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"B COUNCIL REGULATION (EC) No 2450/98
of 13 November 1998
imposing a definitive countervailing duty on imports of stainless steel bars originating in India and
collecting definitively the provisional duty imposed
(OJ L 304, 14.11.1998, p. 1)
Amended by:
Official Journal
No page date
"M1 Council Regulation (EC) No 2049/1999 of 27 September 1999 L 255 8 30.9.1999
"M2 Council Regulation (EC) No 298/2001 of 12 February 2001 L 44 1 15.2.20011998R2450 — EN — 16.02.2001 — 002.001 — 1
COUNCIL REGULATION (EC) No 2450/98
of 13 November 1998
imposing a definitive countervailing duty on imports of stainless steel
bars originating in India and collecting definitively the provisional duty
imposed
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on
protection against subsidised imports from countries not members of the
European Community (
1), and in particular Article 15 thereof,
Having regard to the proposal submitted by the Commission after consulting
the Advisory Committee,
Whereas:
A. PROVISIONAL MEASURES
(1) By Commission Regulation (EC) No 1556/98 (2) (hereinafter referred
to as ‘the provisional duty Regulation’) provisional countervailing
duties were imposed on imports into the Community of stainless steel
bars (hereinafter referred to as ‘SSB’ or ‘the product concerned’)falling within CN codes 7222 20 11, 7222 20 21, 7222 20 31 and7222 20 81 originating in India. The measures took the form of ad
valorem duties varying between 0 and 25,0 % with a residual duty of
25,0 %.
(2) Pursuant to Article 12(1) of Regulation (EC) No 2026/97 (hereinafter
referred to as the ‘basic Regulation’), provisional anti-dumping dutiesoriginally imposed by Commission Regulation (EC) No 1084/98 (
3)
were reduced by the provisional duty Regulation. This amendment of
the anti-dumping duties was necessary in order to avoid that theproduct would be subject to both anti-dumping and countervailing
duties for the purpose of dealing with one and the same situation
arising from dumping or from export subsidisation.
B. SUBSEQUENT PROCEDURE
(3) Following the adoption of the Regulation imposing provisional duties,
several interested parties submitted comments in writing. The partieswho so requested were granted an opportunity to be heard by theCommission.
(4) The Commission continued to seek and verify all information it
deemed necessary for its definitive findings.
(5) Parties were informed of the essential facts and considerations on the
basis of which it was intended to recommend the imposition of adefinitive countervailing duty and the definitive collection of amounts
secured by way of the provisional duty. They were also granted a
period to make representations subsequent to this disclosure.
(6) The oral and written comments submitted by the interested parties
were considered, and, where appropriate, definitive findings were
changed accordingly.
C. PRODUCT UNDER CONSIDERATION AND LIKE PROD-
UCT
(7) The product concerned by the investigation is stainless steel bars and
rods, not further worked than cold-formed or cold-finished, containingby weight 2,5 % or more of nickel, of circular cross-section as well asof other cross sections.
(8) Following the adoption of the Regulation imposing provisional duties,
some Indian exporting producers argued that the products exported to!B
(1) OJ L 288, 21. 10. 1997, p. 1.
(2) OJ L 202, 18. 7. 1998, p. 40.
(3) OJ L 155, 29. 5. 1998, p. 3.1998R2450 — EN — 16.02.2001 — 002.001 — 2
the Community and those sold on the domestic market in India were
not comparable, for instance in terms of chemical characteristics, andconsequently could not be considered to be a like product.
(9) This claim could not be accepted since it was found that SSB produced
and sold domestically in India as well as Indian SSB sold on the
Community market had the same basic physical, technical and
chemical characteristics and uses.
(10) One exporting producer claimed that products corresponding to the
standard DIN 1013 fell within the scope of the current anti-subsidyproceeding and should therefore be taken into consideration. It was
found, however, that these products were hot rolled bars and therefore
not covered by the scope of the investigation as set out in the notice ofinitiation (
1) and the provisional duty Regulation. In addition, it was
noted that they do not fall within the relevant CN codes subject to
measures. Consequently, this claim was not accepted.
(11) As no other arguments were presented, the findings set out in recitals 8
to 11 of the provisional duty Regulation are confirmed.
D. SUBSIDIES
1.Passbook scheme (PBS)
(12) The Government of India (GOI) claimed that this scheme, which is
described in recitals 16 to 24 of the provisional duty Regulation, was
not countervailable since it was a permitted drawback system within
the meaning of Annex I(i) and Annexes II and III to the basicRegulation. Furthermore, it alleged that there was no requirementunder Annex I(i) that imported inputs are used for export production.
However, Annex I(i) clearly states that imported inputs must either be
consumed in the production of the exported product (i.e. a drawback
scheme as provided for within the meaning of Annex II) or theimported inputs must have the same quantity and the same quality andcharacteristics as home market inputs (i.e. a substitution drawback
scheme as provided for within the meaning of Annex III). The PBS in
fact allows the importation of goods free of duty which are not inputsused in producing goods for export or inputs having the same quantityand the same quality and characteristics as home market inputs
actually incorporated in the exported product. It is therefore considered
that the PBS is not a permitted drawback or substitution drawbackscheme under the provisions of the basic Regulation.
(13) Four Indian exporting producers have argued that the scheme operates
in practice as a legitimate duty drawback scheme, and that this is
proved by the fact that adjustments to normal value have been grantedin respect of the PBS in the parallel anti-dumping proceeding.However, such an allowance is not relevant in the assessment of the
countervailability of the PBS, which has been established on the basis
of the provisions of the basic Regulation, for the reasons stated inrecital 12. Once such a countervailable subsidy is found to exist, thebenefit to the recipient is the full amount of import duty not paid by
the exporting producer on all import transactions. In this regard, it is
not adequate to reconstruct the PBS in order to determine whichproducts are physically incorporated and which are not.
(14) The GOI further referred to the existence of a verification procedure,
based on ‘Standard input/output norms’ as described in recital 19 of
the provisional duty Regulation. These norms were issued for exported
products and set out quantities of normally imported raw materialsrequired to produce one unit of the finished product. The GOI argued
that the system was in place to ensure that there was no excess
drawback of import duties as required by Annex I(i) and Annexes IIand III to the basic Regulation and that, furthermore, the Commissionhad the opportunity to verify all actual transactions to determine
whether there was an excess drawback.!B
(1) OJ C 264, 30. 8. 1997, p. 2.1998R2450 — EN — 16.02.2001 — 002.001 — 3
This argument cannot be accepted as the issue of excess remission only
arises in the context of assessing properly constituted drawback/substitution drawback schemes and it has been established that thePBS is not such a drawback or substitution drawback scheme within
the meaning of Annex I(i) and Annexes II and III to the basic
Regulation.
(15) The GOI argued that the element of minimum value addition (MV A) in
the Standard input/output norms does not render the PBS an import
substitution subsidy since there was no minimum prescribed domestic
input requirement and the MV A could also be achieved by the use of,for example, imported inputs.
As the PBS is already considered countervailable on the basis that it is
contingent upon export performance within the meaning of Article
3(4)(a) of the basic Regulation, it is not necessary to make a furtherfinding on the issue of an import substitution subsidy.
(16) The GOI claimed that the benefits under the PBS should not be
countervailed since the PBS had been abolished as from 31 March
1997 and only a limited number of companies could continue to availthemselves of credits previously granted. The GOI made reference toArticle 17 of the basic Regulation, which provides that a countervail-
ing measure remains in force only as long as, and to the extent that, it
is necessary to counteract the countervailable subsidies which arecausing injury, and also referred to previous Community practice. Four
Indian exporting producers claimed that it is highly questionable that a
scheme which is no longer in force may be deemed countervailable.
In response to this point, it should be noted that even though the PBS
has been abolished, companies can still claim credits under thisscheme for export transactions made up to 31 March 1997, and during
the investigation it was established that they may use these credits up
to 31 March 2000. Substantial benefits under this scheme could,therefore, continue to be granted until that time and they constitute
countervailable subsidies. With regard to the continuing counter-
vailability of benefits, it is considered that the principle stated inArticle 5 of the basic Regulation applies, i.e. that the amount ofcountervailable subsidies shall be calculated in terms of the benefit
conferred on the recipient in the investigation period. During the
investigation period, the PBS was, as stated by the GOI, abolished andreplaced by its successor, the Duty Entitlement Passbook Scheme(DEPBS), which is also considered countervailable (see recital 34 of
the provisional duty Regulation). Since benefits will continue to be
granted in the future under the DEPBS it is considered necessary toimpose measures based on the total benefits received during the
investigation period under both the PBS and the DEPBS because, as
prescribed by Article 17 of the basic Regulation, it will still benecessary to counteract the countervailable subsidies which arecausing injury.
(17) Subsequent to the above claim, the GOI provided information that,
following an instruction in July 1998 from the Ministry of Commerce,Indian producers had only until 30 September 1998 at the latest toclaim passbook credits, and not 31 March 2000 as previously provided
for (see recital 16). The GOI asked, therefore, that this development be
taken into consideration in making a final determination.
It should first be noted that since it was presented very late in this
investigation, it is not possible to verify the practical application of this
instruction. Furthermore, as explained above, as the PBS has been
replaced by a successor scheme, the DEPBS (which is also consideredto be a countervailable subsidy), and that benefits will continue to begranted in future under the DEPBS, it is not appropriate to disregard
benefits which accrued to exporters under the PBS during the
investigation period. Therefore, measures should be imposed onbenefits received during the investigation period under both the PBSand the DEPBS. Any other approach would enable subsidising
governments to escape from countervailing measures simply by
changing the name of a scheme during the investigation period.
(18) Four Indian exporting producers claimed that the credits received on
the export turnover for the period of investigation for the products
concerned should have been used for calculating the subsidy, instead of
the debits made from the passbook. They argued that basing the!B1998R2450 — EN — 16.02.2001 — 002.001 — 4
amount of benefit on the debits had led in this case to an exaggerated
amount of subsidy in relation to the actual volume of exports to theEuropean Community, which was brought about by the timing of theuse of the benefit.
It should be noted that the subsidy amount is determined on the basis
of the benefit to the recipient company during the period ofinvestigation. It is only when the debit is made in the passbook that
the credit obtained on the basis of previous export volume is actually
used; consequently it is only at this moment that the recipient receivesa benefit in terms of a relief from import duty which should otherwise
have been paid.
(19) Four Indian exporting producers alleged that double counting had
occurred when the provisional dumping margins and amounts of
subsidisation were established. In particular, they alleged that the part
of the PBS benefits for which no allowance was granted in theanti-dumping proceeding had been double-counted with the subsidyamount and that the dumping margin should have been reduced.
In reply to this point, it should first be noted that the question of
allowances in an anti-dumping proceeding and the extent of counter-vailability in an anti-subsidy proceeding require different analysis,
since each procedure is based on separate basic Regulations. Article
2(1)(a)(ii) of the basic Regulation provides that the exemption of anexported product from duties/charges shall not be deemed to be asubsidy provided that it is granted in accordance with the provisions of
Annexes I to III to the basic Regulation. The PBS is considered
countervailable for the reasons explained in recital 25 in theprovisional duty Regulation, and the countervailable benefit to the
exporters has been calculated on the basis of the amount of customs
duty normally due on all imports made during the investigation periodbut which remained unpaid under the PBS. Consequently, theestablishment of the subsidy amount and the dumping margin is the
product of two separate exercises.
In addition, it should be recalled that, since all of the investigated
schemes were found to constitute export subsidies within the meaning
of Article 3(4)(a) of the basic Regulation, the provisional anti-dumping
duties were reduced by the amount of countervailing duty.
(20) Finally, the GOI claimed that the inclusion of an amount for interest in
arriving at the total benefit to companies which availed themselves of
this scheme is not provided for under the Agreement on subsidies andcountervailing measures (ASCM) of the World Trade Organisation
(WTO). The GOI also claimed that it was not the Community’s normal
practice to include such an amount in calculating the amount of benefitto companies availing themselves of such subsidy schemes.
With regard to this claim, the interest element is added in order to
reflect the benefit to the recipient obtained by the subsidised firm bynot having to raise an equivalent amount of money from commercialsources. Indeed, Article 6 of the basic Regulation (which reproduces
Article 14 of the ASCM) makes it clear that the benchmark for the
calculation of the subsidy is the equivalent cost of funds on thecommercial market. The Community’s established practice in this areasince the entry into force of the WTO Agreement is to add an amount
for interest in calculating the total benefit; this has been done in a
number of recent cases. This claim is therefore rejected.
2.Export Promotion Capital Goods Scheme (EPCGS)
(21) The GOI has made a number of claims regarding the Export Promotion
Capital Goods Scheme (EPCGS), which is described in recitals 36 to39 of the provisional duty Regulation. These concern the qualificationof the scheme as a subsidy and the calculation of the subsidy amount.
(22) It was argued that there is no requirement under the law that capital
goods purchased under this scheme should be exclusively used for themanufacture of export goods and that, consequently, the exemption
from import charges of goods imported under this scheme cannot be
considered as a countervailable subsidy.!B1998R2450 — EN — 16.02.2001 — 002.001 — 5
In regard to this claim, the investigation has shown that to avail itself
of the EPCGS, a company must make a commitment to export acertain value of goods within a certain time period. This scheme istherefore contingent in law upon export performance i.e. the benefit
cannot be obtained without a commitment to export goods. As such, it
is deemed to be specific under the provisions of Article 3(4)(a) of thebasic Regulation and, therefore, countervailable. In the light of thesefacts, the question of whether capital goods are used exclusively or not
for the manufacture of goods for export is of no relevance.
(23) It is further argued that the scope of the term ‘input’ under paragraph
(i) of Annex I (the illustrative list of export subsidies) of the basicRegulation also covers capital goods and that, under this paragraph, the
remission of any duty cannot per se be considered as a subsidy unless
there is an excess remission.
However, it is considered that capital goods do not constitute ‘inputs’
within the meaning of the basic Regulation because they are not
physically incorporated into the exported products.
(24) The GOI contested the fact that, for calculating the subsidy amount per
unit, in the provisional findings, benefits from the scheme had beenallocated only over export turnover. It claimed that as capital goodsimported under the EPCGS are used for producing goods for both the
export and domestic markets, benefits under the scheme should be
spread over total turnover.
In reply to this, it has been determined that this scheme is contingent
solely upon export performance (see recital 22). In conformity with
Article 7(2) of the basic Regulation, it is considered appropriate that
the benefit for this scheme should be spread over export turnover onlysince the subsidy is granted by reference to a certain value of exportsof goods within a certain time period. The claim, therefore, that
benefits under the scheme should be allocated over total turnover is
rejected.
(25) One Indian exporting producer submitted that the depreciation period
used in the provisional findings (i.e. 15,5 years as mentioned in recital
42 of the provisional Regulation) is incorrect, and that a depreciation
period of 21 years, corresponding to the period the company uses towrite off its fixed assets, should have been used.
In reply to this claim, it should be noted that in the provisional
findings, the normal depreciation period of capital goods in the
stainless steel industry concerned was used i.e. 15,5 years, which is anaverage based on information provided by the cooperating Indianexporting producers. This is in accordance with the requirements of
Article 7(3) of the basic Regulation which states that where a subsidy
can be linked to the acquisition of fixed assets, the amount of thecountervailable subsidy shall be calculated by spreading the subsidyacross a period which reflects the normal depreciation of such assets in
the industry concerned. In view of this provision, it is not appropriate
to use the company’ s specific depreciation periods. The claim istherefore rejected.
(26) One Indian exporting producer claimed that the benefit on some
machinery should not have been counted, since it had not been
commissioned during the period of investigation. Having furtherexamined this matter, it is clear that the company has in fact obtained abenefit under this scheme, in the form of an exemption from import
duty which would normally have been payable during the period of
investigation. The fact that the machinery may not have been fullyoperational during the period of investigation does not affect thisconclusion.
(27) Finally, the GOI claimed that the inclusion of an amount for interest in
arriving at the total benefit to companies which availed themselves ofthis scheme is not provided for under the ASCM of the WTO. The GOIalso claimed that it is not the Community’ s practice to include such an
amount in calculating the amount of benefit to companies availing
themselves of such subsidy schemes.
This argument is rejected for the reasons explained in recital 20.!B1998R2450 — EN — 16.02.2001 — 002.001 — 6
3.Income tax exemption scheme
(28) The rate of corporate income tax in India, which is described in recitals
44 to 48 of the provisional duty Regulation, has been reduced since the
1996/97 tax year (i.e. the period on which the Commission made itsprovisional findings for this scheme). It is considered that account
should now be taken of the reduced rate in calculating any benefit to
the Indian exporting producers concerned.
In this regard, it is noted that Article 5 of the basic Regulation provides
that the amount of countervailable subsidies shall be calculated in
terms of the benefit conferred on the recipient which is found to existduring the investigation period for subsidisation. As stated above, in
the case of the provisional findings, the Commission calculated the
benefit on the basis of the tax year 1996/97 (i.e. 1 April 1996 to 31March 1997) which corresponded most closely to the investigationperiod. During this tax year, the rate of corporate tax applied was 43 %.
For the subsequent tax year (i.e. from 1 April 1997 to 31 March 1998),
the rate of tax to be applied was reduced to 35 %. It is considered that,as part of this latter tax year falls within the investigation period of thisproceeding, it is appropriate to make the calculation of the amount of
countervailable subsidies on the basis of a pro rata of the two tax rates
which applied in the investigation period. Appropriate adjustmentshave accordingly been made to the amount of subsidy for thecompanies which availed of this scheme.
(29) The GOI has claimed that, in the provisional findings, the addition of
an amount for interest in arriving at the total benefit to companies
which availed of this scheme was in violation of previous Community
practice as well as both the ASCM and the basic Regulation.
In response to this argument, it is considered that the amount of tax
which remained unpaid by a company in the tax year correspondingmost closely to the investigation period was the most reasonableindicator on which to base the benefit to a company under this scheme.
This amount is considered to equate to a one-time grant which is
available to a company during the investigation period. An amount isadded to this grant for interest for the reasons set out in recital 20 andthe GOI claim has accordingly to be rejected.
4.Amount of countervailable subsidies
(30) Taking account of the definitive findings relating to the various
schemes as set out above, the amount of countervailable subsidies for
each of the investigated exporting producers is as follows:
Passbook DEPB EPCGS Income tax Total
Bhansali Bright Bars 13,7 % 0,7 % 14,4 %
Facor (Ferro Alloys Corp.) 84,5 % 1,1 % 85,6 %
Grand Foundry 84,5 % 84,5 %Isibars 38,7 % 1,1 % 1,2 % 41,0 %Mukand 18,1 % 0,1 % 1,4 % 19,6 %Parekh 0,4 % 0,4 %
Panchmahal Steel 0,2 % 0,7 % 0,9 %Raajratna Metal Industries 44,2 % 2,7 % 46,9 %Venus Wire Industries 22,9 % 1,8 % 24,7 %Viraj Impoexpo 25,6 % 1,4 % 27,0 %
(31) The subsidy amount definitively established for Indian companies
other than those cooperating in this investigation, expressed as apercentage of the net, free-at-Community-frontier price, is 88,3 %,
which is the sum of the highest amount granted to any cooperating
exporter under each scheme.!B1998R2450 — EN — 16.02.2001 — 002.001 — 7
(32) One exporting producer, Chandan Steel Ltd, cooperated in the
anti-dumping proceeding, where an individual dumping margin andan individual injury margin was provisionally established, but did notcooperate fully in the anti-subsidy proceeding. In the context of this
proceeding, Article 28 of the basic Regulation is applicable for the
determination of the subsidy amount, which for this company,expressed as a percentage of the net, free-at-Community-frontierprice, is 88,3 %. However, it is considered that account should be taken
of the cooperation of this company in the anti-dumping proceeding,
and that the definitive countervailing duty should be based on theinjury elimination level established for this company’ s exports of the
product concerned to the Community during the period of investi-
gation in the anti-dumping proceeding, since it is lower than thesubsidy amount.
(33) For the exporter mentioned in recital 6 of the provisional anti-dumping
duty Regulation (Sindia Steel Ltd), it was considered appropriate thatthe weighted average subsidy amount found for the cooperating Indiancompanies should apply for this company. The subsidy amount
definitively established for this company, expressed as a percentage of
the net, free-at-Community-frontier price, is 34,5 %.
E.INJURY
1.Community industry
(34) After add itional verification it was found that the cumulated
production volume of the Community industry of SSB does not
account for 45 % of total Community production, as erroneously set
out in the provisional duty Regulation, but for 38 % of totalCommunity production. This percentage suffices to comply with theconditions in Articles 9(1) and 10(8) of the basic Regulation.
2.Consumption in the Community, market shares and import
volumes from India
(35) Following the disclosure, no comments were received as regards
consumption of SSB in the Community, the market shares and thevolume of imports from India. Consequently, the findings made inrecitals 53 to 56 of the provisional duty Regulation are confirmed.
3.Prices of subsidised imports from India and undercutting
(a) Calculation of the undercutting margins
(36) As explained in the provisional duty Regulation (recitals 57 to 65), a
detailed undercutting analysis was carried out for each of the Indianproducers concerned showing significant undercutting margins. Theundercutting margins were calculated by comparing per product type,
the weighted average export prices at Community frontier level with
the weighted average ex-factory sales prices of the Communityindustry to unrelated parties. Indian product types for which no
matching Community product type was found were excluded from the
calculation after it had been established that the remaining transactionswere sufficiently representative. If exports were made through relatedcompanies the export prices were duly adjusted for costs between
importation and resale to the first independent customer in the
Community as well as for profits accruing. An adjustment was made tothe Community industry’ s sales prices for transport costs within theCommunity. Whereas the Indian exporters sold exclusively to traders,
the Community industry sold to end-users and traders. Consequently,
the Community industry’ s sales to end-users were adjusted to a traderlevel. In addition, the Indian export prices were adjusted for handling
charges at Community border level.
(37) Several Indian producers reiterated their requests for an adjustment
concerning differences in Indian and Community lead times between
order and delivery and concerning differences in reliability of delivery
time. They claimed in particular that they regularly had to issue creditnotes to their customers due to late deliveries. However, credit notesfor late deliveries do not indicate that longer Indian lead times or
unreliability of delivery times affected the sales price when the price
negotiations took place. Consequently, the claim for this adjustment!B1998R2450 — EN — 16.02.2001 — 002.001 — 8
cannot be granted. In this respect, it was also taken into account that
the contractual delivery times of the Indian producers often variedbetween four and six months without this having an effect on theagreed sales price.
(38) All Indian producers also repeated their request for an adjustment for
quality differences. In particular, they alleged that SSB produced bythe Community producers had a higher machinability which would
reduce cycle times in further transformation processes of the SSB. In
this respect, it was noted that some Community producers did indeedsell a certain proportion of products under a trade mark indicatinghigher machinability. However, it was found that there was no
consistent price pattern indicating that the products with higher
machinability were sold at higher prices and would thus have a highermarket value. Consequently, an adjustment could not be granted, sincean effect on prices and price comparability was not established. In
addition, it was noted that all Indian producers had made an identical
claim for an adjustment, disregarding potential quality differencesamongst their products.
(39) One Indian company claimed that the sales price of the Community
industry consisted of a base price and a so-called ‘alloy surcharge’, i.e.a price element for alloys contained in SSB. The company requestedthat the alloy surcharge be excluded from the Community sales prices
for the purpose of the undercutting and underselling calculations. This
request could not be granted since the alloy surcharge was part of thesales price that was paid by the customers. In this respect, it was notedthat the Indian sales prices also contained an alloy element, even if this
was not expressly referred to in the invoice.
(40) Taking into account the corrections described above, the undercutting
margins amount to:
— Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt Ltd,
Mumbai: 14,5 %
— Chandan Steel Ltd, Umbergaon: 14,9 %— Facor (Ferro Alloys Corp. Ltd), Nagpur: 13,0 %— Grand Foundry Ltd, Mumbai: 13,2 %— Isibars Ltd, Mumbai: 19,4 %— Mukand Ltd, Mumbai: 17,8 %— Panchmahal Steel Ltd, Baroda: 13,9 %— Parekh Bright Bars Pvt Ltd, Thane: 5,8 %
— Raajratna Metal Industries Ltd, Ahmedabad: 15,8 %
— Venus Wire Industries Ltd, Mumbai: 12,8 %— Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai: 15,7 %
(41) The weighted average undercutting margin calculated for Sindia Steel
Ltd (see recital 33) amounted to 16,8 %. It was concluded that these
undercutting margins were significant.
(b) Allegation of anti-competitive behaviour
(42) In their comments following the disclosure, the Indian companies
continued to argue that the calculation of undercutting margins as well
as the findings on other injury factors, causality and Community
interest would be meaningless in the context of this investigation inview of the Commission Decision (
1) in the competition case
IV/35.814, ‘Alloy Surcharge’. This Decision stated that Community
producers of stainless steel flat products had modified ‘in a concerted
fashion the reference values used to calculate the alloy surcharge, apractice having the object and effect of restricting and distortingcompetition within the common market’.
(43) In this respect it is recalled that the Decision related to stainless steel
‘flat products’ as opposed to stainless steel bars which belong to thecategory of long products. Moreover, the producers of flat products and
the producers of SSB are, to a large extent, not identical and the!B
(1) OJ L 100, 1. 4. 1998, p. 55.1998R2450 — EN — 16.02.2001 — 002.001 — 9
number of SSB producers is significantly higher than that of the flat
steel producers.
(44) The Indian producers have, however, repeated their allegation that a
concerted practice existed for SSB. Some of these companies have alsolodged a formal complaint with the Commission, pursuant to Article 3of Regulation (EEC) No 17/62 (
1), concerning SSB. In order to support
their allegation, the Indian companies submitted that one of the
national steel associations in the Community circulated to all of itsmembers on a monthly basis a list of the alloy surcharges applied by
the most important producer in this country. In addition, they
submitted that this producer applied the same coefficient (so-calledyield factor) in order to calculate the alloy surcharge for SSB on thebasis of the alloy surcharge for flat products as a trader in a different
Member State. They alleged that the information provided conclusive
evidence of a concerted practice in the SSB market.
(45) In this respect it is important to note that the application of an alloy
surcharge system as such including the use of a yield factor is notillegal. The alloy surcharge system allows a stainless steel producer —
in a legal manner — to reflect the price variations of the market prices
for alloy elements in the sales prices to its customers and thus toprotect itself against the risk of significant fluctuations in the cost ofproduction. It was also noted that the use of an alloy surcharge is
common to other steel markets outside the Community and has, with a
short interruption, been applied in the Community for many years. Inaddition, for ECSC-products, Article 60 of the ECSC Treaty and theimplementing Community legislation requires the Community pro-
ducers to inform the Commission and anyone interested of the
applicable surcharge (Article 6(b) of Decision No 37/54 (
2)).
(46) Consequently and in accordance with the Commission Decision in
Case IV/35.814, the application of an alloy surcharge system couldonly be illegal if the alloy surcharge system were applied in a
concerted, i.e. anti-competitive, manner. However, no conclusive
evidence of this was found in the course of the investigation.
(47) In addition, it was found that the price of the Community producers for
identical products to comparable customers in identical periods varied,resulting in different levels of profitability for the Community
industry.
(48) In the light of the above it was concluded that the findings on injury
and Community interest, including the calculation of undercutting
margins, were not meaningless as alleged by the Indian companies.Consequently, the Indian request that the investigation be terminatedforthwith could not be granted. Similarly, it was not possible to
suspend the anti-dumping investigation until the Commission had
concluded its investigation relating to the alleged anti-competitivebehaviour because anti-dumping investigations have to be concluded
within a maximum of 13 months from initiation according to Article
11(9) of the basic Regulation.
(49) However, it was noted that the Commission is continuing its
investigation regarding the alleged anti-competitive behaviour. Shouldthe Commission find that a concerted practice existed, the conditionsto initiate a review ex officio would be fulfilled. Such a review would
be carried out expeditiously, i.e. within maximum 12 months, in order
to investigate whether and to what extent the relevant findings oninjury, causation and Community interest are affected by such an
anti-competitive practice.
4.Situation of the Community industry
(50) Following the adoption of the Regulation imposing provisional duties
no comments were received as regards the situation of the Communityindustry in respect of production volume, capacity and capacity
utilisation, sales volume, market share, sales prices, profitability,
employment and stocks. Consequently, the findings as laid down inrecitals 67 to 78 of the provisional duty Regulation are confirmed.!B
(1) OJ 13, 21. 2. 1962, p. 204/62.
(2) OJ 18, 1. 8. 1954, p. 470/54.1998R2450 — EN — 16.02.2001 — 002.001 — 10
However, the Government of India questioned the conclusions drawn
from these findings, in particular it was alleged that the drop in theCommunity production figures cannot be blamed on the decreasingIndian imports. This argument concerns causality which is dealt with
below. Finally, the Government of India claimed that the Community
industry increased their sales to related parties from 1994 to the IP12(see recital 52 of the provisional duty Regulation). This does, however,not invalidate the findings and conclusions on total sales (in particular
a negative development of the market share since 1994) and on sales to
unrelated parties which are also used for the purpose of priceundercutting calculations.
5.Conclusions
(51) On the basis of the above it was concluded that the Community
industry is suffering material injury as set out in recital 79 of the
provisional duty Regulation.
F.CAUSATION
(52) Following the adoption of the Regulation imposing provisional duties,
some Indian companies questioned whether the injury suffered by theCommunity industry was caused by the subsidised imports from India.
In particular, it was alleged that the injury was caused by other factors,
namely low priced imports from other countries. In addition, it wasalleged that other Community producers had not followed the sametrend as the Community industry.
(53) In this respect, it is worth noting that Indian imports were present in
significant volumes throughout the period considered and peaked at a
level of 9,1 % market share in 1996. It has also been established that
these imports were made at prices significantly undercutting theCommunity industry’ s prices. Account was further taken of the factthat a number of traders buy SSB both from Indian and Community
sources, which leads to the market being transparent and price
sensitive.
It was noted that the above trends established for the Indian imports
coincided with the deterioration of the Community industry’ s situation,in particular its loss of market share and the depression of its pricessince 1995. In the presence of subsidised imports of SSB originating in
India during the investigation period, the Community industry had to
lower its prices significantly, regardless of the consequences forprofitability. Consequently, a causal link between subsidised importsand material injury suffered by the industry was found to exist.
(54) It was also investigated whether factors other than the subsidised
imports could have contributed to the injury suffered by the
Community industry. In this respect, it was noted that imports from
other countries were made either in quantities below or close to thethresholds set out in Article 14(4) of the basic Regulation and/or athigher prices than Indian imports. Consequently these imports cannot
have broken the causal link between the subsidised imports from India
and injury suffered by the Community industry.
(55) In addition, the allegation by some Indian producers that the situation
of other Community producers was significantly better than that of theCommunity industry was investigated. In this respect, it should berecalled that detailed and verified data is only available for the
Community industry. Taking into account the transparency and the
price sensitivity of the SSB market in the Community, it seemedhowever, not unreasonable to conclude that other Community
producers are likely to have followed a trend similar to that of the
Community industry, in particular as regards prices.
(56) Finally, it was argued that the decrease in the SSB sales prices of the
Community industry since 1995 was the result of a decrease in alloy
prices. In this respect, it was however noted that any change in theworld market prices for the alloys applies equally to the Indian
producers and consequently has no influence on the undercutting
found. In addition, it was noted that the Community industry had alsosignificantly lowered its base prices.
(57) In the light of the above, the findings set out in the provisional duty
Regulation (recitals 80 to 88) are confirmed, i.e. that the low priced!B1998R2450 — EN — 16.02.2001 — 002.001 — 11
subsidised imports from India have, when taken in isolation, caused
material injury to the Community industry.
G. COMMUNITY INTEREST
(58) Following the adoption of the Regulation imposing provisional duties,
no substantiated comments were received as regards the Communityinterest analysis set out in recitals 89 to 94 of the provisional duty
Regulation.
(59) Consequently, it is concluded that the imposition of measures will lead
to a reinstatement of effective competition that will enable theCommunity industry to regain the lost market share and improve its
profitability.
(60) In the absence of a reaction from the users and importers, it was
assumed that the impact of any expected price increase would belimited, also taking into account the level of the duty proposed. As
regards the upstream industry, it was concluded that a reinstatement of
fair trade would lead to an improvement in its competitiveness.
(61) Summarising, it was concluded that the findings set out in recitals 89
to 93 of the provisional duty Regulation can be confirmed. In
particular, there are no compelling reasons to suppose that it would be
not in the interest of the Community to impose measures.
H. COUNTERV AILING MEASURES
(62) Based on the above conclusions on subsidisation, injury, causal link
and Community interest, it was considered what form and level thedefinitive countervailing measures would have to take in order to
remove the trade-distorting effects of injurious subsidies and to restore
effective competitive conditions on the Community SSB market.
(63) Accordingly, as explained in recitals 96 to 98 of the provisional duty
Regulation a non-injurious level of prices was calculated which would
allow the Community industry to cover its cost of production and
obtain a reasonable return for sales of the product concerned.
(64) One Indian company argued that the calculation of the non-injurious
price level was incorrect since the profit margin for all product types
was identical. It should be noted that the non-injurious price level was
calculated on the basis of the average sales prices per product typeminus the actual weighted average profit margin of the Communityindustry plus a reasonable profit, as explained above. This approach
was deemed to be the most appropriate for the purpose of this
investigation.
(65) The comparison of the non-injurious price levels with the export prices
of the Indian producers led to the following injury margins, expressed
in relation to the free-at-Community-frontier price level:
— Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt Ltd,
Mumbai: 18,4 %
— Chandan Steel Ltd, Umbergaon: 19,0 %— Facor (Ferro Alloys Corp. Ltd), Nagpur: 16,5 %— Grand Foundry Ltd, Mumbai: 16,6 %— Isibars Ltd, Mumbai: 25,5 %— Mukand Ltd, Mumbai: 25,3 %— Panchmahal Steel Ltd, Baroda: 17,6 %— Parekh Bright Bars Pvt Ltd, Thane: 7,5 %— Raajratna Metal Industries Ltd, Ahmedabad: 19,8 %— Venus Wire Industries Ltd, Mumbai: 16,1 %— Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai: 20,2 %
(66) For Sindia Steels Ltd the weighted average of the injury margins of the
cooperating Indian companies is applied. This resulted in an injury
margin of 22,1 %.
(67) In accordance with Article 15(1) of the basic Regulation, the duty rate
should correspond to the subsidy amount, unless the injury margin is!B1998R2450 — EN — 16.02.2001 — 002.001 — 12
lower. This led to the following rates of duty for the cooperating
producers:
— Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt Ltd,
Mumbai: 14,4 %
— Chandan Steel Ltd, Umbergaon: 19,0 %— Facor (Ferro Alloys Corp. Ltd), Nagpur: 16,5 %— Grand Foundry Ltd, Mumbai: 16,6 %— Isibars Ltd, Mumbai: 25,5 %— Mukand Ltd, Mumbai: 19,6 %— Panchmahal Steel Ltd, Baroda: 0,0 %— Parekh Bright Bars Pvt Ltd, Thane: 0,0 %— Raajratna Metal Industries Ltd,Ahmedabad: 19,8 %— Venus Wire Industries Ltd, Mumbai: 16,1 %— Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai: 20,2 %
(68) For Sindia Steels Ltd the duty rate should be 22,1 %.
(69) In order to avoid granting a bonus for non-cooperation and to ensure
that no circumvention of the countervailing measures takes place, it
was considered appropriate to establish the duty rate for the
non-cooperating companies at the level of the highest duty rateimposed, i.e. 25,5 % since there was a high level of cooperation from
Indian exporting producers.
I.UNDERTAKINGS
(70) At a late stage of the investigation several Indian companies offered
undertakings. The companies offered not to avail themselves in the
future of the export subsidies found to be countervailable as regardstheir exports to the Community. According to the companies, the
undertaking would have the effect that export prices would rise
significantly.
This offer could not be accepted. In the first place these companies
would continue to receive countervailable subsidies based on exportsto countries other than the Community and concerning imports of raw
materials and capital goods used in the production of products other
than SSB. Thus, there would appear to be insurmountable difficultiesto monitor such an undertaking leaving open the likelihood that
circumvention would occur.
Secondly, the undertaking did not provide for any measure of price
discipline and thus it is considered that the injurious effects of thesubsidised imports would not be removed by the acceptance of such anundertaking.
After expiry of the deadline to submit proposals for undertakings
another exporting producer submitted a proposal for an undertaking.This company offered to respect certain minimum prices. This offerwas examined and it was found that due to the large variety of the
product types concerned and the significant price fluctuations for the
product concerned it would be difficult to set prices which wouldeliminate the injurious effects of subsidised imports. Consequently, the
offer for this undertaking could also not be accepted.
J.COLLECTION OF THE PROVISIONAL DUTIES
(71) In view of the magnitude of the countervailable subsidies found for the
exporting producers and in light of the seriousness of the injury caused
to the Community industry, it is considered necessary that the amountssecured by way of provisional countervailing duty pursuant toRegulation (EC) No 1556/98 be definitively collected to the extent
of the amount of definitive duties imposed, unless the provisional duty
rates are lower in which case the provisional duty rate should prevail,!B1998R2450 — EN — 16.02.2001 — 002.001 — 13
HAS ADOPTED THIS REGULATION:
Article 1
1. A definitive countervailing duty is hereby imposed on imports of
stainless steel bars falling within CN codes 7222 20 11, 7222 20 21,
7222 20 31 and 7222 20 81 originating in India.
2. Products manufactured by the companies listed below shall be subject to
the following rates of duty applicable to the net, free-at-Community-frontier
price:
ManufacturerRate of duty
(%)Taric additional code
Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt Ltd, Mumbai 14,4 8226
Chandan Steel Ltd, Umbergaon 19,0 8593Facor (Ferro Alloys Corp. Ltd), Nagpur 16,5 8400Grand Foundry Ltd, Mumbai 16,6 8401
Hindustan Stainless, Plot No 165, Road No 1, Kalomboli Warehousing
Complex, Kalamboli, Taluka — Panvel, Dist — Raigad, India. 16,1 8407
Isibars Ltd, Mumbai 25,5 8402
— Meltroll Engineering Ltd, Mumbai 5,5 A021
Mukand Ltd, Mumbai 19,6 8403
Panchmahal Steel Ltd, Baroda 0 8404Parekh Bright Bars Pvt Ltd, Thane 0 8594Raajratna Metal Industries Ltd, Ahmedabad 19,8 8405Sindia Steels Ltd, Nashik "
M1123 8406
Venus Wire Industries Ltd, Mumbai 16,1 8407
Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai 20,2 8410
All other companies 25,5 8900
3. Unless otherwise specified, the provisions in force concerning customs
duties shall apply.
Article 2
The amount secured by way of provisional countervailing duty pursuant to
Regulation (EC) No 1556/98 shall be definitively collected at the rate of the
provisional duty if this is lower than the definitive rate. In all other cases it
shall be collected at the duty rate definitively imposed. Amounts secured inexcess of the definitive duty rate shall be released.
Article 3
This Regulation shall enter into force on the day following its publication in
theOfficial Journal of the European Communities .
This Regulation shall be binding in its entirety and directly applicable in all
Member States.!B
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