 %. Accordingly, the
Community industry lost 6,6 percentage points or 14 % of market
share. Furthermore, the Community industry production decreased by9 %, leading also to a reduced capacity utilisation. Despite these
negative developments profitability increased from 6,3 % to 12,9 %.
(205) The investigation also showed that between 1997 and the investigation
period imports from the countries concerned increased significantly in!B2000S0284 — EN — 05.02.2000 — 000.001 — 27
terms of volume (+ 797 000 tonnes), leading to substantial increase of
their market share (+ 4 percentage points). Although the countriesconcerned increased their sales prices by over 10 % they werenevertheless found to be undercutting the prices of the Community
industry by around 6 % on average during the investigation period.
4.Analysis of the situation of the Community industry during the
investigation period
a)Preliminary remarks
(206) The Community industry claimed that prices and thus profits remained
at a high level in the first half of the investigation period because
apparent consumption and therefore demand was exceptionally high,
even though it was not matched by a commensurate actualconsumption. This led, in the first half of the investigation period, toan overstocking which was largely fed by the imports concerned, and,
in the second half of the investigation period, to a significant
de-stocking.
(207) Furthermore, the Community industry indicated that a more refined
analysis of sales by product types and sales channels for which there ishead-on competition between the Community industry and importswould be necessary in the present case to show the full extent of the
injury suffered. This entails a differentiated analysis of sales of black
as opposed to pickled coils, and sales channels where longer-termcontracts are concluded as opposed to other sales.
(208) Finally, the Community industry claimed that a more detailed analysis
of the four quarters of the investigation period was necessary given theexistence of a time lag between orders placed by purchasers and
deliveries made to them. It was claimed that such time lags effectively
delayed the negative impact of the imports concerned. The Communityindustry claimed that it was therefore necessary to further investigatethe development of orders received during the investigation period.
(209) All operators on the steel market agreed that business is mainly carried
out on a quarterly basis. Production is organised on the basis of
quarterly plans and prices. Both orders and deliveries are negotiated
accordingly. Therefore, the suggestion made by some exportingproducers that the partitioning of the investigation period, in particularinto quarters, did not constitute an objective evaluation of the possible
injury suffered by the Community industry was not founded. The
above claims of the Community industry have therefore beeninvestigated and analysed as set out below.
(210) In order to have an overview of the cyclical nature of the activity of the
Community industry and to cross-check the quarterly developments ofits economic situation, the Commission also collected quarterly data
for the period 1996 up to the second quarter of 1999.
b)Cyclical nature of the steel industry
(211) According to the complainant, there are seasonal fluctuations on the
steel market in that the first two quarters of each calendar year arenormally better than the last two quarters. Such seasonal fluctuationscould mainly be observed in sales activity. Sales would normally be
affected in the third quarter of the year due to the holiday period in the
user industries, but they should pick up again in the fourth quarter.Given that some of the above allegations made by the Community
industry required a quarterly analysis it was important to ensure that
any development observed did not merely reflect normal quarterlyfluctuations. This analysis was particularly relevant as the complainantalleged that the trends observed within the investigation period were
far beyond the normal cycles.
(212) For the evaluation of the cyclical nature of the hot-rolled coil business,
the Commission found that the trends in production and sales for the
Community industry from 1996 up to the investigation period were as
follows:!B2000S0284 — EN — 05.02.2000 — 000.001 — 28
(%)
1st quarter 2nd quarter 3rd quarter 4th quarter
Production
— 1996 93 97 95 100
— 1997 97 100 97 97
— IP (1998) 100 94 77 70
Sales volume
— 1996 87 90 91 100
— 1997 97 100 97 97
— IP (1998) 100 87 68 61
Sales value
— 1996 100 96 89 94
— 1997 95 100 99 98
— IP (1998) 100 88 63 51
(213) With regard to production, it was found that the third quarter did not
necessarily show the lowest level of activity. In 1996 and 1997, the
greatest difference found was 7 % between the first and the fourth
quarter of 1996 and the trend in production was linear in those years.During the investigation period however the levels of production in thethird and in the fourth quarter were far lower when compared to the
first quarter, indicating that the fluctuations observed in that period
were far beyond the normal seasonal fluctuations.
(214) Concerning sales volume, the downturn observed in the third and
fourth quarters was even more pronounced during the investigation
period. Sales activity in the second half of the investigation period wasexceptionally low and far beyond the normal seasonal fluctuations.
(215) The above quarterly analysis covering the years 1996 and 1997 as well
as the investigation period, shows that the trends observed during thislatter period are far beyond the normal fluctuations linked to the
cyclical nature of the hot-rolled coil business.
c)Apparent consumption and overstocking
(216) As indicated in recital 155, the development of apparent consumption
on a yearly basis was quite stable, in particular between 1997 and the
investigation period. It should be underlined that apparent consump-tion, by definition, does not reflect actual use, i.e. actual consumptionof the product concerned by its users. The difference between apparent
consumption and actual consumption is basically the quantity of stocks
kept at various levels of the distribution chain, i.e. in the present caseby importers, traders, dealers, SSCs and users.
(217) The examination of this particular issue showed that apparent
consumption was significantly higher in the first two quarters of theinvestigation period than in the last two quarters. In addition, the
comparatively steady development in apparent consumption found
throughout 1997 did not occur during the investigation period. Thisdifference in trends was particularly obvious when comparing the endof 1997 and the beginning of the investigation period, as there was a
considerable increase in apparent consumption between these two time
periods. This suggests an increase in stocks, whereas the reverse wastrue if the fourth quarter of 1997 is compared with the fourth quarter ofthe investigation period, indicating a significant decrease in stocks in
the last two quarters of the investigation period.
(218) As it has been alleged that these stocks played a particularly important
role in the development of the market during the investigation period,
it was considered necessary to establish the quarterly apparentconsumption not only for the investigation period but also for 1997.!B2000S0284 — EN — 05.02.2000 — 000.001 — 29
(219) To confirm these findings, the relevant development should also have
been established for actual consumption. However, its determinationwas hampered by the fact that cooperation of the various relevantinterested parties in the distribution chain and at user level was not
complete. Nevertheless, the Commission was able to establish the
stocks held at trader’s level on the basis of Eurostat informationgathered in the framework of the ECSC Treaty.
(220) In line with the above findings on apparent consumption, this
information showed that there was a considerable build-up of stockat trader level between the end of 1997 and the beginning of the
investigation period. An increase of 29 % between the fourth quarter
1997 and first quarter of the investigation period and a further increaseof 11 % between the first quarter of the investigation period and thesecond quarter of the investigation period were observed.
(221) This information also confirmed a considerable decrease in stocks
towards the end of the investigation period (- 22 %). The use of stocks
became clear when comparing the level of stocks at the end of both the
first and second semesters of the investigation period. A comparison ofthe quarterly development of stocks in 1997 with the quarterlydevelopment during the investigation period also confirms the above
findings.
(222) This trend of overstocking in the first two quarters of the investigation
period was confirmed in a submission received by an exporting
producer under investigation and by the information from a major userof the product concerned on the Community market. This user heldstocks which in the middle of the investigation period were more than
double those held at the beginning of this period, while there was no
indication of a significant difference in the underlying activity betweenthe beginning and the end of the investigation period by this user.
(223) The investigation thus confirmed the Community industry’ s claim that
considerable overstocking occurred at the beginning of the investi-gation period. In the first two quarters of the investigation period
apparent consumption was significantly higher than actual consump-
tion, while for the third and fourth quarters of the investigation periodthe difference was reversed.
(224) In absolute terms, it was found that apparent consumption during the
first half of the investigation period exceeded apparent consumption inthe first half of 1997 by around 1,5 million tonnes.
(225) Some interested parties claimed that the Community industry largely
contributed to the overstocking observed during the first half of the
investigation period. In this respect it should be noted that, as shown
below, the Community industry’ s sales started to decline right from thebeginning of the investigation period. This suggests that theCommunity industry did not play an important role in feeding the
overstocking observed.
d)Production and capacity utilisation
(226) On a quarterly basis, production decreased by 23 % in the third quarter
and by 30 % in the fourth quarter of the investigation period ascompared to the first quarter of the investigation period.
(227) In line with the decrease in production, the rate of capacity utilisation
also decreased by 12 % in the third quarter of the investigation periodand by 17 % in the fourth quarter as compared to the first quarter of
the investigation period.
(228) Similarly, it was found that production and capacity utilisation were
declining when compared with the relevant quarterly activity in 1997.
In the third and fourth quarters of the investigation period as compared
to the third and fourth quarter of 1997, production decreased by 20 %and 11 % respectively, capacity utilisation by 12 % and 18 %.
e)Sales volume, sales prices and profitability
i) Sales volume
(229) The Community industry sales volume decreased by 32 % in the third
quarter of the investigation period and by 39 % in the fourth quarter as
compared to the first quarter.!B2000S0284 — EN — 05.02.2000 — 000.001 — 30
(230) Furthermore, as already mentioned in the year-to-year analysis, the
Community industry claimed that a more refined and differentiatedanalysis of its various types of sales and sales channels should bemade, as this would show that the sales competing directly with the
imports concerned are more affected than other sales. In addition to the
differentiation between sales of black coils and pickled coils, thatindustry claimed that a proportion of its sales were the result oflong-term delivery and sales contracts, concluded, for example, with
the automobile industry. These contracts typically cover a period of up
to one year, during which delivery quantities and prices are fixed. Theexporting producers concerned do basically not supply the customers
under such contracts.
(231) In order to carry out a detailed analysis the above mentioned types of
sales were grouped and are referred to as ‘long-term’sales as compared
to ‘other’ sales. Similarly, the development of sales, sales prices and
profitability of black and pickled coils during the investigation periodwere also analysed.
(232) The sales volume of long-term sales was much more stable throughout
the quarters of the investigation period than the rest of the salesactivity. Indeed, the decrease in long-term sales was 20 % in the thirdquarter and 22 % in the fourth quarter as compared to the first quarter
of the investigation period. The decrease in other sales was much more
pronounced namely 35 % and 43 % in the third and the fourth quarterrespectively, as compared to the first quarter of the investigationperiod.
(233) The same was true when analysing the sales volume of black compared
to pickled coils. During the investigation period the volume of pickled
coils sold developed in a smoother way than that of black coils. The
decrease in the sales volume of black coil was as high as 39 % in thethird quarter and 44 % in the fourth quarter as compared to the firstquarter of the investigation period whereas the decrease in pickled
coils was limited to 21 % and 29 % respectively.
ii) Sales prices of the Community industry
(234) During the first two quarters of the investigation period sales prices of
hot-rolled coils were by and large stable, namely at a level of ECU 306
and ECU 308 per tonne respectively. Subsequently they fell down to
ECU 286 per tonne during the third quarter and to ECU 254 per tonneduring the fourth quarter of the investigation period. Overall this
represents a decrease of 17 % during the investigation period.
(235) The analysis of prices differentiated by types of sales showed that
prices for long-term sales largely remained stable in the first three
quarters of the investigation period, only decreasing from ECU 320 per
tonne to ECU 312 per tonne, namely a decrease of 2 %. The decreasewas limited to 10 % when comparing the first and the fourth quarter ofthe investigation period. By contrast, prices for other sales had already
decreased by 10 % between the first and the third quarter of the
investigation period and by 21 % between the first and the fourthquarter of the investigation period.
(236) The comparison between the development of prices of black coils and
pickled coils showed that prices of the former decreased much morethan those of the latter. The result of these differing trends was thatprices across categories differed significantly more at the end of the
investigation period than at the beginning. Indeed, prices for pickled
coils, only decreasing from ECU 328 per tonne to ECU 316 per tonne,namely a decrease of 4 %. The decrease was limited to 12 % when
comparing the first and the fourth quarter of the investigation period.
By contrast, prices for black coils had already decreased by 10 %between the first and the third quarter and by 22 % between the firstand the fourth quarter of the investigation period.
iii) Profitability
(237) On a quarterly basis, it emerged that profitability was very good during
the first half of the investigation period. Given the precipitation of
price decreases throughout the subsequent quarters, profitability
continued to decrease, namely from 16,8 % during the first quarterof the investigation period to - 2,6 % in the fourth quarter.!B2000S0284 — EN — 05.02.2000 — 000.001 — 31
(238) The differentiation in sales showed significant decreases in profit-
ability from the very start of the investigation period for the sales ofblack coils and sales other than the long-term sales.
(239) The investigation showed that profitability for the long term sales was
very good in the first half of the investigation period (around 21 %)and remained positive throughout the investigation period, namely 8 %in the fourth quarter of the investigation period. Similarly other sales
were also profitable at around 16 % in the first half of the investigation
period. In line with the development of demand for hot-rolled coils, itsubsequently collapsed in the third and the fourth quarter of the
investigation period to become negative (- 7 %) in the fourth quarter of
the investigation period.
(240) The same observations were made on profitability differentiated for
black coils and pickled coils where profitability for both types was
good in the first half of the investigation period. Subsequently,profitability for pickled coils remained positive throughout theinvestigation period (4,5 % in the fourth quarter) whereas profitability
in black coils sales significantly decreased in the third quarter of the
investigation period and reached a level of losses as high as - 16,5 % inthe fourth quarter of the investigation period.
(241) In conclusion, overall sales, prices and profitability all fell during the
investigation period. This trend was significantly less pronounced forsales made in market segments where fewer subsidised imports were
present. In terms of prices and resulting profitability, the situation of
the Community industry remained relatively stable during the time inwhich apparent consumption boomed. The investigation has alsoshown that the Community industry did not increase its sales volume
in line with the increase in the apparent consumption. By contrast,
price levels and profitability remained at a high level at a time ofstrong and increasing demand.
(242) The investigation also showed that the purchase prices of major cost
items in the cost of production decreased during the investigationperiod. Notably, the price of iron ore decreased by up to 12 % and
scrap by up to 40 % and the price of oil dropped to the level of 1 970.
Accordingly, the cost of raw material decreased limiting the level ofthe losses incurred, particularly during the investigation period.
(243) In order to complete the above analysis on sales volume, sales prices
and profitability, it was found that these economic indicators were alsodeclining when compared with the relevant quarterly activity in 1997.
In the third and fourth quarter of the investigation period as compared
to the third and fourth quarter of 1997, sales volume decreased by 24 %and 27 % respectively, sales prices were 6 % and 19 % lower. Asregards profitability, it was found that it was 15 percentage points
lower in the fourth quarter of the IP as compared to the fourth quarter
of 1997.
(244) As shown in the chapter below, in assessing the developments in sales
volume, sales prices and profitability it is important to note that there
is a time lag between price negotiation with customers and invoicingand delivery by the Community industry. Thus, when considering inparticular the developments in other sales the prices applied during the
first quarter of the investigation period were in fact negotiated during
the fourth quarter of 1997 and so on.
f)Time lag between the situation of the Community industry and
the market developments
(245) As already mentioned in the year to year analysis above, the
Community industry alleged that, in assessing its price and profit-
ability development, the existence of a time lag between the sales of
the goods and price negotiation with customers related to such salesshould be considered. In practice, it was claimed, the negotiationspreceded the sales by at least one quarter.
(246) The investigation has shown that production planning for an effective
capacity utilisation resulted in a time lag between the order and thesale. This time lag was indeed found to be at least one quarter. In other
words sales in the first quarter of the investigation period are the result
of orders negotiated and concluded in the fourth quarter of 1997.!B2000S0284 — EN — 05.02.2000 — 000.001 — 32
(247) Given the existence of this time lag, the quarterly trend established in
the orders received by the Community industry showed a significantdecrease during the investigation period. In line with the claim by theCommunity industry, this negative trend is pronounced right from the
first quarter of the investigation period compared to the trend
determined for sales volume and production. The volume of ordersreceived in the second quarter of the investigation period were 17 %lower than those received in the first quarter. Furthermore, it emerged
that a relatively high level of orders was received in the fourth quarter
of 1997, corresponding to deliveries/sales effected in the first quarterof the investigation period.
(248) These findings are thus consistent with the claim by the Community
industry that the relatively positive economic situation during the first
half of the investigation period merely reflects a healthy level of ordersreceived during the last quarter of 1997 and the first quarter of theinvestigation period, namely when demand was still high.
g)Conclusion on the situation of the Community industry in the
investigation period
(249) The quarterly analysis indicated that the economic situation of the
Community industry deteriorated significantly during the investigation
period, in particular in the second half. This deterioration went farbeyond the seasonal fluctuations observed during the previous years ona quarterly basis.
(250) In particular, it was found that in the third quarter of the investigation
period as compared to the average activity of the period, all the injury
indicators followed a negative trend: production decreased by 10 %,capacity utilisation by 6 %, sales volume by 14 %, sales prices by 2,4 %and profitability decreased by 2,1 percentage points.
(251) Furthermore, the developments observed during the fourth quarter of
the investigation period indicated that the situation of the Community
industry only deteriorated further: as compared to the average activityof the investigation period production decreased by 18 %, capacity
utilisation by 10 %, sales volume by 22 %, prices by 13 % profitability
became negative (- 2,6 % on net turnover), a decrease of 15,5percentage points.
5. Developments after the investigation period
(252) As mentioned above, the overstocking which occurred during the first
half of the investigation led to a relatively positive market situation
reflected in the good level of prices on the Community market during
this time period. Accordingly profitability of the Community industrywas still good. However, in view of the fact that this situation was notsupported by an underlying positive development in the user markets
but was likely to lead to negative developments after a certain time lag
it was considered necessary also to confirm this scenario by analysingdevelopments after the end of the investigation period.
(253) As pointed out by some exporting producers it was found that a certain
degree of recovery occurred in the volume produced and sold by the
Community industry at the beginning of 1999. However, it should be
noted that the level of production and sales were significantly lowerthan those at the beginning of the investigation period and those of
1997. In this respect, the investigation showed that the economic
situation of the Community industry continued to deteriorate after theinvestigation period, in particular in terms of a decrease in sales priceand profitability during the two first quarters of 1999.
(254) This confirmed the negative effect of the massive overstocking which
occurred at the beginning of the investigation period and the
de-stocking which began during the third quarter of the investigationperiod and continued, despite a decrease in actual imports, throughoutthe first half of 1999. Apart from the effect of overstocking, the delay
with which the negative development of the Community industry
occurred was also due to the time lag under which the Communityindustry operates with its customers. This is apparent not only from thedevelopment of the injury indicators such as production, sales, prices
and profitability, but also from the development of the orders received
by the Community industry.!B2000S0284 — EN — 05.02.2000 — 000.001 — 33
(255) Some parties have claimed that the imposition of countervailing
measures in the present proceeding was unnecessary as the importsconcerned ceased after the investigation period.
(256) The investigation showed that, based on generally available or
unverified information, imports, in particular for some of the countriesconcerned by the present proceeding, have fallen since the beginningof the investigation period. However, this is not an unusual phenom-
enon in anti-subsidy and anti-dumping investigations as market
participants, in particular importers, take into account the fact thatinvestigations require prudent assessment of the market insofar as theycan lead to the imposition of countervailing and anti-dumping
measures. The reaction of market participants can be more or less
pronounced. In any event, taking into account the decrease in imports,which may be limited in time, to justify the non-imposition of
measures would allow the exporting producers concerned to adopt a
stop-and-go policy for their exports. It is considered that this wouldhave highly disruptive effect on the Community market for anyproduct and therefore can not in the present circumstances serve as a
justification for not imposing countervailing measures.
(257) Finally, it has been claimed that the phenomenon of high imports
concentrated in the investigation period was only short-lived. In the
meantime market prices in the Community have reached levels which
ensure a quick recovery of the economic situation of the Communityindustry.
(258) It should be noted that detailed analysis demonstrates that Community
industry prices continued to deteriorate and reached very low levelsduring the first two quarters of 1999. This price decrease triggeredconsiderable financial losses, which the Community industry incurred
during a considerable period of time.
6. Conclusion on injury
(259) On the one hand, the year-to-year analysis of the situation of the
Community industry in the period from 1995 to the investigation
period showed a number of negative developments. In addition, thequarterly analysis indicated that the economic situation of theCommunity industry significantly deteriorated throughout the inves-
tigation period. Contrary to the suggestion made by some exporting
producers and taking into account the special characteristics of theCommunity market in terms of oversupply and time lag between orders
and deliveries these developments are representative of the economic
situation of the Community industry during the whole investigationperiod.
(260) The investigation has also shown that these negative developments
continued and even worsened after the end of the investigation period,a development which is particularly relevant in view of the functioningand the situation of the Community market. It has been ascertained
that this deterioration went far beyond the seasonal fluctuations
observed in previous years on a quarterly basis.
(261) To summarise, it was found that, during the third and fourth quarters of
the investigation period, all the injury indicators followed a negative
trend compared to the average activity of the investigation period:production decreased by 10 % and 18 % respectively, capacityutilisation by 6 % and 10 %, sales volume by 14 % and 22 %, sales
prices were negotiated 2,4 % and 13 % below the average price of the
investigation period and profitability decreased by 2,1 and 15,5percentage points respectively.
(262) Similarly it was found that these economic indicators were also
declining when compared with the relevant quarterly activity in 1997.In the third and fourth quarter of the investigation period as comparedto the third and fourth quarter of 1997: production decreased by 20 %
and 11 % respectively, capacity utilisation by 12 % and 18 %, sales
prices were 6 % and 19 % and profitability was positive both in 1997and during the investigation period but it was 15 percentage pointslower in the fourth quarter of the IP as compared to the fourth quarter
of 1997. All these trends were confirmed during the two quarters after
the investigation period.!B2000S0284 — EN — 05.02.2000 — 000.001 — 34
(263) The investigation then revealed that the above trends would have been
even more negative without specific sales such as those under longterm contracts or those of pickled coils, which are less affected by theimports concerned. The orders received by the Community industry for
delivery in the fourth quarter of the investigation period were 31 %
lower than those received for delivery in the first quarter of theinvestigation period.
(264) On the other hand, the year-to-year analysis has shown that average
profit rates increased from 1997 to the investigation period, reaching alevel of 12,9 %. Profits and sales prices remained stable during the
first quarters of the investigation period.
(265) Regarding these findings, which could at first sight appear to be
contrary to a finding of injury, the investigation has shown that they
were in line with a high level of apparent consumption during the firstsemester of the investigation period which, the investigation hasconfirmed, was not matched by actual consumption. As a consequence,
the prices and profits of the Community industry (whose sales did not
develop in line with the overstocking) remained stable but were boundto deteriorate thereafter in view of the fact that the significant apparent
consumption was not met by a commensurate actual consumption.
Indeed, during the second part of the investigation period, apparentconsumption tumbled as the massive stocks were used, which in turnprovoked a significant price and profit decrease.
(266) The subsequent analysis of the economic situation of the Community
industry in the first two quarters of 1999 confirmed that these negative
trends were not confined to the investigation period and were the direct
results of the developments during the investigation period. Whileproduction and sales volume improved somewhat compared to thesecond half of the investigation period, sales prices and profitability
continued to decrease. It should be noted that the Basic Decision as
confirmed by the jurisprudence of the Court permits the informationpertaining to the time period after the end of the investigation period tobe taken into account, in particular in order to establish whether trends
observed during the investigation period continue.
(267) Based on the developments in the situation of the Community industry
during the period from 1995 to the investigation period and during the
investigation period in particular, the Commission has concluded thatthe Community industry has suffered injury during the investigation
period. Contrary to the suggestion that the economic indicators
showing injury are largely outweighed by other indicators showinglack of injury, the above detailed investigation showed that alleconomic indicators developed negatively, in particular profits and
sales prices with a time lag of a few months. The magnitude of the
injury suffered enables it to be classified as material in accordancewith the provisions of Article 8(6) of the Basic Decision.
F.CAUSATION
1. Introduction
(268) In the present analysis it should be borne in mind that the product
concerned is a very price sensitive product. In addition, the market for
this product, as shown above, has a number of particular char-
acteristics: the relationship between the Community industry andcertain users is long-term; production set-up and planning entails acertain time lag between order and delivery; and the Community
industry operates more in certain market segments than the exporting
producers concerned. Nevertheless, these characteristics do not callinto question the fact that the products produced and sold by theCommunity industry and those imported by the countries concerned
are like products. It only indicates that certain sales channels and
certain types of product are more prone to competition from theimports concerned than others.
(269) In order to reach its conclusions on the cause of the injury suffered by
the Community industry, the Commission examined the impact of thesubsidised imports from the countries concerned. At the same time, the
impact of other known factors and their possible consequences on the
situation of that industry were also analysed. Such analysis ensured!B2000S0284 — EN — 05.02.2000 — 000.001 — 35
that any injury caused by other factors than subsidised imports would
be identified and not attributed to these imports.
(270) The other factors examined were: the development of consumption,
the oversupply of the Community market, the impact of hot-rolled
coils imported into the Community from other third countries, thebehaviour of other Community producers not included in the definitionof the Community industry, the export performances of the
Community industry and the world-wide situation of the steel business.
2. Impact of subsidised imports
a)Impact of the volume of subsidised imports and stockpiling
(271) The investigation showed that the imports concerned increased
considerably, in particular between 1997 and the investigation period.While in 1995, only 8 000 tonnes of hot-rolled coils entered theCommunity market from the countries concerned, in 1997, this rose to
47 000 tonnes.
(272) The investigation also showed that the major increase in imports
occurred During the period between 1997 to the investigation period (+
797 000 tonnes) and particularly during the first two quarters of the
investigation period. During that period over 550 000 tonnes weredelivered onto the Community market. This represents more than 10
times the import volume of the second semester 1997. Between 1997
and the investigation period, the market share held by the countriesconcerned increased by 4 percentage points.
(273) During the period from 1995 to the investigation period while
Community consumption increased by 9 %, the Community industry’ ssales volume increased by only 1 % and it thus lost 3,7 percentagepoints of its market share.
(274) As far as the period of the import surge (1997 to the investigation
period) is concerned, it coincided with the deterioration of theCommunity industry’ s situation. Production decreased by 9 % and
sales volume by 12 %. The loss in market share amounted to 6,6
percentage points and orders by 17 %.
(275) In addition, the development of import volumes, taken together with
the development of apparent consumption shown earlier, indicates that
the subsidised imports concerned mainly fed the increase in stocks,and thus the increase in apparent consumption in the first two quarters
of the investigation period, whereas the sales of the Community
industry decreased from the very beginning of the investigation period.
(276) The investigation revealed that contrary to the exporting producers in
question the Community industry is not very present in the traders’
sales channel. As regards certain large operators, it showed that theseordered few or no hot-rolled coils from the Community industry duringthe third and the fourth quarter of the investigation period. This
resulted in a significant drop in sales in third quarter of the
investigation period (- 28 %) and in the fourth quarter (- 12 %). Thisin turn had a significant negative influence on prices and profitabilityof the Community industry during the last two quarters of the
investigation period.
(277) In order to fully assess this development it should be borne in mind
that the development of the situation of the Community industry was
particularly negative, pronounced and immediate in sales channels and
for product types in which the exporting producers are mainly active.Indeed, these producers are not very active in sales channels where
long-term sales contracts are concluded The Community industry has
fared relatively better in these sales channels than in others, wherecompetition from imports is more pronounced. It has also been shownabove that the Community industry’ s sales of black coils, which
account for around 90 % of the imports concerned, have been
developing very negatively throughout the investigation period.
b)Impact of the import price level and functioning of the steel
market
(278) The investigation showed that the situation of the Community industry
remained stable in terms of prices and therefore overall profitability!B2000S0284 — EN — 05.02.2000 — 000.001 — 36
during the first two quarters of the investigation period, although
import prices from the countries concerned continuously decreasedduring the whole investigation period. In this respect the investigationhas shown that the development of prices and profits of the
Community industry were due, on the one hand, to the general
structure and functioning of the market in terms of the time lagbetween orders made by and deliveries to clients and, on the otherhand, by the development of stocks and thus apparent consumption
during the investigation period.
(279) Concerning the general functioning of the market, it has been found
that, given the time lag between orders and deliveries (at least one
quarter), the situation of the Community industry during the firstquarter of the investigation period, basically reflected the situation oforders placed during the fourth quarter of 1997, when imports started
to surge.
(280) In terms of the development of apparent consumption, it has been
found that the situation of the Community market in general and of the
Community industry in particular during the first quarter of theinvestigation period corresponded to a time period of spectaculargrowth in stocks — and thus apparent consumption. This allowed
prices and profits to remain high despite the increase in imports which
occurred at the same time. The subsidised imports thus had the biggestimpact on the economic situation of the Community industry when itbecame clear that the growth in stocks and thus in apparent
consumption was not matched by a growth in actual consumption.
Indeed, given the considerable fall in demand for hot-rolled coils at theend of the investigation period, Community industry prices decreased
by 17 % and profitability became negative.
(281) The community industry claimed that during the entire investigation
period the exporting producers adopted a policy of systematic price
decrease and were continually undercutting the Community industry’ s
prices. This precipitated and hastened the fall in sales prices on theCommunity market during that period.
(282) The investigation showed that the exporting producers indeed,
significantly reduced their price during the investigation period whilethe Community industry attempted to maintain its price level until
June 1998. In July 1998, the Community industry reduced its sales
prices. Their sales prices, which were over 300 ECU/tonne in January1998, fell to around 250 ECU/tonne in December 1998.
(283) This dramatic decrease in prices is explained by the fact that the
exporting producers continued to undercut the Community industry’ sprices throughout the investigation period. It is to be noted that the
level of the undercutting was lower at the beginning of the
investigation period and became increasingly more significantthroughout the investigation period. The Community industry had toreduce its prices in order to continue participating in the market, in
particular from the middle of the investigation period onwards.
(284) In this respect it is to be noted that steel is a major commodity product
and the indicative base price of hot-rolled coils is published daily in
specialised newspapers and is well know by all operators present on themarket. The products produced and sold by the Community industryand those imported by the countries concerned are highly sensitive to
price movements which are quickly transmitted through the market.
The above thus suggests that overall the findings of the investigation
show that the imports concerned caused the negative development in
the economic situation of the Community industry.
c)Conclusion on the impact of subsidised imports
(285) It is considered that the volumes of subsidised imports, which
accumulated in the Community market within a very short period,depressed prices and led to a reduced market share of the Communityindustry. These import volumes allowed traders and certain large
Community-based users to accumulate stocks with negative reper-
cussions on price negotiation with the Community industry as early asin the second quarter of the investigation period and to extend theperiod over which such imports depressed prices. Moreover, given the
general transparency of the market, users and purchasers in the
Community market became quickly aware of the low price policy!B2000S0284 — EN — 05.02.2000 — 000.001 — 37
applied by the exporting producers. This precipitated and hastened the
fall of sales price on a market with negative results on market shareand profitability of the Community industry.
(286) Consequently, it is concluded that the presence of low-priced
subsidised imports played an important role in the deteriorating
situation of the Community industry and thus to the material injury
suffered by that industry during the investigation period.
3.Impact of other factors
a)Development of consumption
(287) During the period examined apparent consumption on the Community
market increased continuously by 9 %. During the period between
1997 and the investigation period apparent consumption increased by
0,4 %.
(288) Consequently, given the continuous positive development in con-
sumption volume since 1996, it is considered that it cannot be linked tothe injurious situation suffered by the Community industry during the
investigation period.
b)Oversupply of the Community market
(289) The allegation of an oversupply of the Community market at the
beginning of the investigation period was also investigated. Some
parties argued that the Community industry was continuously
increasing its deliveries on the market and was thus the maincontributing factor in the oversupply. Accordingly, they argued that the
high rate of capacity utilisation of the Community producers resulting
from high deliveries should exclude any injury to be attributed toimports from the countries concerned.
(290) The detailed analysis of the development in apparent consumption in
1997 as compared to the investigation period showed that during the
first two quarters of the investigation period apparent consumption was
1,4 million tonnes higher than in the corresponding quarters of 1997.This comparison should be seen in the light of the fact that 551 000tonnes of subsidised hot-rolled coils were imported from the countries
concerned in the first two quarters of the investigation period whereas
the corresponding volume imported in the same period in 1997 wasabout 4 000 tonnes. This represents an increase of over 0,5 milliontonnes during the first half of the investigation period.
(291) Furthermore, it is recalled that traders significantly increased their
stocks in the first half of the investigation period, thus participating to
the oversupply of the Community market. The investigation revealedthat the Community industry is not very active in the traders sales
channel whereas the exporting producers sold significant quantities via
traders. Accordingly, the Community industry did not feed the stockspiled by traders during the investigation period.
(292) In conclusion, the investigation has shown that the increase in
subsidised imports was considerable during the investigation period
while it was found that the Community industry lost sales and
experienced a drop in production resulting in a fall in market share.Accordingly, the increase in low-priced subsidised imports largelycontributed to the oversupply.
c)Imports of hot-rolled coils from other third countries
(293) In addition to the countries concerned by the present anti-subsidy
proceeding other exporting countries, namely Bulgaria, Iran and theFederal Republic of Yugoslavia were concerned by an anti-dumping
proceeding.
(294) In addition, other countries exported hot-rolled coils to the Community
market. During the investigation period the main exporters wereRussia, Slovakia, Romania, Hungary, South Korea and Indonesia.
(295) Some exporting producers argued that they have been unduly
discriminated against in comparison to some other third countries
mentioned above which were excluded from the scope of the
investigation.!B2000S0284 — EN — 05.02.2000 — 000.001 — 38
(296) In this respect it is pointed out that no complaint against the above
third countries was lodged and that therefore no prima facie evidenceof subsidisation and injury justifying the initiation of an investigationwas received. As furthermore, the investigation has not brought to light
any evidence of injurious subsidisation practices by such third country
exports the allegation of discrimination is not founded.
(297) During the period examined, other third countries not subject to any
proceeding’s share of total imports of the product concerned onto the
Community market while remaining significant showed a decreasingtrend. The import volume decreased from 3 million tonnes in 1995 to2,4 million tonnes in the investigation period, namely a decrease by
20 % in terms of volume. The share of these imports represented 99 %
of total import volume in 1995 but only 74 % during the investigationperiod. Accordingly, throughout the period examined, the share of theCommunity market held by the other third countries decreased by
20 %.
(298) Import prices from these third c ountries followed the general
downward tendency in the Community market and decreased by 9 %.
(299) Based on the above facts and considerations it was found that imports
from other third countries not subject to any proceeding remainedsignificant and enjoyed a continued presence in the Community
market during the period examined. However, it also emerged that
while the situation of the Community industry only deteriorated inparticular from 1997 to the investigation period, namely when thesubsidised imports surged massively, the increase in imports from
other third countries was very limited.
(300) Accordingly, the suggestion by some exporting producers that the
imports of hot-rolled coils from other third countries not subject to anyproceeding are the cause of the injury suffered by the Community
industry cannot be taken into consideration.
d)Other producers in the Community
(301) During the investigation period, the producers in the Community not
included in the definition of the Community industry represented 35 %
of total Community production.
(302) Based on the information available, during the period examined, the
economic situation of the other producers of hot-rolled coils in the
Community was similar to that of the Community industry. During the
investigation period their sales volume increased by 5 %, namely anincrease below the increase in consumption. Accordingly, their shareof the market in terms of volume decreased by 4 %. Furthermore, these
producers also suffered from price depression as the decrease in sale
value by 6 % indicates and their sales prices were in line with those ofthe Community industry.
(303) Consequently, the impact of the other producers in the Community on
the deteriorating economic situation of the Community industry waslimited.
e)Export activity of the Community industry
(304) Certain exporting producers claimed that the situation of the
Community industry deteriorated because of the decrease in its export
activity during the period examined.
(305) The investigation showed that the sales volume destined for exports to
third countries decreased by 536 000 tonnes between 1995 and the
investigation period and by 299 000 tonnes between 1997 and theinvestigation period. This represents a decrease of 4,8 % and 2,9 %respectively of the total sales of the Community industry. On this basis,
the Commission does not exclude that such a decrease in the export
sales affected the overall economic situation of the Communityindustry. However, it is recalled that the present investigationexclusively covered the economic situation of the Community industry
as regards the Community free market. Accordingly, prices and
revenues from export sales were excluded from the injury analysis.!B2000S0284 — EN — 05.02.2000 — 000.001 — 39
f)Community industry’s preference to supply captive market
(306) A number of users of the product concerned on the Community market
stated that the Community industry had attempted to increase theintegration of its activities over the period examined. At the end of1997, the Community industry had allegedly given priority to
supplying related parties in the captive market before supplying
independent parties on the free market with the result that the userswere forced to obtain their supplies from outside the Community.
Therefore, injury could not be caused by the development of imports.
(307) The Commission found that between 1997 and the investigation period
the evolution of sales volume to both related and unrelated customers
showed decreasing trends. The fact that the supply to the captivemarket followed a similar trend indicates that production capacity wasavailable. This decline in sales volume indicated that there was no
shortage of supply of the product concerned, which could have led to a
decrease in the sales volume to unrelated parties.
g)World wide situation in the steel business
(308) Some exporting producers claimed that the situation of the Community
industry, in particular in the second part of the investigation period,
was largely due to the deterioration of the worldwide situation of the
steel business.
(309) Based on the information available it emerged that a worldwide
downturn occurred during the investigation period. Sales pricesdecreased in the USA, Japan and South Korea. However, it was foundthat sales prices in these countries were 15 %, 24 % and 7 %
respectively, higher than those in the Community at the end of the
investigation period.
(310) Consequently the worldwide situation of the steel industry and in
particular the situation in South East Asia, cannot explain thedeterioration of the economic situation of the Community industry
during the period examined.
4.Conclusion on causation
(311) The above analysis indicates that factors other than subsidised imports
from the countries concerned may have contributed to the difficultstate of the Community industry during the investigation period.However, the investigation has shown that the sudden increase in
imports, the price depression and price undercutting practised by the
exporting producers had significantly negative consequences on thesituation of the Community industry. Therefore, it is concluded that the
subsidised imports, taken in isolation, had caused material injury to the
Community industry.
G. COMMUNITY INTEREST
1.Preliminary remarks
(312) The purpose of countervailing measures is to remedy unfair trading
practices having an injurious effect on the Community industry andre-establish a situation of effective competition on the Communitymarket. In addition to subsidisation, injury and the cause of this injury,
the Commission examined whether any compelling reasons existed
which could lead to the conclusion that it is not in the Communityinterest to impose measures. For this purpose, and in accordance with
Article 31(1) of the Basic Decision, the impact of possible measures on
all parties involved in this proceeding and the consequences of takingor not taking measures, were considered on the basis of the evidenceavailable.
2.Interest of the Community industry
(313) In case of injurious subsidisation caused by low-priced subsidised
imports, the interest of a Community industry is that conditions of
effective competition are restored.
(314) The investigation has shown that the Community market of hot-rolled
coils was characterised by the presence of products originating in the!B2000S0284 — EN — 05.02.2000 — 000.001 — 40
countries concerned which were sold at prices undercutting those of
the Community industry. The resulting injurious situation could becontained as long as the volume imported was limited. However, thehigh volume of subsidised imports, which suddenly flooded on the
Community market in a very short time during the investigation period,
caused a price depression, which had a significant impact on thefinancial situation of the Community industry. This situation leaves theCommunity industry in a seriously weakened position and this industry
has an interest in it being corrected.
(315) During the period examined, the Community industry, as well as other
producers located in the Community, undertook important rational-
isation and restructuring projects that are still going on at present. Therealisation of these projects is important in view of the globalisation ofthe steel market. This activity of the Community industry at a
worldwide level demonstrates its adaptability, its competitiveness and
viability.
(316) With measures in force, employment, which increased during the
period examined, could be maintained and possibly increased,depending on the evolution of consumption. The results of theinvestigation have shown that the Community industry lost significant
sales volume and saw its prices decrease, in particular towards the end
of the investigation period. The proposed countervailing duties, whichamount to around 6 % for cooperating exporting producers on aweighted average level, should allow the Community industry to
recover from its injurious situation by either increasing its own prices
and/or sales quantities.
(317) In view of the inadequate profitability in 1996 and 1997 and the
material injury suffered during the investigation period, it is highlyprobable that the financial situation of the Community industry willdeteriorate further in the absence of any measures to correct the
negative effects of subsidised imports. This may ultimately lead to cuts
in production or closures of certain facilities and therefore threatenemployment in the Community.
3.Interest of users and related activities in the Community
(318) In order to evaluate the impact on users of taking or not taking
measures, the Commission sent questionnaires to the known users on
the Community market. An on-the-spot investigation took place at the
premises of a major user in order to verify the information submitted.The following conclusions are based on the responses received fromusers.
(319) Users were found to have themselves imported 40 % of total imports of
hot-rolled coils from the countries concerned. They employ 4 000
people in the Community.
(320) Users claimed that in the event of the imposition of measures, they
would no longer have a choice in their sources of supply and they
feared that they would become entirely dependent on the goodwill of
the Community producers. In particular it was claimed that theseproducers had to supply a large captive market and that they already
held a share of 75 % of the Community free market. They recalled that
these producers’ sales on the captive market as well as a large share oftheir sales on the free market was destined for related companies,whose downstream products were in direct competition with their own
products. The users in question also indicated that the Community
industry supplied independent users only after the requirements oftheir related companies had been fully satisfied. They also claimedthat the related user companies already bought the product concerned
below the market price. Under these circumstances, the users were of
the opinion that the imposition of countervailing measures would givethe Community industry a decisive and unjustified competitiveadvantage in the downstream markets which would not be in the
interest of the Community.
(321) Finally, these users claimed that the imposition of countervailing duties
was likely to cause shortage of supply for independent buyers, as was
the case in the Community market at the end of 1997. This situationwould clearly be an infringement to the ECSC Treaty.
(322) It is to be noted that the purpose of the imposition of countervailing
measures is not to prevent users from importing hot-rolled coils from!B2000S0284 — EN — 05.02.2000 — 000.001 — 41
the countries concerned, rather to ensure that these imports are made at
non-injurious prices. Even with the imposition of countervailingmeasures, these products will always be present in the Communitymarket and will ensure that the choice of supply is maintained for users
companies.
(323) The Commission estimated that a weighted average countervailing
duty of 6 % on hot-rolled coils imported from the countries concernedmay prompt at maximum an increase of around 1,2 % in the overall
cost of the user companies’ raw materials. This extra cost would cause
an estimated increase in the full cost of production of about 0,8 %,given the mix of various sources of purchases and the average value
added in the downstream products.
(324) This estimated extra cost of pr oduction incurred by the user
companies, either charged or not to the subsequent purchasers, is notsuch as to endanger the profitability of the user industries. Moreover,
this cost should be seen in the light of expected positive developments
in the hot-rolled coils markets when governed by effective tradeconditions.
(325) Concerning the level of sales price in the free market, it is recalled that
no significant differences were found between the prices applied by the
Community industry to related and unrelated customers. Moreover, theclaim purporting that the Community industry did not supply or had
set up priorities for its supplies of hot-rolled coils depending on the
relationship with the purchaser during the period examined cannot betaken into consideration as no evidence in this respect has been madeavailable. More to the contrary, it has been found that certain sales
contracts concluded with the Community industry were cancelled.
(326) Based on the foregoing, it is considered that any negative effects on
users from taking measures against subsidised imports from thecountries concerned cannot outweigh the positive effects from which
all the other operators active on the Community market will benefit.
4.Consequences on competition in the Community market
(327) Some parties claimed that countervailing measures would reduce
competition on the Community market, encouraging the creation ofbig steel groups. They argued that in the recent past major steel
companies, such as British Steel and Sollac, had increased in size by
merging with or by purchasing other steel companies. These groups arealso in competition in the downstream products with independent
users, mostly small and medium-sized enterprises. The consequences
of such a concentration may be the disappearance of many independentusers resulting in the reduction of employment in the Community.
(328) Concerning the alleged restriction in competition, it is recalled that
there are a number of alternative sources of supply such as Russia,
Indonesia, Hungary, Romania, South Korea, Slovakia, Brazil, etc.exporting hot-rolled coils to the Community. There are also severalhundred SSCs, stockholders and dealers selling the product concerned
mainly to small and medium-sized users. Finally, there are several
Community steel producers, in addition to the Community industry,located in Finland, France, Austria and Greece.
(329) Furthermore, given that the level of the measures proposed is not such,
from an economic point of view, to foreclose the Community market tothe countries concerned there appears to be no risk of restrictingcompetition in the Community market.
5.Shortage of supply on the Community market
(330) Certain exporting producers from the countries concerned and users in
the Community claimed that the imposition of countervailingmeasures would cause a shortage of supply, in particular forindependent user industries. This claim was based on the fact that
the Community industry alone is not able to supply the whole
Community free market in particular given its current high capacityutilisation levels.
(331) Other interested parties claimed that the Community industry does not
have the capacity to supply its own related companies in the free
market and, is therefore not in the position to compensate for any!B2000S0284 — EN — 05.02.2000 — 000.001 — 42
decrease in imports caused by the imposition of countervailing
measures.
(332) In this respect it should be noted that as the producers in the
Community cannot supply the whole of the free market, imports from
third countries will always be needed and the Community market will
always been open to such imports, provided they are made in respect ofthe provisions of the Basic Decision.
(333) In any event, the Community industry, other producers in the
Community and exporting producers in other third countries will be
able to continue to supply the Community market. The exportingproducers in the countries concerned will also be able to continue tosupply the Community market given that the measures proposed are
not such as to close the market to them.
(334) Based on the above facts and considerations, the claim that the
imposition of countervailing measures will entail a shortage of supplyis not considered to be founded.
6.Conclusion on the Community interest
(335) The Commission considers that the imposition of countervailing duties
is necessary to prevent further imports of low-priced subsidised
imports and avoid the situation of the Community industry todeteriorate further. Moreover, the imposition of countervailingmeasures in the present case will re-establish effective competitive
conditions for all operators in the Community. Furthermore, having
examined the various interests involved in the present proceeding, nocompelling reasons were found to exist against the imposition ofdefinitive countervailing measures. The imposition of definitive
countervailing measures is therefore not against the Community
interest.
H. DEFINITIVE MEASURES
(336) Having established that the subsidised imports originating in India and
Taiwan have caused material injury to the Community industry and
that there are no compelling reasons not to take action, definitivecountervailing measures should be adopted.
1.Injury elimination level
(337) For establishing the level of duty, account has been taken of the
subsidy margins found and of the amount of the duty necessary to
eliminate the injury caused by subsidised imports to the Community
industry. The necessary price increase was determined on the basis of acomparison of the weighted average import price, as established for theundercutting calculations, with the non-injurious price of the different
types of hot-rolled coils sold by the Community industry on the
Community market.
(338) It was considered that the amount of duty necessary to remove the
effects of injurious subsidisation should allow the Community industry
to cover its costs of production and obtain a reasonable profit on sales.
In this respect, it was considered that the profit margin before tax of12,9 % on turnover claimed by the Community industry was anappropriate basis, regard being given to the need for long-term
investments and for a rate of return, which the Community industry
could reasonably expect in the absence of injurious subsidisation.
(339) Accordingly and given the profit rate realised by the Community
industry during the investigation period, injury elimination levels were
determined on a type-by-type basis as the difference between the
actual net sales price of the Community industry and the actual netsales price of the comparable imported models. The difference was
then expressed as a percentage of the cif import price at the
Community frontier customs duty unpaid.
2.Level of definitive duties
(340) In the light of the foregoing, it is considered that a definitive
countervailing duty should be imposed at the level of the subsidy!B2000S0284 — EN — 05.02.2000 — 000.001 — 43
margin found, but should not be higher than the injury margin set out
above in accordance with Article 15(1) of the Basic Decision.
(341) The rates of countervailing duty applicable to the free-at-Community-
frontier price, before duty, shall be:
(%)
Country/company Injury margin Total subsidy MarginProposed countervail-
ing duty
India 23,8 13,1 13,1
Essar 6,4 4,9 4,9SAIL 23,8 12,3 12,3
TISCO 6,4 8,7 6,4
Taiwan 29,3 4,4 4,4
CSC 8,9 4,4 4,4
Yieh Loong 3,9 0,3 0,0
(342) The individual company countervailing duty rates specified in this
Decision were established on the basis of the findings of the presentinvestigation. Therefore, they reflect the situation found during that
investigation with respect to the above companies. These duty rates (as
opposed to the country-wide duty applicable to ‘all other companies’)are thus exclusively applicable to imports of products originating in the
country concerned and produced by the companies and thus by the
specific legal entities mentioned. Imported products produced by anyother company not specifically mentioned in the operative part of thisDecision with its name and address, including entities related to those
specifically mentioned, cannot benefit from these rates and shall be
subject to the duty rate applicable to ‘all other companies’.
(343) Any claim requesting the application of these individual company
countervailing duty rates (e.g. following a change in the name of theentity or following the setting up of new production or sales entities)should be addressed to the Commission (
1) forthwith with all relevant
information, in particular any modification in the company’ s activities
linked to production, domestic and export sales associated with e.g.that name change or that change in the production and sales entities.The Commission, if appropriate, will, after consultation of the
Advisory Committee, amend the Decision accordingly by updating
the list of companies benefiting from individual duty rates.
(344) In the case of India, in order to avoid granting a bonus for
non-cooperation, it was considered appropriate to establish the dutyrate for the non-co-operating companies as the sum of the highest level
established per individual subsidy programme for the cooperating
companies, i.e. 13,1 %.
(345) The limited cooperation of Taiwanese exporters may also have
warranted the establishment of a higher residual duty. However, since
the residual dumping margin in the parallel anti-dumping case againstTaiwan exceeds the injury threshold, it is not necessary to make such a
calculation.
3.Undertakings
(346) Exporting producers in India have offered a price undertaking in
accordance with Article 13(1)(b) of the Basic Decision.
(347) The Commission considers that the undertakings offered by the
exporting producers in India can be accepted. The acceptance of theprice undertaking should be conditional on the presentation to theMember States’ customs services of a valid undertaking invoice clearly
identifying the producer and containing the information listed in the
Annex. Where no such invoice is presented, the appropriate rate ofcountervailing duty will be payable.!B
(1) European Commission, Trade Directorate-General C DM 24 — 8/38, Rue de la
Loi/Wetstraat 200, B-1049 Brussels.2000S0284 — EN — 05.02.2000 — 000.001 — 44
(348) It should be noted that in the event of a breach or withdrawal of the
undertaking a countervailing duty may be imposed, pursuant to Article(9) and (10) of the Basic Decision.
I.TERMINATION OF THE PROCEEDING
(349) In view of the findings on the level of imports originating in South
Africa, the proceeding with respect to this country should beterminated,
HAS ADOPTED THIS DECISION:
Article 1
1. A definitive countervailing duty is hereby imposed on imports of certain
flat rolled products of iron or non-alloy steel, of a width of 600 mm or more,not clad, plated or coated, in coils, not further worked than hot-rolledoriginating in India or Taiwan falling within CN codes 7208 10 00,
7208 25 00, 7208 26 00, 7208 27 00, 7208 36 00, 7208 37 10, 7208 37 90,
7208 38 10, 7208 38 90, 7208 39 10, 7208 39 90.
2. The rates of duty for products manufactured by the companies listed in
the table below applicable to the free-at-Community-frontier price, beforeduty, shall be:
Country CompanyRate of AS duty
(%)TARIC additional
code
India Essar Steel Ltd, 27th KM, Surat Hazira Road, Hazira 394270,
Dist: Surat, State: Gujarat4,9 A119
The Steel Authority of India Limited, Central Marketing
Organisation, Transport and Shipping Department, Ispat Bha-wan, 40, Jawaharal Nehru Road, Calcutta — 700 07112,3 A120
Tata Iron & Steel Company Limited, 43 Chowringhee Road,
Calcutta — 700 0716,4 A121
All other companies 13,1 A999
Taiwan China Steel Corp., 1 Chung Kang Road, Hsiao Kang, Kaohsiung
812334,4 A071
"
C1Yieh Loong Enterprise Co., Ltd 3 317 Yu Liao Road,
Chiao Tou Hsiang, Kaohsiung Hsien0,0 A072
All other companies 4,4 A999
3. Notwithstanding paragraph 1, the definitive countervailing duty shall not
apply to imports released for free circulation in accordance with the
provisions of Article 2.
4. Unless otherwise specified, the provisions in force concerning customs
duties shall apply.!B
!M1
!B2000S0284 — EN — 05.02.2000 — 000.001 — 45
Article 2
1. The undertakings offered in connection with this anti-subsidy proceeding
by:
Company CountryTARIC additional
code
Essar Steel Ltd, 27th KM, Surat Hazira Road, Hazira 394270,
Dist: Surat, State: GujaratIndia A083
The Steel Authority of India Limited, Central Marketing
Organisation, Transport & Shipping Department, Ispat Bhawan40, Jawaharlal Nehru Road, Calcutta — 700 071India A084
Tata Iron & Steel Company Limited, 43 Chowringhee Road,
Calcutta — 700 071India A075
are hereby accepted.
2. Imports pursuant to these undertakings, when released for free
circulation, shall be exempted from the countervailing duty set in Article
1(2) when they are manufactured and directly exported and invoiced to an
importing company in the Community by a company listed in the table ofparagraph 1 and declared under the appropriate TARIC additional code.
The exemption shall be conditional upon presentation to the relevant Member
State’s customs services of a valid undertaking invoice issued by the exportingcompany containing the essential elements listed in the Annex.
Article 3
Pursuant to Article 24(6) of Decision (EC) No 1889/98/ECSC, Member
States’ reports to the Commission shall indicate for each release for free
circulation, the year and month of import, the Combined Nomenclature,
TARIC and TARIC additional codes, the type of measure, the country oforigin, the quantity, the value, the countervailing duty, the Member State of
import and, where appropriate, the serial number of the production certificate.
Article 4
The anti-subsidy proceeding concerning imports of certain flat-rolled
products of iron or non-alloy steel, of a width of 600 mm or more, not
clad, plated or coated, in coils, not further worked than hot-rolled originatingin South Africa is hereby terminated.
Article 5
This Decision shall enter into force on the day of its publication in the Official
Journal of the European Communities .
This Decision shall be binding in its entirety and directly applicable in all
Member States.!B
!M1
!B2000S0284 — EN — 05.02.2000 — 000.001 — 46
ANNEX
Elements to be indicated in the undertaking invoice referred to in Article 2(2)
1. The product reporting code number (PRC) (as established in the undertaking
offered by the exporting producer in question), including type and CN code.
2. The exact description of the goods, including:
— invoice number,
— invoice date,— the ‘company product code’ (CPC),
— the TARIC additional code under which the goods on the invoice may be
customs-cleared at Community borders (as specified in the Decision),
— quantity (to be given in kilos),
— minimum price applicable.
3. The description of the terms of the sale, including:
— price per kilo,— the applicable payment terms,
— the applicable delivery terms,
— total discounts and rebates.
4. Name of the importer to which the invoice is issued directly by the company.
5. The name of the official of the company that has issued the undertaking invoice
and the following signed declaration:
6. ‘I, the undersigned, certify that the sale for direct export to the European
Community of the goods covered by this invoice is being made within the scope
and under the terms of the undertaking offered by … (name of the company), and
accepted by the European Commission through Decision No 284/2000/ECSC. Ideclare that the information provided in this invoice is complete and correct.’!
B2000S0284 — EN — 05.02.2000 — 000.001 — 47