2000S0284 — EN — 23.05.2002 — 002.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COMMISSIONDECISIONNo284/2000/ECSC
of4February2000
imposingadefinitivecountervailingdutyonimportsofcertainflatrolledproductsofironornon-
alloysteel,ofawidthof600mmormore,notclad,platedorcoated,incoils,notfurtherworkedthan hot-rolled, originating in India and Taiwan and accepting undertakings offered by certainexporting 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
►M1Commission Decision No 2071/2000/ECSC of 29 September 2000 L 246 32 30.9.2000
►M2Commission Decision No 842/2002/ECSC of 21 May 2002 L 134 18 22.5.2002
Corrected by:
►C1Corrigendum, OJ L 119, 20.5.2000, p. 39 (2000/284/EC)
▼B
COMMISSIONDECISIONNo284/2000/ECSC
of4February2000
imposingadefinitivecountervailing dutyonimportsofcertain flat
rolled productsofironornon-alloysteel, ofawidthof600mmormore, not clad, plated or coated, in coils, not further worked thanhot-rolled, originating in India and Taiwan and accepting under-
takings offered by certain exporting producers and terminating
theproceedingconcerningimportsoriginatinginSouthAfrica
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Coal and SteelCommunity,
Having regard to Commission Decision No 1889/98/ECSC of 3
September 1998 on protection against subsidised imports from coun-
tries not members of the 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 the Official Journal of the European Commu-
nities(2) the initiation of an anti-subsidy proceeding with regard
to imports into the Community of certain flat rolled products ofiron 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, 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
major proportion of the total Community production of the
product concerned within the meaning of Articles 9(1) and10(7) Decision (EC) No 1889/98/ECSC (hereinafter referred toas the ‘Basic Decision’). The complaint contained evidence ofsubsidisation 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
producers’) and importers as well as their representative associa-tions known to be concerned, the representatives of the exportingcountries and the complaining Community producers of theinitiation of the proceeding. 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 toArticle 11(5) of the Basic Decision, the Commission also gavethe parties directly concerned the opportunity to make theirviews known in writing and to request a hearing.
(4)Certain exporting producers, complaining Community producersand 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 of the proceeding and that there were particularreasons why they should be heard, were granted such a hearing.2000S0284 — EN — 23.05.2002 — 002.001 — 2
(1) OJ L 245, 4.9.1998, p. 3.
(2) OJ C 5, 8.1.1999, p. 2.
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(5)All parties were informed of the essential facts and considera-
tions on the basis of which it was intended to recommend:
(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 wereconsidered and, where appropriate, the definitive findings have
been modified accordingly.
(7)The Commission sought and verified all the information itdeemed 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— ILVA 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, CalcuttaSteel 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 Kingdom
Macsteel International Belgium NV,
Antwerpen, Belgium
Macsteel International Stahlhandel GmbH,
Düsseldorf, Germany.
(8)The investigation of subsidy covered the period from 1 January
1998 to 31 December 1998 (hereinafter referred to as the ‘inves-tigation period’ or ‘IP’). The examination of injury covered theperiod from 1 January 1995 up to the end of the subsidy investi-gation period (hereinafter also referred to as the ‘periodexamined’).2000S0284 — EN — 23.05.2002 — 002.001 — 3
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B.PRODUCTCONCERNEDANDLIKEPRODUCT
1.Productconcerned
(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
or coated, in coils, not further worked than hot-rolled (herein-
after ‘hot-rolled coils’). This product is currently classifiablewithin CN codes 7208 10 00, 7208 25 00, 7208 2600,720827 00, 7208 3600, 7208 37 10, 7208 37 90(
1), 7208 3810,
720838 90, 7208 3910, 7208 39 90.
(10)Hot-rolled coils are generally obtained in steel mills by hotrolling semifinished steel products after the final rolling pass orafter pickling or continuous annealing. Hot-rolled coils arewound 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 manufac-turing other steel products (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 thirdcountries into the Community consist of ‘structural steels’ (suchas S235 and S275 according to ‘Euronorm’ EN 10025) and ‘mildsteels’ (such as DD11, DD12, DD13 according to EN 10011 and
the ‘Deutsche Industrie-Norm’ DIN 1614/1). Coils are conven-
tionally between 1,5 and 15 mm thick and from 600 to2 050 mm wide. Each of the CN codes listed above correspondsto a specific product type as differentiated by width and thick-ness within the above ranges.
(11)The product concerned is also classified into two distinct cate-gories according to its finishing: black hot-rolled coils(hereafter referred to as ‘black coils’) which are the basicproduct and pickled hot-rolled coils (hereafter referred to as‘pickled coils’) which, after being hot-rolled, go through an addi-tional surface treatment called pickling. The distinction between
black coils and pickled coils is also reflected in the structure of
the Combined Nomenclature as coils classified under the twocategories 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 thus all the different products listed above. Notwith-standing the fact that each CN code corresponds to adistinguishable type of hot-rolled coil, it was found that they allhave identical or similar physical and technical characteristics,uses and applications. Accordingly, all types of hot-rolled coils
form one single product falling under the CN codes listed in
recital 9.
2.Likeproduct
(13)The investigation has shown that the hot-rolled coils imported
from the countries concerned are identical to or comparable tothe Community-produced products, in particular in terms of thegrades and the range of dimensions available.
(14)Some exporting producers claimed that the product concernedwhich they produce and sell is not interchangeable and notcomparable as such with the Community-produced product.They claimed that the production process of the Community
producers was more advanced and even used different tech-
nology, thus producing a higher quality product. Theymentioned that users sometimes had to re-roll the importedproducts before they could be processed further. They thereforeclaimed that their product was not a like product to that of thecomplaining Community producers.2000S0284 — EN — 23.05.2002 — 002.001 — 4
(1) See corrigendum published in OJ C 107, 16.4.1999, p. 6.
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(15)Obviously, any difference in the production process resulting in
surface or chemical defects may lead to a lower market value.
However, the investigation showed that, in general both theCommunity-produced product and the imported product stillhave the same basic physical characteristics and uses, eventhough the products are not identical, in particular in terms ofquality, 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 soldin the Community.
(16)The investigation also showed that the grades and dimensions ofthe product concerned imported from the countries concerned are
identical or 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 inthe countries concerned, hot-rolled coils exported to the Commu-nity from these 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 BasicDecision.
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
investigated the following five schemes, which allegedly involvethe 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 (Develop-
ment 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 issue notifications regarding export and import policy.
These are summarised in ‘Export and Import Policy’ documentswhich are issued every five years and updated every year. TwoExport and Import Policy documents are relevant to the investi-gation period of this case i.e. the five-year plans relating to theyears 1992-1997 and 1997-2002.
(20)The last scheme, the Income Tax Scheme, is based on theIncome Tax Act of 1961 which is amended yearly by theFinance Act.
b)PassbookScheme(PBS)
(21)One instrument under the Export and Import Policy involving
export-related assistance is the PBS which entered into force on30 May 1995.
Eligibility
(22)The PBS is available to certain categories of exporters i.e. those
which manufacture in India and subsequently export (Manufac-turer-exporters) and exporters, whether manufacturers or onlytraders, granted an ‘Export House/Trading House/Star TradingHouse/SuperStar Trading House certificate’. The latter categoryof exporters, which is defined in the Export and Import Policy2000S0284 — EN — 23.05.2002 — 002.001 — 5
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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.
c)DutyEntitlementPassbookScheme(DEPB)
(24)Another instrument under the Export Import Policy involving
export related assistance is the DEPB which became effectiveon 7 April 1997. The DEPB constitutes the successor to thePBS which was terminated on 31 March 1997. The DEPB is oftwo 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 manufac-
turer-exporters (i.e. every manufacturer in India who exports) ormerchant-exporters (i.e. traders) linked with manufacturers. Tobe eligible under this scheme, the company must have exportedduring 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 offset customs duties due on future imports of goods. Thevalue of the licence is calculated on the basis of 5 % of theaverage 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 12months from the date of issue. Once the credit on the licence hasbeen exhausted, a fee is payable to the relevant authority. Thecompany may then apply for a further credit amount, againcalculated on the basis of 5 % of the average value of exportsduring the previous three years.
(28)The DEPB on pre-export basis allows duty-free imports of inputsrequired for the production of goods in the factory of thecompany concerned. Determination of what products may beimported duty free is made by reference to the inputs listed inthe Standard Input-Output Norm (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, ordisposed of in any manner whatsoever by the company, otherthan as a constituent part of the finished 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 under-
takes to use the goods as inputs for finished products destinedfor export. Export will attract a benefit based on the type andquantity of finished product. The benefit is calculated by refer-ence to the SION. Once the licence holder has made exports of
such a value which will entitle him to a benefit equivalent to the
credit already given under DEPB on pre-export basis, his obliga-tion is fulfilled.2000S0284 — EN — 23.05.2002 — 002.001 — 6
(1) For an explanation of the SION programme please see Commission Regula-
tion (EC) No 1156/98, (OJ L 202, of 18.7.1998, p. 40).
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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 theprovisions of Annex I(i) to the Basic Decision, and, as such, isnon-countervailable. Annex II and III to the Basic Decision giveguidelines on the determination of whether such schemes areexport subsidies.
(31)The DEPB pre-export is a value based scheme. The SOGN setsnotional costings based on what are considered to be the value ofinputs that have to be imported to manufacture a particularproduct. 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 allof the inputs on the SION list. The only limits to the quantity ofany particular input that may be imported under the scheme isthe value of the licence granted and the corresponding commit-
ment 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 theinputs on the domestic market, would be able to import excess
duty-free inputs that could be used in its domestic production.
There would appear to be no provision within the SIONprogramme to prevent such a situation arising. Neither wasevidence found of any other system or procedure in place toconfirm either which duty-free inputs are actually consumed inthe 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 theexporting country does not have a verification system in place,
a further examination by the exporting country based on actual
inputs involved, or actual transactions, respectively, willnormally need to be carried out in the context of determiningwhether an excess payment occurred. The GOI did not carryout such an examination.
(34)However, the only Indian exporter in this investigation to use thescheme has provided to the Commission proof that they receivedno excess benefit. The company was able to establish that allbenefits under the DEPB pre-export scheme during the POIwere offset by the duty normally payable only on inputs
consumed in finished exported product. 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
finished products. Such DEPB rates have been established bythe Indian authorities for most products, including the productsconcerned, on the basis of the SION. A licence stating theamount of credit granted is issued automatically.
(37)DEPB on post-export basis allows for the use of such credits forany subsequent imports (e.g. raw materials or capital goods) noton the Negative List of Imports. Such imported goods can besold on the domestic market (subject to sales tax) or used other-wise.2000S0284 — EN — 23.05.2002 — 002.001 — 7
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(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 inputswere actually used for export production or in what quantities.Indeed a company can claim a licence irrespective of whether itmakes any imports or purchases imported goods from other
sources. The scheme cannot therefore be considered as a duty
drawback or substitution scheme, since the remission of importduties is not limited to that payable on goods consumed in theproduction process and therefore an excess remission isinvolved, in accordance with Article 2(1)(a)(ii). It is thereforecountervailable under Article 3(4)(a) of the Basic Decision, since
it involves revenue foregone and is contingent upon export
performance.
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 theamount of customs duty normally due on imports made duringthe investigation period but which remained unpaid under theDEPB.
(43)In the event the company sold its licences, the benefit was calcu-lated on the basis of the amount of credit granted in the licenceregardless of the sales price of the licence. The three exportingproducers 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 the credits in the licence. However, thisclaim cannot be granted since the sale of a licence at a priceless than the face value is a pure commercial decision whichdoes not alter the amount of benefit received from the scheme.
(44)In order to establish the full benefit to the recipient under thisscheme, this amount has been adjusted by adding interest duringthe investigation period. It is normal practice to reflect the
benefit to the recipient of one-time grants by adding the annual
commercial interest to the nominal amount of the grant, on theassumption that the grant is considered to have been made onthe first day of the investigation period. However, in the presentcase, it is clear that individual grants can be made at any timebetween the first and the last day of the investigation period.
Consequently, instead of adding commercial interest to the
whole amount, it is considered appropriate to assume that anaverage grant would have been received at the mid-point of theinvestigation period, and therefore the interest should cover aperiod of six months, equivalent to half of the commercial rate
during the IP in India, i.e. 7 %. This amount has been allocated
over total exports during 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 thebenefits under these schemes was incorrect since only the excessduty drawback could be considered a subsidy in accordance withArticle 2 of the Basic Decision.2000S0284 — EN — 23.05.2002 — 002.001 — 8
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(46)Article 2(1)(a)(ii) provides for an exception for, inter alia , draw-
back and substitution drawback schemes which conform to the
strict rules laid down in Annex I(i) and Annex II (definitionand rules for drawback) and Annex III (definition and rules forsubstitution drawback).
(47)As the analysis of the Commission revealed that the DEPB postexport scheme is not a properly constituted drawback or a substi-tution drawback scheme, the question of any excess dutydrawback does not arise, 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 investi-
gation period and obtained subsidies of between 4,1 % and
12,3 %.
d)ExportPromotion CapitalGoodsScheme(EPCGS)
(49)Another instrument under the Export Import Policy involving
export related assistance is the EPCGS introduced on 1 April
1990 and amended on 5 June 1995.
Eligibility
(50)The EPCGS is available to manufacturer/exporters (i.e. every
manufacturer 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.
Practical implementation
(51)To benefit from the scheme, a company must provide to the rele-
vant authorities details of the type and value of capital goodswhich are to be imported. Depending on the level of exportcommitment which the company is prepared to undertake, thecompany will be allowed to import capital goods at either azero rate of duty or a reduced rate. A licence authorising the
import at preferential rates is issued automatically.
(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 financialcontribution by the GOI, revenue otherwise due is foregone anda benefit is conferred on the recipient by lowering the dutiespayable or fully exempting him from paying the import duties.
(55)The subsidy is contingent in law upon export performance withinthe meaning of Article 3(4)(a) of the Basic Decision, since itcannot 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 ofthe product concerned. This period has been established by usingthe weighted average (on the basis of production volume of theproducts concerned) of depreciation periods for capital goods
actually imported under the EPCGS by each company, resulting
into a normal depreciation period of 15,5 years. The amount socalculated which is attributable to the investigation period hasbeen adjusted by adding interest during the investigation periodin order to establish the full benefit to the recipient under thisscheme. Given the nature of this subsidy, which is equivalent to2000S0284 — EN — 23.05.2002 — 002.001 — 9
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a one-time grant, the commercial interest rate during the investi-
gation period in India, i.e. 14 % was considered appropriate. Theamount of subsidy has then been allocated over total exports
during 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
machinery imported under the EPCG scheme would be used for
both export and domestic production. It is further claimed thatthe true purpose of the scheme is to assist Indian companies toupdate their technology and to become more competitive on theinternational market (as well as to prevent a loss of foreignexchange), 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 to exporthas to be given. Therefore, the subsidy is deemed to be contin-gent upon export, and, in accordance with paragraph F(b)(I) ofthe 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 inthe 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 productconcerned was established in an EPZ or was an EOU. There istherefore no need for the Commission to assess this scheme inthe context of the investigation.
f)IncomeTaxExemptionScheme(ITES)
(61)The Income Tax Act 1961 is the legal basis under which the
ITES operates. The Act, which is amended yearly by the FinanceAct, sets out the basis for the collection of taxes as well asvarious exemptions/deductions which can be claimed. Among
the exemptions which can be claimed by firms are those covered
by Sections 10A, 10B and 80HHC of the Act.
(62)The Commission established that no producer of the productconcerned made a claim under the ITES during the IP. There is
therefore no need for the Commission to assess this scheme in
the context of the investigation.
g)Amountofcountervailable subsidies
(63)In view of the above, the total amount of countervailable subsi-
dies 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 8,72000S0284 — EN — 23.05.2002 — 002.001 — 10
(1) See OJ C 394, 17.12.1998, p. 6.
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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 Commissioninvestigated 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 Develop-ment Programme (SRIDP), and the General Export IncentiveScheme, were not investigated. At the time of the opening ofthe proceeding, the Government of South Africa (GOSA) had
already provided evidence showing that these programmes were
discontinued between November 1996 and July 1997. TheCommission, therefore, accepted that the exporters concernedcould have received no benefit from them during the investiga-tion period.
b)Termination
(66)For those schemes found to be used by the companies under
investigation, it was determined that the cumulative level ofbenefit varied from 0,10 % to 0,48 %. As this would representade minimis level of subsidisation in accordance with Article
14(5) of the Basic Decision, the Commission did not need to
further analyse the countervailability of each individual scheme.Instead, the Commission decided that this proceeding should beterminated in respect of South Africa without the imposition ofduties.
3. TAIWAN
a)Introduction
(67)On the basis of the information contained in the complaint and
the replies to the Commission's questionnaire, the Commissionservices investigated 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 UpgradingIndustries. The last scheme is based on the Statute for the Estab-
lishment and Administration of Science-based Parks and the
Statute for the Establishment and Management of Export Proces-sing Zones.
b)Tax credits for the purchase of automation and pollution
controlequipment
Legal basis
(70)The basic instrument involving economic development of the
Taiwanese industry is the Statute for Upgrading Industries2000S0284 — EN — 23.05.2002 — 002.001 — 11
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(SUI) which entered into force on 1 January 1991 and was last
amended on 27 January 1995. The Statute is supplemented bythe 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 implementa-tion of the scheme is regulated by the Measures Governing theApplication of Tax Deductions promulgated on 15 April 1991by 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 depen-dent 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 600000 (New Taiwan Dollars). The tax creditsfor the different types of investment can be cumulated. Theamount 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 purchaseamount against the corporate income tax payable for the current
year. In case the amount of income tax payable is less than the
deductible amount, the benefit may be carried over during thenext four years.
(75)The amount of tax credit is determined as follows.
For the purchase of domestically manufactured automated equip-
ment or pollution control equipment, the credit rate is 20 %. Forthe purchase of foreign made automated or pollution controlequipment, the credit rate is 10 %. For the purchase of tech-nology for automation production, the permissible credit is atthe rate of 10 %.
Practical implementation
(76)In order to obtain the tax credits, a company makes an applica-
tion for the issuance of a tax deduction certificate to theIndustrial Development Bureau (IDB) of the Ministry ofEconomic 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 deduction certificate, the local tax authorities willverify whether the equipment falls within the criteria of Article 6of the SUI and has effectively been installed. Once the certifi-cate is issued, the tax credit can be deducted in the taxdeclaration for the current year (item 95 on the tax declaration).
Countervailability
(77)The tax credits under Article 6 of the SUI constitute countervail-
able subsidies in the sense of Article 3(4)(b) of the BasicDecision. The tax credits constitute subsidies which are contin-gent upon the use of domestic over imported goods. Although
the programme provides for a tax credit for imported as well as
domestically produced equipment, the subsidy is doubled for thepurchase of domestic equipment and therefore, directly providesan incentive for the purchase of Taiwanese made equipment. Theverification revealed that the Taiwanese authorities tend tofavour the purchase of domestically manufactured equipment2000S0284 — EN — 23.05.2002 — 002.001 — 12
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over imported machinery by providing for a differentiated level
of benefit (20 % for domestic versus 10 % for imported equip-ment).
(78)The scheme constitutes a subsidy as the financial contribution bythe 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 there-fore deemed to be specific under Article 3(4)(b) of the BasicDecision.
(79)For the abovementioned reasons, it is considered that the taxcredits 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 inves-
tigation period in this proceeding corresponds with a tax year in
Taiwan i.e. 1 January 1998 to 31 December 1998). The totalamount of subsidy should be allocated over total sales sincethis subsidy benefits both domestic and export sales.
(81)The GOT and one company claim that the Commission shouldhave calculated the benefit from the subsidy to be the differencebetween the two rates i.e. 20 % tax credit for domesticallypurchased equipment and 10 % for imported equipment. The
Commission countervailed the full amount of tax credits since
the tax credit of 20 % for domestically purchased equipmentcannot be considered as a deviation from a standard tax creditrate of 10 %. The two tax credit rates should be considered asseparate programmes which are both specific for domesticallypurchased equipment and imported equipment respectively. In
the absence of the 20 % tax credit for domestically-produced
equipment, a company would have received no tax credit, sincethe 10 % rate only applies to imported machinery; it is not ageneral rate. Therefore, the Commission concluded that theamount of the subsidy is the total revenue foregone by the GOT.
(82)One company benefited from this scheme and obtained a benefitof 2,19 %.
c)Taxcreditsforinvestmentincertain 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
technology-based enterprise or an important invested enterprisedesignated by the government (invested company). The investingcompany should hold the registered stocks for a period of atleast two years. There is no precise definition of important tech-
nology-based enterprise. An important invested enterprise may
be any enterprise with a capital of TWD 2 billion providing ithas been designated as such by the GOT.
Amount of tax credit
(84)Any eligible company which invested in the abovementioned
enterprises may credit 20 % of the price paid for the acquisitionof 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
for the issuance of a tax deduction certificate to IDB. Prior to
issuing the tax certificate, IDB will verify whether the companyqualifies as a technology-based enterprise or whether theinvested enterprise was designated as an important investedcompany by the government authorities. Once the certificate isissued to the invested company, the investor may claim the tax2000S0284 — EN — 23.05.2002 — 002.001 — 13
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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 whichmake a specific investment. The verification revealed that theTaiwanese authorities in effect favour investment in certainsectors and enterprises.
(87)The scheme constitutes a subsidy as the financial contribution bythe GOT in the form of tax credits confers a benefit to exporters.It is a subsidy which is specific to certain enterprises in Taiwanpursuant to Article 3(2)(a) of the Basic Decision.
(88)The GOT claims that this programme does not constitute asubsidy since there is no financial contribution to investedcompanies. This is not correct. As explained above, a companywhich invests in certain enterprises obtains a tax credit for 20 %of the amount invested. A tax credit clearly constitutes a finan-
cial contribution by the GOT, i.e. revenue foregone in the sense
of Article 2(1)(a)(ii) of the Basic Decision and a benefit isthereby conferred to the investing company.
(89)The GOT and one company claim that this programme is gener-ally available and therefore non-specific, as it is open to all
companies investing in certain enterprises. The Commission,
however, found that the access to this programme is explicitlylimited to companies which invest in certain enterprises, sincenot all investments in stocks are eligible for tax credits. Onlyinvestments in a limited number of enterprises, i.e. importanttechnology-based or important invested enterprises 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 on applica-tion, 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 ofchoice is restricted on a sector-specific basis. Article 2 of theCriteria for determining the scope of major technology enter-prises with respect to manufacturing industry and technical-service industry limits the tax credit to 11 specific type of
investments. Consequently, the access to this programme is
dependent upon making investment in certain enterprises; it isnot generally available and is therefore countervailable underArticle 3(2)(a) of the Basic Decision.
(90)For the abovementioned reasons, it is considered that the taxcredits constitute countervailable subsidies.
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 duringthe investigation period. The amount of benefit should be allo-cated over the total turnover of the company during the
investigation period.
(92)One company benefited from this scheme and obtained a benefit
of 1,34 %.
d)TaxcreditsforR&Dandpersonneltraining
Legal basis
(93)The tax credits for R & D and personnel training are covered by
Article 6 of the SUI. Furthermore, the practical implementationof the scheme is regulated by the Measures governing the appli-cation of tax deduction for company investment in R & D,2000S0284 — EN — 23.05.2002 — 002.001 — 14
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personnel training and establishing a world-wide brand image
(hereinafter referred to as ‘the Measures’) promulgated on 15April 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 exportrequirement 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 000000 or 2 % of the net businessrevenue in the same taxable year, 15 % thereof may be deductedfrom the corporate income tax payable for that year. If the total
expenditure reaches TWD 2 000 000 and exceeds 3 % of the net
business revenue, 20 % of the exceeding amount may bededucted 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
600000 in the tax year, 15 % of the investment may bededucted 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 be carried 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 of Article 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 creditcan be deducted in the tax 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, agriculturaland service industries investing in R & D and personnel training.Furthermore, the eligible expenses are described in detail inArticle 2 (R & D) and Article 3 (personnel training) of theMeasures, and the eligible activities are of a type which may be
undertaken by firms in all sectors of the industry. There is no
discretion for the tax authorities to determine which investmentis eligible or not. Finally, the verification revealed that the taxcredits have in fact been used by all sectors of industry.
e)Othertaxcredits
(100)The following tax credits and exemptions were found to exist
but not to have been used by the exporting producers of theproduct 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 aScience-based park.2000S0284 — EN — 23.05.2002 — 002.001 — 15
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(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 energypurposes.
Practical implementation
(103)A company which has invested in eligible equipment has to
make an application to IDB or the Energy Commission whichincludes a description of the machinery and a copy of the cata-
logue for the machinery. IDB or the Energy Commission verifies
whether the machinery is eligible and issues a certificate. Whenthe corporate income tax return is filed with the tax authorities,the company submits the certificate(s) and a list of all itemswhich were approved for accelerated depreciation. The local taxauthorities will verify again whether the machinery falls within
the criteria of Article 5 of the SUI and 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, thefixed percentage on diminishing book-value method or theworking-hour method. The verification revealed that all
exporting producers of the products concerned used the straight-
line depreciation method which provides for the depreciation ofa fixed amount during the service life of the equipment.According to the Table of Service Life of Fixed Assets, eachtype of machinery has a fixed service life of between two andfifty 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 insteadof the normal depreciation period (i.e. seven years on averagein 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 verificationrevealed that despite the apparently objective criteria set out inArticle 5 of the SUI, one company used the provisions for accel-erated depreciation to depreciate all machinery and equipment in
a new production line as well as buildings. This machinery is
used for the production of steel products and has no direct effecton R & D, pilot products or energy saving. The Energy Commis-sion and the local tax authorities approved this request. Itappears that these investments do not fall within the criteria ofArticle 5 of the SUI, i.e. equipment used for energy saving, pilot
products or investments in R & D. Therefore, it should be
concluded that the granting authority has discretion in the deci-sion to grant the benefit of accelerated depreciation, and is ableto favour certain enterprises over others.
(107)After disclosure, the GOT claims that the certificate for acceler-ated depreciation was granted by the Energy Commission andnot IDB. After verification, the Commission services agree withthe GOT that the certificate was granted by the Energy Commis-sion for the alleged purchase of energy saving equipment.Nevertheless, the Commission still has to conclude that the2000S0284 — EN — 23.05.2002 — 002.001 — 16
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subsidy involved is countervailable in the sense of Article
3(2)(a) of the Basic Decision, since the criteria appear not to beadhered to by the granting authority in all cases and access to
the subsidy is therefore effectively limited, by means of discre-
tion, to certain enterprises. The company which made use of thisprogramme accelerated its depreciation on a large number ofitems which can clearly not be classified as energy savingsequipment, such as buildings. Therefore, the Commission
concludes that this programme confers a benefit to the product
concerned and is countervailable.
(108)One company submits that although it applied the accelerateddepreciation, it did not benefit from the programme since itsoverall depreciation amount under accelerated depreciation wasless during the 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 accordancewith its normal methodology, took into account only the taxsaving incurred by all items which were still being depreciatedduring the POI, comparing the amounts depreciated under the
normal and accelerated schedules. All items which were,
according to the accounts of the company, already fully writtenoff 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 depre-
ciation 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 calcu-
lated as the difference between the amount of tax that wouldhave been payable in the investigation period if the normaldepreciation rate was used and the amount of tax effectivelypaid under accelerated depreciation. The calculation of thedifference was made on the basis of all fixed assets (buildings
and machinery) which were still being depreciated in the inves-
tigation period. The amount of benefit should be allocated overthe total turnover of the company.
(111)One company made use of this programme and obtained abenefit of 0,60 %.
g)Importdutyexemption
Legal basis
(112)Chapters 84, 85 and 90 of the Customs Import Tariff and Classi-
fication of Import and Export Commodities of the Republic ofChina (hereinafter ‘the Customs Code’).
Eligibility
(113)Pursuant to the abovementioned provisions of the Customs Code,
a manufacturing company which imports machinery for thedevelopment of new products, quality upgrading, increase ofproduction, achievement of energy conservation, promotion ofrecycling or improvement of production techniques, which is
not yet being manufactured 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 themachinery. If IDB is satisfied that the machinery is not producedin Taiwan, it will issue a certificate which is sent to the appli-cant and the customs department. The customs services willverify whether the imported machinery is identical to the2000S0284 — EN — 23.05.2002 — 002.001 — 17
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machinery described in the IDB certificate. This verification is
undertaken on a random basis.
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 normal duty 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 thesubsidy, the programme as established will automatically be
disproportionately used by certain industry sectors. The industry
sectors whose machinery is produced in Taiwan will not beeligible to use this programme. Consequently, eligibility for theimport duty exemption is limited to industries which are obligedto import machinery since the machinery is 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 importedmachinery does not constitute a subsidy in the sense of Article2(1)(a) of the Basic Decision. However, for the Commission, it
is clear that an exemption from import duties constitutes revenue
foregone for the GOT whereby a benefit is conferred to theimporter of the machinery. This constitutes a subsidy in thesense of Article 2(1)(a)(ii) of the Basic Decision. The GOTfurther claims that if the programme was a subsidy, it is not
countervailable under Article 3(2)(a) of the Basic Decision. The
Commission is of the view that an import duty exemption forcertain imported machinery which is not produced domesticallyprovides by definition for a benefit to certain companies whichare 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 exemptedfrom it, this is a subsidy 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 in the complaint which led to the initiation of theinvestigation. The Commission notes that the complainant listedthe import duty exemption for machinery and equipment in thecomplaint (page 9 Section B.2.2.2). Although the complainant
stated that such a programme is available for companies located
in tax exempt zones, science-based industrial parks or bondedfactories, the Commission considers that this information consti-tutes sufficient evidence to commence an investigation regardingimport duty exemption for machinery. Furthermore, it is the roleof the investigating authority to determine the correct legal basis
and practical implementation of any programme which is alleged
in the complaint. For these reasons, the Commission hasincluded this programme in the investigation and the claim ofthe exporter cannot be accepted.
(119)Therefore, it is considered that the import duty exemption onmachinery constitutes a countervailable subsidy in the sense ofArticle 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 this scheme. This amount should be allocated over the
normal service life of the machinery in this industry, i.e. sevenyears.
(121)Two companies made use of this programme and obtained bene-fits of 0,27 % and 0,32 %.2000S0284 — EN — 23.05.2002 — 002.001 — 18
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h)Othersubsidies
(122)The complainant alleged that the exporting producers of the
product concerned benefited from a number of other subsidy
programmes. The questionnaire response and the verification
visits at the GOT and at the exporters revealed that theprogrammes listed below were not used by the exporting produ-cers.
(123)Loans at preferential interest rates. During the verification visits,it was established that loans were provided by the Chiao Tung
Bank and the Medium Business Bank of Taiwan to one exporter
but at normal commercial conditions.
(124)Benefits for companies in export processing zones (EPZ) andindustrial parks. None of the companies under investigation(nor their related companies) were located in an EPZ or indus-trial 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 devel-opment or scant natural 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
this programme.
i)Totalamountofsubsidy
(127)The amount of subsidy was calculated according to the metho-
dology set out above. In addition, in order to encompass the
full benefit to the companies concerned, interest was added at
the average commercial interest rate in Taiwan during the inves-tigation period, i.e. 8 %.
(128)One exporter claims that the addition of an interest amountresults in an overestimating of the subsidy amount. In regard tothis claim, the interest element is added in order to reflect the
benefit to the recipient obtained 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 bench-mark for the calculation of the subsidy is the equivalent cost offunds on the commercial market. It should also be stated that the
ASCM does not preclude the addition of an amount for interest
for the purpose of calculating the total amount of benefit to arecipient under a subsidy scheme. Thus, the Community's consis-tent practice in this area since the adoption of revised legislationfollowing the conclusion of the Uruguay Round, has been to addan amount for interest in calculating the total benefit in such
cases. This claim should therefore be rejected.
(129)The following subsidy rates for the cooperating companies were
established:
(%)
China Steel
CorporationYieh Loong Enter-
prise Co. Ltd
Tax credit (automation and pollution control
equipment) 2,19 0
Tax credit (investment in certain enterprises) 1,34 0Accelerated depreciation 0,60 0Import duty exemption 0,27 0,32
Total amount of subsidy 4,40 0,322000S0284 — EN — 23.05.2002 — 002.001 — 19
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(130)For information, it should be noted that the weighted average
country-wide subsidy margin for the two exporting producers
investigated, which account for about half of the exports to theCommunity originating in Taiwan, expressed as a percentage ofthe cif price at Community frontier level is 2,77 %. which issignificantly above the de minimis threshold for Taiwan (i.e.
1 %). In addition, it cannot be excluded that the country-wide
margin would be higher taking into account possible benefits
received by non-cooperators.
D.COMMUNITYINDUSTRY
1.DeterminationoftherelevantCommunitymarket
(131)For the purposes of establishing whether the Community
industry had suffered injury and, in this context, for determining
consumption and the various economic indicators related to the
situation of the Community industry, it had to be examinedwhether production of this industry destined for the captivemarket should be excluded for the purposes of this analysis orwhether 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 used in a captive market, i.e. they are further
transformed by these producers in an integrated process (herein-after referred to as ‘captive market’). These hot-rolled coilsfollow an internal process of transfers to downstream processingworks, for which no invoices are issued since the transfers occurwithin the same legal entity. The remaining production (herein-
after referred to as ‘free market’) is sold to both related 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 competitionwith subsidised imports. Consequently, the imports subject toinvestigation could not affect this market. In parallel, thecomplainant has claimed that the remaining production wassold 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’), steelmerchants and stockholders. Only the hot-rolled coils sold onthe free market are subject to the complaint.
(134)Exporting producers and importers of hot-rolled coils onto theCommunity 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 market made by the complainant was arbitrary. Theytherefore requested that the assessment of the Communitymarket should include the captive market and the free markettaken together.
(135)In support of this claim, reference was made to the Gimelecjudgment(
1) of the European Court of Justice. They stated that
in the abovementioned ruling, the Court referred to the following
factors to 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 thesame price,2000S0284 — EN — 23.05.2002 — 002.001 — 20
(1) Case C-315-90 of 27.11.1991.
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— companies on the downstream market used to buy the
product concerned not only from related Communitysuppliers but also from importers or other unrelated produ-
cers.
(136)Some exporting producers claimed that, in the light of the above
judgement, the legal conditions to separate the markets were notmet in the present case. They considered that Community produ-cers could choose, depending on market conditions, to sellalternatively to the free and captive markets since Communityproduction of the two categories of hot-rolled coils is alike. It
was claimed that the alleged movements between the two
segments of the market legally prevented the exclusion of partof Community production from the examination of injury, andin 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 in particular, the Community producers of theproduct concerned merely physically transferred, withoutinvoicing, hot-rolled coils intended for the captive market.No invoices were issued since the parties involved did nothave separate legal identities. As a result, there were, within
the captive market, no prices for transfers comparable to
those in the free market.
(b) the Community industry did not produce for stockpiling hot-
rolled coils which could subsequently be delivered either forcaptive use or sold on the free market. This is because allusers of hot-rolled coils, including the integrated processesof the Community industry, have technical constraints for
the production of downstream products. As a result, move-
ments, if any, of hot-rolled coils between the two marketsare insignificant.
(c) the investigation showed that the Community producers did
not purchase the product concerned for the captive marketfrom independent parties inside or outside of the Commu-nity. As a result hot-rolled coils intended for the captivemarket were not in competition with other hot-rolled coils
available in the Community. Consequently, the captive
market can clearly be distinguished from the free market.
(138)On this basis the Commission considers that the separationbetween the free and the captive market is fully in line with therequirements of the Basic Decision and the Community institu-tions' past practice.
(139)For the purposes of establishing the economic indicators relevantfor the injury analysis such as development of sales, profitability,etc., the Commission 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. Itwas found that such sales were made at prices more or less thesame as those charged to independent parties. In addition, in linewith claims by certain exporting producers the investigation hasconfirmed that these related parties are free to source their
purchases from either related or unrelated suppliers in or outside
the Community. Consequently, it was concluded that sales fromCommunity producers to related parties having separate legalentities were in competition with sales from independentsuppliers such as those located in the countries concerned and
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 torelated parties should be considered as belonging to the captivemarket. It was argued that the prices invoiced to its relatedparties were not the market prices and were significantlydifferent from those applied to independent customers. Theproducer added that the parent company did not allow any2000S0284 — EN — 23.05.2002 — 002.001 — 21
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related parties to purchase hot-rolled coils from independent
parties on the free market. Consequently, hot-rolled coils soldto related parties were not affected by any direct competition
from other hot-rolled coils. They should therefore be excluded
from the determination 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 showedthat the prices invoiced to these related parties were in manyinstances significantly different from market prices charged toindependent parties. Moreover, all the sales were made to relatedusers who used the products captively without reselling them
onwards, as such. Consequently, the Commission concluded
that the sales of the hot-rolled coils concerned could not beconsidered as being sold on the free market and should thereforenot be included in the determination of the free market.
(142)In conclusion, hot-rolled coils used by Community producers aspre-material for further transformation in an integrated processwithin one single legal entity were considered to be part of acaptive market. The same applies to sales by the aforementionedCommunity producer who could demonstrate that its sales to a
related customer did indeed belong to a captive market. All other
sales of the producers in the Community were considered to bepart of the free market. Consequently, the situation of theCommunity industry in terms of the development of the variouseconomic indicators such as production, sales, market share andprofitability was examined with respect to the free market.
(143)It should be noted that the above findings regarding the separa-tion and the determination of the above markets are reflected inthe data collected in the framework of the ECSC Treaty, in parti-
cular for the surveillance of the steel markets. Indeed, such data
differentiates the use of the hot-rolled coils basically along thesame lines.
2.DefinitionoftheCommunityindustry
a)Total Community production
(144)Several exporting producers claimed that a number of producers
in the Community should be excluded from the definition ofCommunity production given that they had imported hot-rolled
coils from the countries 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 suchimports during that period.
(146)In line with the findings on the definition of the relevant
Community markets outlined in recitals 131 to 143, the investi-
gation confirmed, however, that these related parties had actedindependently from the producers related to them in their opera-tions on the free market. Consequently, the purchases could notaffect 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 Communityproduction of hot-rolled coils. In accordance with Article 9(1)
of the Basic Decision all 16 producers operating in the Commu-
nity market represent 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 5supported the complaint.2000S0284 — EN — 23.05.2002 — 002.001 — 22
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(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 allowits aggregation with the data available for the other Communityproducers.
(151)Some exporting producers claimed that at least one Communityproducer included in the definition of the Community industryset out above received preferential treatment in relation to therequirements imposed on interested parties during anti-subsidyinvestigations. In particular they argued that the said Community
producer did not provide the Commission with a reply to its
questionnaire within the statutory deadlines for the impositionof provisional duties. They considered that this constitutes discri-minatory treatment and violates Article 11(2) of the BasicDecision.
(152)It should be noted that all the Community producers included inthe definition of the Community industry replied to the Commis-sion's questionnaire within the deadlines set forth in the BasicDecision and therefore within the deadline for the imposition of
provisional measures. The Commission considers that all inter-
ested parties in the present proceeding in similar situation weregiven equal treatment. Consequently, any claims suggesting aninfringement to Article 11(2) of the Basic Decision and discrimi-natory treatment by the Commission are not founded.
(153)In conclusion, the eight Community producers having fullycooperated in the investigation make up the Community industryfor the purposes of this proceeding. They fulfil the requirement
of Article 10(7) of the Basic Decision, since during the investi-
gation period they accounted for around 65 % of the totalCommunity production of the product concerned.
(154)These producers are accordingly considered as the Communityindustry and are referred to as such hereinafter as they representa major proportion of total Community production within themeaning of Article 9(1) of the Basic Decision.
E.INJURY
1.Apparentconsumption
(155)Apparent consumption of hot-rolled coils in the Community was
established on the basis of the total sales made by the 16Community producers on the free market and total imports ofthe product concerned into the Community as indicated in theEurostat import statistics 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 char-
acterised by exceptionally high sales prices and good demand,particularly for Community-produced hot-rolled coils. Thefollowing year, however, the volume of the market decreasedby 11 %.
(157)Between 1996 and the investigation period, apparent consump-tion increased steadily. The main growth occurred between1996 and 1997 when the market increased by 22 %. Between1997 and the investigation period, it increased by only 0,4 %.2000S0284 — EN — 23.05.2002 — 002.001 — 23
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2.Importsfromthecountriesconcerned
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 wasmade in relation to apparent consumption of the productconcerned on the Community 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 thattheir imports were negligible and that they should be excludedfrom the scope of the investigation. Since India is a developingcountry, the Commission also examined in accordance withArticle 14(4) of the Basic Decision, whether imports from India
represented less than 4 % of total imports, the de minimis
threshold for developing countries. In fact, imports from Indiarepresent 5,4 % of total imports.
(160)In this respect it should be noted that the evidence submitted bythe Indian exporting producers provided no grounds for consid-ering their imports into the Community as negligible, in
particular given the methodology used to determine the relevant
Community market set out in recitals (131) to (143). Indeed, therelevant Eurostat information and the replies to the Commis-sion's questionnaire did not show imports below 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
in accordance with Article 8(4) of the Basic Decision.
(162)It was therefore examined whether all criteria were met to cumu-
late imports from the countries concerned. The results of theexamination 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
between imported hot-rolled coils and the like Community
product also indicated that imports from the countriesconcerned should be cumulated. Indeed, the exporting coun-tries concerned mainly sold hotrolled coils on the freeCommunity market directly to unrelated customers, such as
cold rolling mills, tube makers, SSCs and steel merchants.
Hot-rolled coils were also imported via related sales compa-nies, which subsequently sold the product concerned to thesame categories of customers mentioned above. The investi-gation showed that the Community industry was selling thelike product through the same sales channels and to the
same categories of customers. Finally, it was found that a
similar pricing policy was followed for all these sales.
(163)Accordingly, contrary to the suggestion made by some exportingproducers, the Commission concluded that all conditions justi-fying the cumulation of the imports from the abovementionedcountries were met.
c)Volume of the imports concerned
(164)Based on Eurostat import statistics, between 1995 and the inves-
tigation period, the volume of imports into the Community fromthe countries concerned increased from 8 000 tonnes to 8440002000S0284 — EN — 23.05.2002 — 002.001 — 24
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tonnes. The main increase occurred between 1997 and the inves-
tigation period (+ 797000 tonnes).
(165)The analysis of the developments during the investigation periodindicated that imports from all the countries concerned weremade mainly during the first half of the investigation period(551000 tonnes); they subsequently dropped by 47 % in the
second half of the 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 around 90 % of all hot-rolled coils importedfrom 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 theCommunity market.
(168)The main increases in market share occurred between 1997 and
the investigation period, when the countries concerned gained 4
percentage 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 same Member State and to the same customers.
The prices of the exporting producer free-at-Community-frontierwere compared with the Community industry's ex-factory prices.Where necessary, exporting countries' sales prices were adjustedto a free at Community-frontier level, customs duty paid and
including relevant import costs. Similarly, these prices were
also adjusted to ensure comparison at the same level of trade asthat of the Community industry. All adjustments were based onthe evidence collected and verified by the Commission duringthe investigation.
(170)As already mentioned in recital 14 some exporting producerssuggested that the hot-rolled coils they produced and sold onthe Community market were not of a comparable quality to thatof the Community industry.
(171)The Commission found that, in general, a price adjustment fordifferences in quality was not justified, particularly as suchdifferences were not apparent to users, and as it emerged fromthe 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 %— SAIL: 19,1 %
— Taiwan: 4,3 %
— Yieh Long: 3,9 %
— CSC: 7,5 %2000S0284 — EN — 23.05.2002 — 002.001 — 25
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3.Situation of the Community industry between 1995 and
investigationperiod
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 remainedstable at around 11,4 million tonnes although a fall in consump-tion was observed in 1996. It should be noted that thisproduction was either sold on the free market or exported tothird countries.
(174)As the production capacity of the Community industry is usedfor hot-rolled coils intended for both the free and the captivemarket, it was also considered necessary to analyse informationon 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 the captive market.
(175)It was found that between 1995 and the investigation period, thisproduction 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 investiga-tion period, these were similar to those observed above for theproduction 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, aswell as for other products not concerned by this proceeding(including other steel grades and other steel products). Capacityutilisation related to the product concerned has therefore been
established on the basis of the capacities officially declared to
the Commission within the framework of the ECSC Treaty.These capacities are established according to specific parametersand must not be confused with the gross or nameplate capacity.The gross or nameplate capacity is the highest possible capacityachievable without taking into account factors such as the
personnel available, holiday periods, set-up times, maintenance,
etc.
(178)The capacity utilisation rate of the Community industry was87 % between 1995 and the investigation period, except in
1997 when the Community industry's production was at its peak
and the rate reached 93 %. At that time, both the consumption ofhot-rolled coils destined for the free market and those destinedfor the captive market were high.
(179)The high utilisation rates were found to be normal bearing inmind that in heavy industry, particularly in the steel industry,high capacity utilisation is necessary to reduce the impact ofthe 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 whichis also available under the framework of the surveillance of the
Community steel market under the ECSC Treaty. Although these
data do not reflect exactly the situation with respect to theproduct concerned but encompassed a slightly broader categoryof products, it was found that this aggregation of data could beconsidered representative for the situation of the productconcerned. These data showed that 1997 was a year were the2000S0284 — EN — 23.05.2002 — 002.001 — 26
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level of orders was high as compared to the situation found
during the investigation period. Contrary to the stable develop-ment of the apparent consumption between 1997 and the
investigation period shown above, orders received by the
Community industry declined by 17 % between 1997 and theinvestigation period.
(181)The above finding suggests that the economic activity of theCommunity industry was more regular and evenly spreadthroughout the year 1997 when the volume of orders received
developed more in line with sales volume. Furthermore, given
the existence of a time lag between orders and deliveries, thereduction in the orders received indicated a reduction of the levelof 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 theinvestigation period, the Community industry's sales decreasedby 12 % while consumption increased slightly.
(184)The Community industry submitted that the injury indicatorconcerning sales set out above has been established on the basisof transactions delivered and invoiced during the periods speci-
fied. In this context, it is important to point out, that the
Community industry has organised its production process insuch a way that users' orders made on a given date are deliveredand invoiced and thus sold to them, with a time lag of at leastthree months. Therefore, in order to make a meaningful assess-
ment of the development, which occurred during any given
period, not only the actual sales but also the orders receivedduring such a period have to be analysed. It is considered thatany development observed with respect to these orders is boundto translate into corresponding developments of sales with a timelag 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 ascompared to pickled coils, should be analysed separately. Theclaim was that given the high share of subsidised imported black
coils in total imports, the development of the Community
industry' sales volume and sales prices for that type of coilswould indicate a particularly injurious situation.
(186)Investigation of this particular issue showed that from 1995 upto the investigation period (1998), the volume of black coilssold by the Community industry on the free market decreasedby 13 %, whereas the 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 around0,5 million tonnes in sales of pickled coils.
(187)It also confirmed that the share between the sales of black coilsand pickled coils for the Community industry was more balancedthan that of the exporting producers. From 1995 up to 1997 theshare in sales volume 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 total sales clearly shows that during theinvestigation period a shift occurred from black to pickled coils,i.e. from a category of products where imports where morepresent to one were they where less prominent.2000S0284 — EN — 23.05.2002 — 002.001 — 27
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d)Price evolution
(188)During the period examined the Community industry's weighted
average sales price decreased by 10 %. In 1995 sales prices wereat their highest for ten years. They continued to follow adecreasing trend until 1997 (- 17 % and - 3 % compared to
1995 and 1996 respectively) but recovered from 1997 up to the
end of the investigation period (+ 9 %).
e)Market share
(189)From 1995 upto the investigation p eriod, 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 investigationperiod.
(190)Between 1995 and 1996 and between 1996 and 1997 the marketshare held by the Community industry increased by 1,1 and 1,8percentage points respectively.
(191)Between 1997 and the investigation period, however, theCommunity 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 indi-cated that market share was lost due to a decrease in sales bothto related and unrelated customers on the Community freemarket.
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 of high prices on the market at thattime. In 1996, despite a downturn in the market and a reductionin sales prices (15 %), the Community industry remained profit-able. However, the recovery in sales volume in 1997 did not
allow that industry to increase its profit margin since its sales
prices again decreased by 3 %.
(193)During the investigation period profitability recovered slightlyfrom its 1997 level. The increase in sales prices during theinvestigation period (9 % compared to 1997) allowed theCommunity industry to achieve a profit margin of 12,9 %. TheCommunity industry claimed that this level of profit was reason-able.
(194)Some exporting producers suggested that the Communityindustry achieved an extremely high level of profitability during
the investigation period and that the development of this indi-
cator alone should have warranted immediate termination of theproceeding. They said that such profit was significantly higherthan that considered reasonable by the Commission in past casesinvolving steel products.
(195)In this respect it should be noted that the relevant provisions ofthe Basic Decision and the WTO Agreement state that the deter-mination 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 likeproducts; and
(b) the consequent impact of those imports on the Community
industry. Moreover, they specify that consideration shall begiven to whether there has been a significant increase in thevolume of subsidised imports, either in absolute terms or
relative to consumption in the Community. Furthermore,
they also specify that consideration shall be given to whetherthere has been significant price undercutting by subsidisedimports or whether the effect of such imports was to depressprices to a significant degree or to prevent price increases.No one or more of these factors can necessarily give deci-2000S0284 — EN — 23.05.2002 — 002.001 — 28
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sive guidance. Finally, they state that the examination of the
impact of subsidised imports on the domestic industry shallinclude an evaluation of all the relevant economic 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, marketshare, productivity, utilisation of capacity, factors affectingprices, 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 werefound to significantly undercut the Community industry's prices.Furthermore, significant margins of subsidy were found to existfor most of the exporting producers concerned. All the aboveconditions being met, the Commission has evaluated the poten-
tial and actual developments of a number of relevant economic
factors in its investigation before reaching its definitive conclu-sions. Accordingly, it is considered that the suggestion by someexporting producers that only the level of profitability shouldhave warranted the termination of the proceeding is clearlyagainst the provisions of the Basic Decision.
(197)Furthermore, the economic situation of the Community industryduring the investigation period, in particular its price and profit-ability situation, must be seen in the light of the structure of the
hot-rolled coils market and the developments that occurred in the
economic situation of the Community industry during the inves-tigation period, as set out in point 4 below.
(198)Finally, it is considered that the comparison of a specificeconomic indicator pertaining to the Community industry withthe same economic indicator worldwide level is not relevant inthe context of anti-subsidy proceedings.
g)Investments and employment
(199)The investigation showed that investments were made mainly in
the replacement of machinery and equipment. During the inves-tigation period, the level of investment was similar to the 1995level. Investments were increased by 32 % as compared to 1995,consistent with the high demand in 1997.
(200)As regards employment, the Community industry manufacturesvarious products on the same site and with the same machinery,notably hot-rolled coils. The investigation showed that duringthe period 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 estab-
lished in the years 1995 and 1997. They found that, inparticular, price and profitability levels in 1995, production,capacity utilisation, sales volume and market share levels in1997 were not representative of what their levels should beunder conditions of fair competition. They thus argued that on
the basis of the other findings over the entire period examined,
it could not reasonably be concluded that the Communityindustry suffered material injury.
(202)In this respect it should be noted that, in the above claim, inter-ested parties have not stated in which respect some economicindicators established in 1995 and 1997 could not be consideredrepresentative. They merely stated that prices and profits in 1995and production, capacity utilisation, sales volume and marketshare were not representative. In other words, the above claim2000S0284 — EN — 23.05.2002 — 002.001 — 29
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suggests that a significant part of the data established during the
investigation carried out by the Commission should be disre-garded in the present proceeding without any evidence or
explanations indicating that the conditions of normal competition
were not met in 1995 and 1997. Given that during its investiga-tion the Commission found no evidence to corroborate theallegation that normal competition was not taking place on theCommunity market during the years 1995 and 1997, it is consid-
ered 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, and its overall economic situation between 1995 and
the investigation period, on a yearly basis.
(204)The investigation showed that between 1997 and the investiga-tion period, with a slight increase in apparent consumption, the
Community industry increased its sales prices by 9 % but was
not able to maintain its sales volume, which decreased by 12 %.Accordingly, the Community industry lost 6,6 percentage pointsor 14 % of market share. Furthermore, the Community industryproduction decreased by 9 %, 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 inves-tigation period imports from the countries concerned increased
significantly in terms of volume (+ 797 000 tonnes), leading to
substantial increase of their market share (+ 4 percentage points).Although the countries concerned increased their sales prices byover 10 % they were nevertheless found to be undercutting theprices of the Community industry by around 6 % on average
during the investigation period.
4.Analysis of the situation of the Community industry
duringtheinvestigationperiod
a)Preliminary remarks
(206)The Community industry claimed that prices and thus profits
remained at a high level in the first half of the investigationperiod because apparent consumption and therefore demand was
exceptionally high, even though it was not matched by a
commensurate actual consumption. This led, in the first half ofthe investigation period, to an overstocking which was largelyfed by the imports concerned, and, in the second half of theinvestigation period, to a significant de-stocking.
(207)Furthermore, the Community industry indicated that a morerefined analysis of sales by product types and sales channels forwhich there is head-on competition between the Communityindustry and imports would be necessary in the present case to
show the full extent of the injury suffered. This entails a differ-
entiated analysis of sales of black as opposed to pickled coils,and sales channels where longer-term contracts are concludedas opposed to other sales.
(208)Finally, the Community industry claimed that a more detailedanalysis of the four quarters of the investigation period wasnecessary given the existence of a time lag between ordersplaced by purchasers and deliveries made to them. It wasclaimed that such time lags effectively delayed the negative
impact of the imports concerned. The Community industry
claimed that it was therefore necessary to further investigate thedevelopment of orders received during the investigation period.
(209)All operators on the steel market agreed that business is mainlycarried out on a quarterly basis. Production is organised on thebasis of quarterly plans and prices. Both orders and deliveriesare negotiated accordingly. Therefore, the suggestion made bysome exporting producers that the partitioning of the investiga-tion period, in particular into quarters, did not constitute an2000S0284 — EN — 23.05.2002 — 002.001 — 30
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objective evaluation of the possible injury suffered by the
Community industry was not founded. The above claims of theCommunity industry have therefore been investigated 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 quar-terly developments of its economic situation, the Commissionalso collected quarterly data for the period 1996 up to the secondquarter 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 calendaryear are normally better than the last two quarters. Such seasonalfluctuations could mainly be observed in sales activity. Saleswould normally be affected in the third quarter of the year due
to the holiday period in the user industries, but they should pick
upagain in the fourth quarter. Given that some of the above alle-gations made by the Community industry required a quarterlyanalysis it was important to ensure that any developmentobserved did not merely reflect normal quarterly fluctuations.This analysis was particularly relevant as the complainant
alleged 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 coilbusiness, the Commission found that the trends in productionand sales for the Community industry from 1996 upto the inves-tigation period were as follows:
(%)
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 and1997, 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 howeverthe levels of production in the third and in the fourth quarterwere far lower when compared to the first quarter, indicatingthat the fluctuations observed in that period were far beyondthe normal seasonal fluctuations.
(214)Concerning sales volume, the downturn observed in the third and
fourth quarters was even more pronounced during the investiga-
tion period. Sales activity in the second half of the investigationperiod was exceptionally low and far beyond the normalseasonal fluctuations.
(215)The above quarterly analysis covering the years 1996 and 1997as well as the investigation period, shows that the trendsobserved during this latter period are far beyond the normal fluc-2000S0284 — EN — 23.05.2002 — 002.001 — 31
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tuations linked to the cyclical nature of the hot-rolled coil busi-
ness.
c)Apparent consumption and overstocking
(216)As indicated in recital 155, the development of apparent
consumption on a yearly basis was quite stable, in particularbetween 1997 and the investigation period. It should be under-lined that apparent consumption, by definition, does not reflect
actual use, i.e. actual consumption of the product concerned by
its users. The difference between apparent consumption andactual consumption is basically the quantity of stocks kept atvarious 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 apparentconsumption was significantly higher in the first two quarters ofthe investigation period than in the last two quarters. In addition,the comparatively steady development in apparent consumptionfound throughout 1997 did not occur during the investigationperiod. This difference in trends was particularly obvious when
comparing the end of 1997 and the beginning of the investiga-
tion period, as there was a considerable increase in apparentconsumption between these two time periods. This suggests anincrease in stocks, whereas the reverse was true if the fourthquarter of 1997 is compared with the fourth quarter of the inves-
tigation 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 particularlyimportant role in the development of the market during theinvestigation period, it was considered necessary to establishthe quarterly apparent consumption not only for the investigation
period but also for 1997.
(219)To confirm these findings, the relevant development should also
have been established for actual consumption. However, itsdetermination was hampered by the fact that cooperation of thevarious relevant interested parties in the distribution chain and atuser level was not complete. Nevertheless, the Commission was
able to establish the stocks held at trader's level on the basis of
Eurostat information gathered in the framework of the ECSCTreaty.
(220)In line with the above findings on apparent consumption, thisinformation showed that there was a considerable build-upofstock at 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 periodand a further increase of 11 % between the first quarter of theinvestigation period and the second quarter of the investigationperiod 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 stocksat the end of both the first and second semesters of the investi-gation period. A comparison of the quarterly development ofstocks in 1997 with the quarterly development during the inves-
tigation period also confirms the above findings.
(222)This trend of overstocking in the first two quarters of the inves-
tigation period was confirmed in a submission received by anexporting producer under investigation and by the informationfrom a major user of the product concerned on the Communitymarket. This user held stocks which in the middle of the investi-
gation period were more than double those held at the beginning
of this period, while there was no indication of a significantdifference in the underlying activity between the beginning andthe end of the investigation period by this user.
(223)The investigation thus confirmed the Community industry'sclaim that considerable overstocking occurred at the beginning2000S0284 — EN — 23.05.2002 — 002.001 — 32
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of the investigation period. In the first two quarters of the inves-
tigation period apparent consumption was significantly higherthan actual consumption, while for the third and fourth quarters
of the investigation period the difference was reversed.
(224)In absolute terms, it was found that apparent consumption during
the first half of the investigation period exceeded apparent
consumption in the 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 notedthat, as shown below, the Community industry's sales started todecline right from the beginning of the investigation period. Thissuggests that the Community industry did not play an importantrole 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 investigationperiod as compared to the first quarter of the investigationperiod.
(227)In line with the decrease in production, the rate of capacity utili-sation also decreased by 12 % in the third quarter of theinvestigation period and by 17 % in the fourth quarter ascompared to the first quarter of the investigation period.
(228)Similarly, it was found that production and capacity utilisationwere declining when compared with the relevant quarterlyactivity in 1997. In the third and fourth quarters of the investiga-
tion period as compared to the third and fourth quarter of 1997,
production decreased by 20 % and 11 % respectively, capacityutilisation 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.
(230)Furthermore, as already mentioned in the year-to-year analysis,
the Community industry claimed that a more refined and differ-
entiated analysis of its various types of sales and sales channels
should be made, as this would show that the sales competingdirectly with the imports concerned are more affected than othersales. In addition to the differentiation between sales of blackcoils and pickled coils, that industry claimed that a proportionof its sales were the result of long-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 custo-mers under such contracts.
(231)In order to carry out a detailed analysis the above mentionedtypes of sales were grouped and are referred to as ‘long-term’sales as compared to ‘other’ sales. Similarly, the developmentof sales, sales prices and profitability of black and pickled coils
during the investigation period were 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 sales activity. Indeed, the decrease in long-term sales was
20 % in the third quarter and 22 % in the fourth quarter ascompared to the first quarter of the investigation period. Thedecrease in other sales was much more pronounced namely35 % and 43 % in the third and the fourth quarter respectively,as compared to the first quarter of the investigation period.2000S0284 — EN — 23.05.2002 — 002.001 — 33
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(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 thanthat of black coils. The decrease in the sales volume of blackcoil was as high as 39 % in the third quarter and 44 % in thefourth quarter as compared to the first quarter of the investiga-tion 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 alevel of ECU 306 and ECU 308 per tonne respectively. Subse-quently they fell down to ECU 286 per tonne during the third
quarter and to ECU 254 per tonne during the fourth quarter of
the investigation period. Overall this represents a decrease of17 % during the investigation period.
(235)The analysis of prices differentiated by types of sales showedthat prices for long-term sales largely remained stable in the firstthree quarters of the investigation period, only decreasing from
ECU 320 per tonne to ECU 312 per tonne, namely a decrease
of 2 %. The decrease was limited to 10 % when comparing thefirst and the fourth quarter of the investigation period. Bycontrast, prices for other sales had already decreased by 10 %between the first and the third quarter of the investigation periodand by 21 % between the first and the fourth quarter of the
investigation period.
(236)The comparison between the development of prices of black
coils and pickled coils showed that prices of the formerdecreased much more than those of the latter. The result of thesediffering trends was that prices across categories differed signifi-cantly more at the end of the investigation period than at thebeginning. 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 % whencomparing the first and the fourth quarter of the investigationperiod. By contrast, prices for black coils had already decreasedby 10 % between the first and the third quarter and by 22 %
between the first and 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 preci-pitation of price decreases throughout the subsequent quarters,
profitability continued to decrease, namely from 16,8 % during
the first quarter of the investigation period to - 2,6 % in thefourth quarter.
(238)The differentiation in sales showed significant decreases in prof-itability from the very start of the investigation period for thesales of black coils and sales other than the long-term sales.
(239)The investigation showed that profitability for the long termsales was very good in the first half of the investigation period
(around 21 %) and remained positive throughout the investiga-
tion period, namely 8 % in the fourth quarter of theinvestigation period. Similarly other sales were also profitableat around 16 % in the first half of the investigation period. Inline with the development of demand for hot-rolled coils, it
subsequently collapsed in the third and the fourth quarter of the
investigation period to become negative (- 7 %) in the fourthquarter of the investigation period.
(240)The same observations were made on profitability differentiatedfor black coils and pickled coils where profitability for bothtypes was good in the first half of the investigation period.Subsequently, profitability for pickled coils remained positive2000S0284 — EN — 23.05.2002 — 002.001 — 34
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throughout the investigation period (4,5 % in the fourth quarter)
whereas profitability in black coils sales significantly decreasedin the third quarter of the investigation period and reached a
level of losses as high as - 16,5 % in the 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 for sales made in market segments where fewersubsidised imports were present. In terms of prices and resultingprofitability, the situation of the Community industry remainedrelatively stable during the time in which apparent consumptionboomed. The investigation has also shown that the Community
industry did not increase its sales volume in line with the
increase in the apparent consumption. By contrast, price levelsand profitability remained at a high level at a time of strongand increasing demand.
(242)The investigation also showed that the purchase prices of majorcost items in the cost of production decreased during the investi-gation period. Notably, the price of iron ore decreased by up to12 % and scrap by up to 40 % and the price of oil dropped tothe level of 1970. Accordingly, the cost of raw material
decreased limiting the level of the losses incurred, particularly
during the investigation period.
(243)In order to complete the above analysis on sales volume, salesprices and profitability, it was found that these economic indica-
tors were also declining when compared with the relevant
quarterly activity in 1997. In the third and fourth quarter of theinvestigation period as compared to the third and fourth quarterof 1997, sales volume decreased by 24 % and 27 % respectively,sales prices were 6 % and 19 % lower. As regards 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 insales volume, sales prices and profitability it is important to note
that there is a time lag between price negotiation with customers
and invoicing and delivery by the Community industry. Thus,when considering in particular the developments in other salesthe prices applied during the first quarter of the investigationperiod were in fact negotiated during the fourth quarter of 1997and 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 prof-itability development, the existence of a time lag between the
sales of the goods and price negotiation with customers related
to such sales should be considered. In practice, it was claimed,the negotiations preceded 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 the sale. This time lag was indeed found to be at leastone quarter. In other words sales in the first quarter of the inves-tigation period are the result of orders negotiated and concludedin the fourth quarter of 1997.
(247)Given the existence of this time lag, the quarterly trend estab-lished in the orders received by the Community industryshowed a significant decrease during the investigation period.In line with the claim by the Community industry, this negative
trend is pronounced right from the first quarter of the investiga-
tion period compared to the trend determined for sales volumeand production. The volume of orders received in the secondquarter of the investigation period were 17 % lower than thosereceived in the first quarter. Furthermore, it emerged that a rela-tively high level of orders was received in the fourth quarter of2000S0284 — EN — 23.05.2002 — 002.001 — 35
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1997, corresponding to deliveries/sales effected in the first
quarter of the investigation period.
(248)These findings are thus consistent with the claim by the Commu-nity industry that the relatively positive economic situation
during the first half of the investigation period merely reflects a
healthy level of orders received during the last quarter of 1997and the first quarter of the investigation period, namely whendemand 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 theinvestigation period, in particular in the second half. This dete-rioration went far beyond the seasonal fluctuations observedduring the previous years on a quarterly basis.
(250)In particular, it was found that in the third quarter of the investi-gation 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 volumeby 14 %, sales prices by 2,4 % and profitability decreased by2,1 percentage points.
(251)Furthermore, the developments observed during the fourthquarter of the investigation period indicated that the situation ofthe Community industry only deteriorated further: as compared
to the average activity of the investigation period production
decreased by 18 %, capacity utilisation by 10 %, sales volumeby 22 %, prices by 13 % profitability became negative (- 2,6 %on net turnover), a decrease of 15,5 percentage points.
5.Developmentsaftertheinvestigationperiod
(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 Communitymarket during this time period. Accordingly profitability of theCommunity industry was still good. However, in view of thefact that this situation was not supported by an underlying posi-tive 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 analysing develop-ments after the end of the investigation period.
(253)As pointed out by some exporting producers it was found that acertain degree of recovery occurred in the volume produced andsold by the Community industry at the beginning of 1999.However, it should be noted that the level of production and
sales were significantly lower than those at the beginning of the
investigation period and those of 1997. In this respect, the inves-tigation showed that the economic situation of the Communityindustry continued to deteriorate after the investigation period,in particular in terms of a decrease in sales price and profit-
ability during the two first quarters of 1999.
(254)This confirmed the negative effect of the massive overstockingwhich occurred at the beginning of the investigation period and
the de-stocking which began during the third quarter of theinvestigation period and continued, despite a decrease in actualimports, throughout the first half of 1999. Apart from the effectof overstocking, the delay with which the negative development
of the Community industry occurred was also due to the time lag
under which the Community industry operates with its custo-mers. This is apparent not only from the development of theinjury indicators such as production, sales, prices and profit-ability, but also from the development of the orders received bythe Community industry.2000S0284 — EN — 23.05.2002 — 002.001 — 36
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(255)Some parties have claimed that the imposition of countervailing
measures in the present proceeding was unnecessary as the
imports concerned ceased after the investigation period.
(256)The investigation showed that, based on generally available orunverified information, imports, in particular for some of thecountries concerned by the present proceeding, have fallen sincethe beginning of the investigation period. However, this is not an
unusual phenomenon in anti-subsidy and anti-dumping investiga-
tions as market participants, in particular importers, take intoaccount the fact that investigations require prudent assessmentof the market insofar as they can lead to the imposition of coun-tervailing and anti-dumping measures. The reaction of marketparticipants 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 theexporting producers concerned to adopt a stop-and-go policy fortheir exports. It is considered that this would have highly disrup-tive effect on the Community market for any product and
therefore can not in the present circumstances serve as a justifi-
cation for not imposing countervailing measures.
(257)Finally, it has been claimed that the phenomenon of highimports concentrated in the investigation period was only short-lived. In the meantime market prices in the Community havereached levels which ensure a quick recovery of the economic
situation of the Community industry.
(258)It should be noted that detailed analysis demonstrates that
Community industry prices continued to deteriorate and reachedvery low levels during the first two quarters of 1999. This pricedecrease triggered considerable financial losses, which theCommunity industry incurred during a considerable period of
time.
6.Conclusiononinjury
(259)On the one hand, the year-to-year analysis of the situation of the
Community industry in the period from 1995 to the investigationperiod showed a number of negative developments. In addition,
the quarterly analysis indicated that the economic situation of the
Community industry significantly deteriorated throughout theinvestigation period. Contrary to the suggestion made by someexporting producers and taking into account the special charac-teristics of the Community market in terms of oversupply and
time lag between orders and deliveries these developments are
representative of the economic situation of the Communityindustry during the whole investigation period.
(260)The investigation has also shown that these negative develop-ments continued and even worsened after the end of theinvestigation period, a development which is particularly rele-
vant in view of the functioning and the situation of the
Community market. It has been ascertained that this deteriora-tion went far beyond the seasonal fluctuations observed inprevious years on a quarterly basis.
(261)To summarise, it was found that, during the third and fourthquarters 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 % and18 % respectively, capacity utilisation by 6 % and 10 %, salesvolume by 14 % and 22 %, sales prices were negotiated 2,4 %and 13 % below the average price of the investigation period andprofitability decreased by 2,1 and 15,5 percentage points respec-
tively.
(262)Similarly it was found that these economic indicators were also
declining when compared with the relevant quarterly activity in1997. In the third and fourth quarter of the investigation periodas compared to the third and fourth quarter of 1997: productiondecreased by 20 % and 11 % respectively, capacity utilisation by2000S0284 — EN — 23.05.2002 — 002.001 — 37
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12 % and 18 %, sales prices were 6 % and 19 % and profit-
ability was positive both in 1997 and during the investigationperiod but it was 15 percentage points lower 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 investi-gation period.
(263)The investigation then revealed that the above trends would havebeen even more negative without specific sales such as thoseunder long term contracts or those of pickled coils, which areless affected by the imports concerned. The orders received bythe 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 the investigation period.
(264)On the other hand, the year-to-year analysis has shown thataverage profit rates increased from 1997 to the investigationperiod, reaching a level of 12,9 %. Profits and sales pricesremained stable during the first quarters of the investigationperiod.
(265)Regarding these findings, which could at first sight appear to becontrary to a finding of injury, the investigation has shown thatthey were in line with a high level of apparent consumption
during the first semester of the investigation period which, the
investigation has confirmed, was not matched by actualconsumption. As a consequence, the prices and profits of theCommunity industry (whose sales did not developin line withthe overstocking) remained stable but were bound to deterioratethereafter in view of the fact that the significant apparent
consumption was not met by a commensurate actual consump-
tion. Indeed, during the second part of the investigation period,apparent consumption tumbled as the massive stocks were used,which in turn provoked a significant price and profit decrease.
(266)The subsequent analysis of the economic situation of theCommunity industry in the first two quarters of 1999 confirmedthat these negative trends were not confined to the investigationperiod and were the direct results of the developments during the
investigation period. While production and sales volume
improved somewhat compared to the second half of the investi-gation period, sales prices and profitability continued todecrease. It should be noted that the Basic Decision as confirmedby the jurisprudence of the Court permits the information
pertaining to the time period after the end of the investigation
period to be taken into account, in particular in order to establishwhether trends observed during the investigation periodcontinue.
(267)Based on the developments in the situation of the Communityindustry during the period from 1995 to the investigation periodand during the investigation period in particular, the Commissionhas concluded that the Community industry has suffered injury
during the investigation period. Contrary to the suggestion that
the economic indicators showing injury are largely outweighedby other indicators showing lack of injury, the above detailedinvestigation showed that all economic indicators developednegatively, in particular profits and sales prices with a time lagof a few months. The magnitude of the injury suffered enables it
to be classified as material in accordance with 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 ofparticular characteristics: the relationship between the Commu-nity industry and certain users is long-term; production set-up2000S0284 — EN — 23.05.2002 — 002.001 — 38
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and planning entails a certain time lag between order and
delivery; and the Community industry operates more in certainmarket segments than the exporting producers concerned. Never-
theless, these characteristics do not call into question the fact
that the products produced and sold by the Community industryand those imported by the countries concerned are like products.It only indicates that certain sales channels and certain types ofproduct are more prone to competition from the imports
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 the subsidised imports from the countries
concerned. At the same time, the impact of other known factorsand their possible consequences on the situation of that industrywere also analysed. Such analysis ensured that any injury causedby other factors than subsidised imports would be identified andnot attributed to these imports.
(270)The other factors examined were: the development of consump-tion, the oversupply of the Community market, the impact ofhot-rolled coils imported into the Community from other third
countries, the behaviour of other Community producers not
included in the definition of the Community industry, the exportperformances of the Community industry and the world-widesituation of the steel business.
2.Impactofsubsidisedimports
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 investigationperiod. While in 1995, only 8 000 tonnes of hot-rolled coilsentered the Community market from the countries concerned, in
1997, this rose to 47000 tonnes.
(272)The investigation also showed that the major increase in imports
occurred During the period between 1997 to the investigation
period (+ 797000 tonnes) and particularly during the first two
quarters of the investigation period. During that period over550000 tonnes were delivered onto the Community market.This represents more than 10 times the import volume of thesecond semester 1997. Between 1997 and the investigationperiod, the market share held by the countries concerned
increased by 4 percentage points.
(273)During the period from 1995 to the investigation period while
Community consumption increased by 9 %, the Community
industry's sales volume increased by only 1 % and it thus lost
3,7 percentage points of its market share.
(274)As far as the period of the import surge (1997 to the investiga-
tion period) is concerned, it coincided with the deterioration of
the Community industry's situation. Production decreased by9 % and sales volume by 12 %. The loss in market shareamounted to 6,6 percentage points and orders by 17 %.
(275)In addition, the development of import volumes, taken togetherwith the development of apparent consumption shown earlier,indicates that the subsidised imports concerned mainly fed theincrease 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 begin-ning of the investigation period.
(276)The investigation revealed that contrary to the exporting produ-cers in question the Community industry is not very present inthe traders' sales channel. As regards certain large operators, itshowed that these ordered few or no hot-rolled coils from theCommunity industry during the third and the fourth quarter ofthe investigation period. This resulted in a significant drop in2000S0284 — EN — 23.05.2002 — 002.001 — 39
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sales in third quarter of the investigation period (- 28 %) and in
the fourth quarter (- 12 %). This in turn had a significant nega-tive influence on prices and profitability of 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 exportingproducers are mainly active. Indeed, these producers are notvery active in sales channels where long-term sales contractsare concluded The Community industry has fared relativelybetter in these sales channels than in others, where competition
from imports is more pronounced. It has also been shown above
that the Community industry's sales of black coils, whichaccount for around 90 % of the imports concerned, have beendeveloping 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 Communityindustry remained stable in terms of prices and therefore overallprofitability during the first two quarters of the investigationperiod, although import prices from the countries concernedcontinuously decreased during the whole investigation period.
In this respect the investigation has shown that the development
of prices and profits of the Community industry were due, on theone hand, to the general structure and functioning of the marketin terms of the time lag between orders made by and deliveriesto clients and, on the other hand, 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 (atleast one quarter), the situation of the Community industry
during the first quarter of the investigation period, basically
reflected the situation of orders placed during the fourth quarterof 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 thefirst quarter of the investigation period corresponded to a timeperiod of spectacular growth in stocks — and thus apparentconsumption. 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 biggest impact on theeconomic situation of the Community industry when it becameclear that the growth in stocks and thus in apparent consumptionwas not matched by a growth in actual consumption. Indeed,given the considerable fall in demand for hot-rolled coils at the
end of the investigation period, Community industry prices
decreased by 17 % and profitability became negative.
(281)The community industry claimed that during the entire investiga-tion period the exporting producers adopted a policy of
systematic price decrease and were continually undercutting the
Community industry's prices. This precipitated and hastened thefall in sales prices on the Community market during that period.
(282)The investigation showed that the exporting producers indeed,significantly reduced their price during the investigation periodwhile the Community industry attempted to maintain its pricelevel until June 1998. In July 1998, the Community industryreduced its sales prices. Their sales prices, which were over300 ECU/tonne in January 1998, 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 indus-try's prices throughout the investigation period. It is to be noted2000S0284 — EN — 23.05.2002 — 002.001 — 40
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that the level of the undercutting was lower at the beginning of
the investigation period and became increasingly more signifi-cant throughout the investigation period. The Community
industry had to reduce its prices in order to continue partici-
pating in the market, in particular from the middle of theinvestigation period onwards.
(284)In this respect it is to be noted that steel is a major commodityproduct and the indicative base price of hot-rolled coils ispublished daily in specialised newspapers and is well know by
all operators present on the market. The products produced and
sold by the Community industry and those imported by thecountries concerned are highly sensitive to price movementswhich are quickly transmitted through the market.
The above thus suggests that overall the findings of the investi-
gation show that the imports concerned caused the negativedevelopment in the economic situation of the Communityindustry.
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 shortperiod, depressed prices and led to a reduced market share ofthe Community industry. These import volumes allowed traders
and certain large Community-based users to accumulate stocks
with negative repercussions on price negotiation with theCommunity industry as early as in the second quarter of theinvestigation period and to extend the period over which suchimports depressed prices. Moreover, given the general transpar-ency of the market, users and purchasers in the Community
market became quickly aware of the low price policy applied
by the exporting producers. This precipitated and hastened thefall of sales price on a market with negative results on marketshare and profitability of the Community industry.
(286)Consequently, it is concluded that the presence of low-pricedsubsidised 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.Impactofotherfactors
a)Development of consumption
(287)During the period examined apparent consumption on the
Community market increased continuously by 9 %. During theperiod between 1997 and the investigation period apparentconsumption increased by 0,4 %.
(288)Consequently, given the continuous positive development in
consumption volume since 1996, it is considered that it cannot
be linked to the injurious situation suffered by the Communityindustry 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 continu-ously increasing its deliveries on the market and was thus themain contributing factor in the oversupply. Accordingly, theyargued that the high rate of capacity utilisation of the Commu-nity producers resulting from high deliveries should exclude
any injury to be attributed to imports from the countries
concerned.
(290)The detailed analysis of the development in apparent consump-tion in 1997 as compared to the investigation period showedthat during the first two quarters of the investigation periodapparent consumption was 1,4 million tonnes higher than in the2000S0284 — EN — 23.05.2002 — 002.001 — 41
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corresponding quarters of 1997. This comparison should be seen
in the light of the fact that 551000 tonnes of subsidised hot-rolled coils were imported from the countries concerned in the
first two quarters of the investigation period whereas the corre-
sponding volume imported in the same period in 1997 wasabout 4 000 tonnes. This represents an increase of over 0,5million tonnes during the first half of the investigation period.
(291)Furthermore, it is recalled that traders significantly increasedtheir stocks in the first half of the investigation period, thusparticipating to the oversupply of the Community market. The
investigation revealed that the Community industry is not very
active in the traders sales channel whereas the exporting produ-cers sold significant quantities via traders. Accordingly, theCommunity industry did not feed the stocks piled by tradersduring the investigation period.
(292)In conclusion, the investigation has shown that the increase insubsidised 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 inmarket share. Accordingly, the increase in low-priced subsidisedimports largely contributed 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
the Federal Republic of Yugoslavia were concerned by an anti-
dumping proceeding.
(294)In addition, other countries exported hot-rolled coils to theCommunity market. During the investigation period the mainexporters were Russia, Slovakia, Romania, Hungary, SouthKorea and Indonesia.
(295)Some exporting producers argued that they have been undulydiscriminated against in comparison to some other third coun-tries mentioned above which were excluded from the scope of
the investigation.
(296)In this respect it is pointed out that no complaint against theabove third countries was lodged and that therefore no prima
facie evidence of subsidisation and injury justifying the initiationof an investigation was received. As furthermore, the investiga-tion has not brought to light any evidence of injurioussubsidisation practices by such third country exports the allega-tion of discrimination is not founded.
(297)During the period examined, other third countries not subject toany proceeding's share of total imports of the product concerned
onto the Community market while remaining significant showed
a decreasing trend. The import volume decreased from 3 milliontonnes in 1995 to 2,4 million tonnes in the investigation period,namely a decrease by 20 % in terms of volume. The share ofthese imports represented 99 % of total import volume in 1995
but only 74 % during the investigation period. Accordingly,
throughout the period examined, the share of the Communitymarket held by the other third countries decreased by 20 %.
(298)Import prices from these third countries followed the generaldownward tendency in the Community market and decreased by9% .
(299)Based on the above facts and considerations it was found thatimports from other third countries not subject to any proceedingremained significant and enjoyed a continued presence in the
Community market during the period examined. However, it
also emerged that while the situation of the Community industryonly deteriorated in particular from 1997 to the investigationperiod, namely when the subsidised imports surged massively,the increase in imports from other third countries was verylimited.2000S0284 — EN — 23.05.2002 — 002.001 — 42
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(300)Accordingly, the suggestion by some exporting producers that
the imports of hot-rolled coils from other third countries not
subject to any proceeding are the cause of the injury sufferedby 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 repre-sented 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 coilsin the Community was similar to that of the Communityindustry. During the investigation period their sales volume
increased by 5 %, namely an increase below the increase in
consumption. Accordingly, their share of the market in terms ofvolume decreased by 4 %. Furthermore, these producers alsosuffered from price depression as the decrease in sale value by6 % indicates and their sales prices were in line with those of
the Community industry.
(303)Consequently, the impact of the other producers in the Commu-
nity on the deteriorating economic situation of the Communityindustry was limited.
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 itsexport activity during the period examined.
(305)The investigation showed that the sales volume destined for
exports to third countries decreased by 536000 tonnes between
1995 and the investigation period and by 299000 tonnesbetween 1997 and the investigation period. This represents adecrease of 4,8 % and 2,9 % respectively of the total sales ofthe Community industry. On this basis, the Commission doesnot exclude that such a decrease in the export sales affected the
overall economic situation of the Community industry. However,
it is recalled that the present investigation exclusively coveredthe economic situation of the Community industry as regardsthe Community free market. Accordingly, prices and revenuesfrom export sales were excluded from the injury analysis.
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 toincrease the integration of its activities over the period exam-ined. At the end of 1997, the Community industry hadallegedly given priority to supplying related parties in thecaptive market before supplying independent parties on the free
market with the result that the users were forced to obtain their
supplies from outside the Community. Therefore, injury couldnot 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 unre-
lated customers showed decreasing trends. The fact that thesupply to the captive market followed a similar trend indicatesthat production capacity was available. This decline in salesvolume 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 theinvestigation period, was largely due to the deterioration of theworldwide situation of the steel business.2000S0284 — EN — 23.05.2002 — 002.001 — 43
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(309)Based on the information available it emerged that a worldwide
downturn occurred during the investigation period. Sales prices
decreased in the USA, Japan and South Korea. However, it wasfound that sales prices in these countries were 15 %, 24 % and7 % respectively, higher than those in the Community at the endof the investigation period.
(310)Consequently the worldwide situation of the steel industry and in
particular the situation in South East Asia, cannot explain the
deterioration of the economic situation of the Communityindustry during the period examined.
4.Conclusiononcausation
(311)The above analysis indicates that factors other than subsidised
imports from the countries concerned may have contributed to
the difficult state of the Community industry during the investi-gation period. However, the investigation has shown that thesudden increase in imports, the price depression and price under-cutting practised by the exporting producers had significantlynegative consequences on the situation of the Community
industry. Therefore, it is concluded that the subsidised imports,
taken in isolation, had caused material injury to the Communityindustry.
G.COMMUNITYINTEREST
1.Preliminaryremarks
(312)The purpose of countervailing measures is to remedy unfair
trading practices having an injurious effect on the Communityindustry and re-establish a situation of effective competition onthe Community market. In addition to subsidisation, injury and
the cause of this injury, the Commission examined whether any
compelling reasons existed which could lead to the conclusionthat it is not in the Community interest to impose measures.For this purpose, and in accordance with Article 31(1) of theBasic Decision, the impact of possible measures on all parties
involved in this proceeding and the consequences of taking or
not taking measures, were considered on the basis of theevidence available.
2.InterestoftheCommunityindustry
(313)In case of injurious subsidisation caused by low-priced subsi-
dised 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 origi-nating in the countries concerned which were sold at pricesundercutting those of the Community industry. The resulting
injurious situation could be contained as long as the volume
imported was limited. However, the high volume of subsidisedimports, which suddenly flooded on the Community market in avery short time during the investigation period, caused a pricedepression, which had a significant impact on the financial situa-tion of the Community industry. This situation leaves the
Community 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 asother producers located in the Community, undertook importantrationalisation and restructuring projects that are still going on atpresent. The realisation of these projects is important in view of
the globalisation of the steel market. This activity of the
Community industry at a worldwide level demonstrates its adapt-ability, its competitiveness and viability.
(316)With measures in force, employment, which increased during theperiod examined, could be maintained and possibly increased,depending on the evolution of consumption. The results of the2000S0284 — EN — 23.05.2002 — 002.001 — 44
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investigation have shown that the Community industry lost
significant sales volume and saw its prices decrease, in particulartowards the end of the investigation period. The proposed coun-
tervailing duties, which amount to around 6 % for cooperating
exporting producers on a weighted average level, should allowthe Community industry to recover from its injurious situationby either increasing its own prices and/or sales quantities.
(317)In view of the inadequate profitability in 1996 and 1997 and thematerial injury suffered during the investigation period, it ishighly probable that the financial situation of the Communityindustry will deteriorate further in the absence of any measuresto correct the negative effects of subsidised imports. This may
ultimately lead to cuts in production or closures of certain facil-
ities and therefore threaten employment in the Community.
3.Interestofusersandrelated activities intheCommunity
(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 theinformation submitted. The following conclusions are based onthe responses received from users.
(319)Users were found to have themselves imported 40 % of totalimports of hot-rolled coils from the countries concerned. Theyemploy 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 onthe goodwill of the Community producers. In particular it wasclaimed that these producers had to supply a large captivemarket 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 of their saleson the free market was destined for related companies, whosedownstream products were in direct competition with their ownproducts. The users in question also indicated that the Commu-nity industry supplied independent users only after the
requirements of their related companies had been fully satisfied.
They also claimed that the related user companies alreadybought the product concerned below the market price. Underthese circumstances, the users were of the opinion that the impo-sition of countervailing measures would give the Community
industry a decisive and unjustified competitive advantage in the
downstream markets which would not be in the interest of theCommunity.
(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 of1997. This situation would clearly be an infringement to theECSC Treaty.
(322)It is to be noted that the purpose of the imposition of counter-vailing measures is not to prevent users from importing hot-rolled coils from the countries concerned, rather to ensure thatthese imports are made at non-injurious prices. Even with theimposition of countervailing measures, these products will
always be present in the Community market and will ensure
that the choice of supply is maintained for users companies.
(323)The Commission estimated that a weighted average counter-vailing duty of 6 % on hot-rolled coils imported from the
countries concerned may prompt at maximum an increase of
around 1,2 % in the overall cost of the user companies' rawmaterials. This extra cost would cause an estimated increase inthe full cost of production of about 0,8 %, given the mix ofvarious sources of purchases and the average value added in thedownstream products.2000S0284 — EN — 23.05.2002 — 002.001 — 45
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(324)This estimated extra cost of production incurred by the user
companies, either charged or not to the subsequent purchasers,
is not such as to endanger the profitability of the user industries.Moreover, this cost should be seen in the light of expected posi-tive developments in the hot-rolled coils markets when governedby effective trade conditions.
(325)Concerning the level of sales price in the free market, it isrecalled that no significant differences were found between the
prices applied by the Community industry to related and unre-
lated customers. Moreover, the claim purporting that theCommunity industry did not supply or had set up priorities forits supplies of hot-rolled coils depending on the relationshipwith the purchaser during the period examined cannot be takeninto consideration as no evidence in this respect has been made
available. More to the contrary, it has been found that certain
sales contracts concluded with the Community industry werecancelled.
(326)Based on the foregoing, it is considered that any negative effectson users from taking measures against subsidised imports fromthe countries concerned cannot outweigh the positive effectsfrom which all the other operators active on the Community
market will benefit.
4.Consequencesoncompetition intheCommunitymarket
(327)Some parties claimed that countervailing measures would reduce
competition on the Community market, encouraging the creationof big steel groups. They argued that in the recent past majorsteel companies, such as British Steel and Sollac, had increased
in size by merging with or by purchasing other steel companies.
These groups are also in competition in the downstream productswith independent users, mostly small and medium-sized enter-prises. The consequences of such a concentration may be thedisappearance of many independent users resulting in the reduc-tion 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. Thereare also several hundred SSCs, stockholders and dealers sellingthe 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 notsuch, from an economic point of view, to foreclose the Commu-nity market to the countries concerned there appears to be norisk of restricting competition in the Community market.
5.ShortageofsupplyontheCommunitymarket
(330)Certain exporting producers from the countries concerned and
users in the Community claimed that the imposition of counter-
vailing measures would cause a shortage of supply, in particularfor independent user industries. This claim was based on the factthat the Community industry alone is not able to supply thewhole Community free market in particular given its current
high capacity utilisation levels.
(331)Other interested parties claimed that the Community industrydoes not have the capacity to supply its own related companies
in the free market and, is therefore not in the position tocompensate for any decrease in imports caused by the impositionof countervailing measures.
(332)In this respect it should be noted that as the producers in theCommunity cannot supply the whole of the free market, importsfrom third countries will always be needed and the Community2000S0284 — EN — 23.05.2002 — 002.001 — 46
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market will always been open to such imports, provided they are
made in respect of the provisions of the Basic Decision.
(333)In any event, the Community industry, other producers in theCommunity and exporting producers in other third countrieswill be able to continue to supply the Community market. Theexporting producers in the countries concerned will also be ableto continue to supply 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 ofsupply is not considered to be founded.
6.ConclusionontheCommunityinterest
(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 Communityindustry to deteriorate further. Moreover, the imposition of coun-tervailing measures in the present case will re-establish effectivecompetitive conditions for all operators in the Community.
Furthermore, having examined the various interests involved in
the present proceeding, no compelling reasons were found toexist against the imposition of definitive countervailingmeasures. The imposition of definitive countervailing measuresis therefore not against the Community interest.
H.DEFINITIVEMEASURES
(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, definitive countervailing measures should be adopted.
1.Injuryeliminationlevel
(337)For establishing the level of duty, account has been taken of the
subsidy margins found and of the amount of the duty necessaryto eliminate the injury caused by subsidised imports to theCommunity industry. The necessary price increase was deter-
mined on the basis of a comparison of the weighted average
import price, as established for the undercutting calculations,with the non-injurious price of the different types of hot-rolledcoils sold by the Community industry on the Community market.
(338)It was considered that the amount of duty necessary to removethe effects of injurious subsidisation should allow the Commu-nity industry to cover its costs of production and obtain areasonable profit on sales. In this respect, it was considered thatthe profit margin before tax of 12,9 % on turnover claimed bythe Community industry was an appropriate basis, regard being
given to the need for long-term investments and for a rate of
return, which the Community industry could reasonably expectin 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 differencebetween the actual net sales price of the Community industryand the actual net sales price of the comparable importedmodels. The difference was then expressed as a percentage ofthe cif import price at the Community frontier customs duty
unpaid.
2.Level ofdefinitiveduties
(340)In the light of the foregoing, it is considered that a definitive
countervailing duty should be imposed at the level of the subsidymargin found, but should not be higher than the injury marginset out above in accordance with Article 15(1) of the Basic Deci-sion.2000S0284 — EN — 23.05.2002 — 002.001 — 47
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(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 counter-
vailing duty
India 23,8 13,1 13,1
Essar 6,4 4,9 4,9
SAIL 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 ofthe present investigation. Therefore, they reflect the situationfound during that investigation with respect to the above compa-nies. These duty rates (as opposed to the country-wide duty
applicable to ‘all other companies’) are thus exclusively applic-
able to imports of products originating in the country concernedand produced by the companies and thus by the specific legalentities mentioned. Imported products produced by any othercompany not specifically mentioned in the operative part of this
Decision with its name and address, including entities related to
those specifically mentioned, cannot benefit from these rates andshall be subject to the duty rate applicable to ‘all other compa-nies’.
(343)Any claim requesting the application of these individualcompany countervailing duty rates (e.g. following a change in
the name of the entity or following the setting upof new p roduc-
tion or sales entities) should be addressed to the Commission(
1)
forthwith with all relevant information, in particular any modifi-cation in the company's activities linked to production, domesticand export sales associated with e.g. that name change or thatchange 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 compa-nies 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 havewarranted the establishment of a higher residual duty. However,since the residual dumping margin in the parallel anti-dumpingcase against Taiwan exceeds the injury threshold, it is not neces-
sary 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 theexporting producers in India can be accepted. The acceptance
of the price undertaking should be conditional on the presenta-
tion to the Member States' customs services of a validundertaking invoice clearly identifying the producer and2000S0284 — EN — 23.05.2002 — 002.001 — 48
(1) European Commission, Trade Directorate-General C DM 24 — 8/38, Rue de
la Loi/Wetstraat 200, B-1049 Brussels.
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containing the information listed in the Annex. Where no such
invoice is presented, the appropriate rate of countervailing dutywill be payable.
(348)It should be noted that in the event of a breach or withdrawal ofthe undertaking a countervailing duty may be imposed, pursuantto Article (9) and (10) of the Basic Decision.
I.TERMINATIONOFTHEPROCEEDING
(349)In view of the findings on the level of imports originating in
South Africa, the proceeding with respect to this country shouldbe terminated,
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 of600 mm or more, not clad, plated or coated, in coils, not furtherworked than hot-rolled originating in India or Taiwan falling withinCN codes 7208 10 00, 7208 2500, 7208 26 00, 7208 2700,7208 36 00, 7208 37 10, 720837 90, 7208 3810, 7208 3890,
7208 39 10, 720839 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, before duty, shall be:
Country CompanyRate of AS duty
(%)TARIC additional code
India ►M2Ispat Industries Ltd, ‘Park Plaza’,
71 Park Street, Calcutta — 700 016,
India◄►M29,8◄►M2A204◄
Jindal Vijayanagar Steel Ltd, Jindal
Mansion, 5-A. G. Deshmukh Marg,
Mumbai — 400 026, India5,7 A270
Essar Steel Ltd, 27 KM, Surat Hazira
Road, Hazira 394270, Dist: Surat, State:
Gujarat4,9 A076
Steel Authority of India Limited, Ispat
Bhavan, Integrated Office Complex,
Lodhi Road, New Delhi — 110 00312,3 A077
Tata Iron & Steel Company Limited, 43
Chowringhee Road, Calcutta 700 0716,2 A078
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◄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.2000S0284 — EN — 23.05.2002 — 002.001 — 49
▼M1
▼M2
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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 Depart-
ment, Ispat Bhawan 40, Jawaharlal Nehru Road,
Calcutta — 700 071India A084
Tata Iron & Steel Company Limited, 43 Chowringhee
Road, Calcutta — 700 071India A075
Ispat Industries Ltd, ‘Park Plaza’, 71 Park Street,
Calcutta — 700 016India A204
are hereby accepted.
2. Imports pursuant to these undertakings, when released for free
circulation, shall be exempted from the countervailing duty set inArticle 1(2) when they are manufactured and directly exported andinvoiced to an importing company in the Community by a companylisted in the table of paragraph 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 ►
M2Commercial
Invoice◄issued by the exporting company 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 forfree circulation, the year and month of import, the Combined Nomen-clature, TARIC and TARIC additional codes, the type of measure, the
country of origin, the quantity, the value, the countervailing duty, the
Member State of import and, where appropriate, the serial number ofthe 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-rolledoriginating in 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.2000S0284 — EN — 23.05.2002 — 002.001 — 50
▼M2
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ANNEX
Information necessary for Commercial Invoices accompanying sales made
subjecttotheundertaking(Article 2(2))
1. The heading ‘COMMERCIAL INVOICE ACCOMPANYING GOODS
SUBJECT TO AN UNDERTAKING’.
2. The name of the company issuing the Commercial Invoice.
3. The Commercial Invoice number.4. The date of issue of the Commercial Invoice.
5. The TARIC additional code under which the goods on the invoice are to be
customs-cleared at the Community frontier (as specified in the Decision).
6. The exact description of the goods, including:
— the company product code number (CPC) (if applicable),
— the product code number (PCN) (as established in the undertaking offered
by the producing exporter in question),
— the technical specification of the PCN,— CN code,— quantity (to be given in tonnes).
7. The description of the terms of the sale, including:
— price per tonne,
— the applicable payment terms,— the applicable delivery terms,— total discounts and rebates.
8. Name of the first buyer acting as an importer to which the invoice is issued
directly by the company.
9. The name of the official of the company that has issued the commercial
invoice and the following signed declaration:
‘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
company), and accepted by the European Commission through Decision
(842/2002/ECSC). I declare that the information provided in this invoice is
complete and correct.’2000S0284 — EN — 23.05.2002 — 002.001 — 51