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This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COUNCIL REGULATION (EC)No 1601/1999
of 12 July 1999
imposing a definitive countervailing duty and collecting definitively the provisional duty imposed
on stainless steel wires with a diameter of less than 1 mm originating in India and terminating theproceeding concerning imports of stainless steel wires with a diameter of less than 1 mm origin-
ating in the Republic of Korea
(OJ L 189, 22.7.1999, p. 26)
Corrected by:
►C1 Corrigendum, OJ L 9, 13.1.2000, p. 31 (1601/1999)
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COUNCIL REGULATION (EC)No 1601/1999
of 12 July 1999
imposing a definitive countervailing duty and collecting definitively
the provisional duty imposed on stainless steel wires with a diam-eter of less than 1 mm originating in India and terminating theproceeding concerning imports of stainless steel wires with a diam-
eter of less than 1 mm originating in the Republic of Korea
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 notmembers of the European Community (
1) and in particular Articles 14
and 15 thereof,
Having regard to the proposal submitted by the Commission after
consulting the Advisory Committee,
Whereas:
(A)PROVISIONAL MEASURES
(1) The Commission, by Regulation (EC) No 619/1999 (2) (herein-
after referred to as the ‘provisional Regulation') imposed provi-sional countervailing duties on imports of stainless steel wireswith less than 1 mm (hereinafter referred to as ‘fine SSW' or‘product concerned'), originating in India and in the Republic ofKorea (hereinafter referred to as ‘Korea'), and falling within CNcode ex 7223 00 19.
(B)SUBSEQUENT PROCEDURE
(2) Subsequent to the disclosure of the essential facts and considera-
tions on the basis of which it was decided to impose provisionalmeasures on imports of fine SSW originating in India and Korea(hereinafter referred to as ‘disclosure'), several interested partiessubmitted comments in writing. The parties who so requestedwere also granted an opportunity to be heard orally.
(3) The Commission continued to seek and verify all information itdeemed necessary for its definitive findings.
(4) All parties were informed of the essential facts and considera-tions on the basis of which it is intended to recommend (i) theimposition of definitive countervailing duties on imports fromIndia and the definitive collection of amounts secured by way ofprovisional duties on these imports and (ii) the termination of theproceeding against imports from Korea without the imposition ofmeasures. They were also granted a period within which theycould make representations subsequent to this disclosure.
(5) The oral and written comments submitted by the parties wereconsidered, and, where deemed appropriate, the provisional find-ings have been modified accordingly.
(C)PRODUCT CONCERNED AND LIKE PRODUCT
(6) The product under consideration is fine SSW, containing by
weight 2,5 % or more of nickel, other than containing by weight28 % or more but no more than 31 % of nickel and 20 % or morebut not more than 22 % of chromium.
(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 79, 24.3.1999, p. 60.
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(7) It was found at the provisional stage of the investigation that
there were differences in physical characteristics and usesbetween SSW covered by the present investigation, i.e. with adiameter of 1 mm or more (large wire) and SSW with a diameterof less than 1 mm (fine wire). For these reasons, it also appearedthat there was no or only very limited interchangeability betweenlarge and fine wires’ applications. However, it was also stated inthe provisional Regulation that the question whether a cleardividing line could be drawn between these two products wasgoing to be further investigated up to the definitive stage.
(8) On the basis of the further information collected from interestedparties, it is concluded that large wire and fine wire are twodifferent products as they present different physical characteris-tics and are used for different applications. Firstly, as to thephysical characteristics, the tensile strength, granular structureand coating of SSW are different for large and fine wires.Secondly, as regards the various applications of the two products,it has been found that large wire is used for heavier duty engin-eering applications such as fasteners, wall reinforcement prod-ucts, welding wires, etc. By contrast, fine wire is as a rule usedfor precision applications such as screens and filters (woven wirecloth) with small openings for filtering very fine or smallparticles (for example dust filters and chemical filters), medical/surgical applications, etc.
(9) On the basis of the above it is concluded that fine and large wiresare two different products which have different characteristicsand applications and that they are not interchangeable from thepoint of view of SSW users.
(10) Since no arguments were put forward by any of the partiesconcerned with respect to the Commission’s provisional findingson the product concerned and the considerations made on the likeproduct, the facts and findings as set out in recitals 8 to 12 of theprovisional Regulation are hereby confirmed.
(D)SUBSIDIES
I. INDIA
1.Passbook scheme (PBS)and duty entitlement passbook
scheme (DEPB)
(11) The Government of India (GOI) and nine exporting producersclaimed that these schemes, which are described in recitals 14 to25 and 26 to 35 of the provisional Regulation, were wronglyassessed by the Commission in terms of the extent of subsidy andthe amount of countervailable benefit. In particular, they claimthat the Commission’s assessment of the benefits under theseschemes was incorrect since only the excess duty drawback couldbe considered a subsidy in accordance with Article 2 of Regula-tion No 2026/97 (hereinafter referred to as ‘the Basic Regula-tion').
(12) The Commission used the following method in order to establishwhether the PBS and the DEPB constitute countervailable subsi-dies and if so, to calculate the amount of benefit. Pursuant toArticle 2(1)(a)(ii) of the Basic Regulation, the Commissionconcluded that these schemes involve a financial contribution bythe GOI since government revenue (i.e. import duties on imports)otherwise due are not collected. There is also a benefit to therecipient since the exporting producers did not have to paynormal import duties.
(13) However, Article 2(1)(a)(ii) of the Basic Regulation provides foran exception to this general rule for, inter alia , drawback and
substitution drawback schemes which conform to the strict ruleslaid down in Annexes I(i), II (definition and rules for drawback)and IlI (definition and rules for substitution drawback) to theBasic Regulation.
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(14) The analysis of the Commission revealed that neither the PBS
nor the DEPB is a drawback or a substitution drawback scheme.These schemes lack a built-in obligation to import only goodsthat are consumed in production of the exported goods (Annex IIto the Basic Regulation). Additionally, there is no verificationsystem in place to check whether the imports are actuallyconsumed in the production process. It is also not a substitutiondrawback scheme because the importetgoods do not need to be ofthe same quantity and characteristics as the domestically sourcedinputs that were used for export production (Annex III to theBasic Regulation). Lastly, exporting producers are eligible for thePBS and DEPB benefits regardless of whether they import anyinputs at all. It is enough for an exporter to obtain the benefit bysimply exporting goods without the need to show that any inputmaterial was indeed imported; thus, exporting producers whichprocure all of their inputs locally and do not import goods whichcan be used as inputs are still entitled to the PBS and the DEPBbenefits. Hence, the PBS and DEPB does not conform to any ofthe provisions of Annexes I to III. Since this exception to thesubsidy definition of Article 2 of the Basic Regulation doestherefore not apply, the countervailable benefit is the remission oftotal import duties normally due on all imports.
(15) From the above, it clearly follows that the excess remission ofimport duties is the basis for calculating the amount of the benefitonly in the case of bona fide drawback and substitution drawbackschemes. Since it is established that the PBS and the DEPB donot fall in one of these two categories, the benefit is the totalremission of import duties, not any supposed excess remission.
(16) The GOI and nine exporting producers have argued that treat-ment of these schemes is inconsistent with the provisional find-ings in the parallel anti-dumping investigation since the Commis-sion granted in the anti-dumping investigation an allowance forimport duties not paid under the PBS and the DEPB for importedinputs actually consumed in the production of exported products.
(17) However, pursuant to Article 2(10)(b) of the Basic anti-dumpingRegulation, Regulation (EC) No 384/96 (
1), an allowance was
only granted where it was shown that the materials on whichimport duties were paid were physically incorporated in theproduct concerned sold on the domestic market and that theimport duties were not collected or refunded in respect of theproduct exported to the Community. While such an allowanceultimately will reduce the dumping margins, it is not relevant inthr anti-subsidy investigation, since the PBS and the DEPB havealready been found to be countervailable, on the basis of theprovisions of the Basic Regulation, for the reasons stated above.As explained above, once such a countervailable subsidy is foundto exist, the benefit to the recipient is the full amount of importduty not paid by the exporting producer on all import transac-tions. In this regard, it is not for the Commission to reconstructthe PBS and the DEPB in order to determine which products arephysically incorporated and which are not. Furthermore, it shouldbe stressed that the analysis regarding countervailability of ascheme and an allowance for physically incorporated inputs arecompletely different with regard to purpose, calculation methodo-logy and legal basis. The purpose of examining the allowance atissue in anti-dumping investigations is to adjust normal values.The examination of the countervailability of a scheme in ananti-subsidy investigation aims at establishing benefits receivedby the exporter thereunder. In addition, the calculation methodo-logy is different in anti-dumping and anti-subsidy investigations.While in anti-dumping cases the allowance is granted in relationonly to exports of the products concerned to the Community, inan anti-subsidy investigation benefits are examined in relation to
(1) OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation (EC)
No 905/98 (OJ L 128, 30.4.1998, p. 18).
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total exports of all products to all destinations in line with Article
7(2) of the Basic Regulation and the ‘Guidelines for the calcula-tion of the amount of subsidy in countervailing duty investiga-tions' (hereinafter referred to as the ‘Calculation Guidelines')(
1).
(18) The GOI and nine exporting producers further argue that theCommission should have examined whether there was in fact anexcess drawback of import charges on inputs consumed in theproduction process.
(19) As already explained in recitals 12 to 15, Annexes II and IIIcontain the rules to establish whether a scheme constitutes a dutydrawback or a substitution drawback. The excess remission ofimport duties is the basis for calculating the amount of the benefitonly in the case of drawback and substitution drawback schemes.This argument cannot be accepted as the issue of excess remis-sion only arises in the context of assessing properly constituteddrawback/substitution drawback schemes, and it has been estab-lished that the PBS and the DEPB are not drawback or substitu-tion drawback schemes within the meaning of Annex I(i) andAnnexes II and III to the Basic Regulation.
(20) The GOI and nine exporting producers claim that the Commis-sion failed to examine whether the GOI has a system or proce-dure in place, to confirm which inputs are consumed in themanufacturing process of the exported products, and in whatamounts. The GOI claims that the standard input/output normsconstitute an adequate verification system.
(21) This argument relates to the issue whether the PBS and theDEPB can be considered as drawback schemes or substitutiondrawback schemes. Since it was established that the PBS and theDEPB are not drawback or substitution drawback schemes in thesense of Annexes Il and III to the Basic Regulation no furtherexamination needs to be carried out. Even if the PBS and DEPBwere to meet the criteria of Annexes Il and IlI, it should beconcluded that no reasonable verification system exists. Theinput/output norms are a list of possible items that can beconsumed in the production process and in what amounts.However, the input/output norms are not a verification system inthe sense of paragraph 5 of Annex Il to the Basic Regulation.These norms do not provide for a verification of the inputs thatare actually consumed in the production process and do notprovide for a verification system whether these inputs were effec-tively imported.
(22) The GOI and nine exporting producers allege that the Commis-sion has incorrectly countervailed the value of the credit amountin the DEPB licence instead of the net value upon the sale of thelicence. One company claimed that the sales tax, which was paidupon the sale of the licence, should be deducted from the totalsubsidy amount.
(23) Under the current provisions of the DEPB, a company, which hasobtained licences, has two options: to import any product (exceptthe items listed on the negative list) using the credits to offset theapplicable import duties or transfer the licence to a third party.As explained in recital 34 of the provisional Regulation, theCommission considers that ‘the sale of a licence at a price lessthan the face value is a pure commercial decision which does notalter the benefit received from the scheme'. Furthermore, Article7 of the Basic Regulation lists the elements that may be deductedfrom the subsidy amount. Any application fees or costs neces-sarily incurred in order to qualify for or obtain the subsidy maybe deducted from the amount of subsidy. The transfer of a loweramount of benefit than that actually granted and the sales taxcannot be considered as justified deductions in the sense ofArticle 7 of the Basic Regulation since these elements are not a
(1) OJ C 394, 17.12.1998, p. 6.
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cost necessarily incurred in order to qualify for or obtain the
subsidy.
(24) The GOI and nine exporting producers argue that the Commis-sion countervailed part of the benefits under these schemes twicedue to the overlap between this proceeding and the stainless steelbright bars investigation.
(25) The Commission followed the same methodology as was used inantibiotics (
1) and stainless steel bars (2). Pursuant to Article 7(2)
of the Basic Regulation, the amount of countervailable subsidywas determined by allocating the value of the total subsidy overthe level of total exports. Since the export subsidies were notlinked to the export of the product concerned but all exports ofthe companies, the Commission considered it appropriate to usethis methodology. In using this methodology, there was nodouble counting of benefits that were already countervailed instainless steel bars since the subsidies were allocated over allexports.
(26) One company, Raajratna Metal Industries Ltd, disputes the meth-odology used by the Commission in calculating the benefit underthe passbook and DEPB schemes. They contend that only creditsearned on the product concerned during the period of invest-igation should be taken into account. This amount, the companysays, should then be allocated over the corresponding exportturnover of the product concerned to calculate the benefit.
(27) The Commission considers that if it were to accept this argument,the effect would be to countervail potential as opposed to actualbenefits that accrued during the investigation period. As acompany cannot be said to receive a subsidy until the credit ismade use of, the Commission has decided that it is the totaldebits utilised that best reflects the true benefit to a company.The argument is therefore rejected.
2.Export promotion capital goods scheme (EPCGS)
(28) Three companies made a claim regarding the export promotion
capital goods scheme (EPCGS), which is described in recitals 36to 39 of the provisional Regulation. These concern the allocationof the benefit over the normal depreciation period of fixed assets.
(29) It was argued that there was a discrepancy between the deprecia-tion period used in the disclosure letter and the provisional Regu-lation. The Commission established an average of the deprecia-tion periods used by all exporting producers of the productconcerned and arrived at an average depreciation period of 12years. This period was used in the provisional finding and will beconfirmed at the definitive stage. The subsidy amount under theEPCGS was allocated over 12 years in accordance with Article7(3) of the Basic Regulation.
(30) One company argued that its capital goods were being depre-ciated over 21 years and that this depreciation period should havebeen used instead of the average of 12 years.
(31) As explained above, the Commission services, in establishing theprovisional findings, determined the normal depreciation periodof capital goods in the stainless steel wire industry i.e. 12 yearson the basis of the average period used by the cooperating Indianexporting producers. This is in accordance with the requirementsof Article 7(3) of the Basic Regulation which states that where asubsidy can be linked to the acquisition of fixed assets, theamount of the countervailable subsidy shall be calculated byspreading the subsidy across a period which reflects the normaldepreciation of such assets in the industry concerned. In view of
(1) OJ L 273, 9.10.1998, p. 4.
(2) OJ L 202, 18.7.1998, p. 44.
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Passbook DEPB EPCGS Income tax Totalthis provision, it is not appropriate to use the company specific
depreciation period. The claim is therefore rejected.
3.Income tax exemption scheme
(32) One company, Drawmet Wires Ltd did not submit a copy of its
income tax return within the deadline stipulated by the Commis-sion and was therefore considered non-cooperating for thepurpose of the income tax exemption. After disclosure, thiscompany submitted a copy of its income tax return that revealedthat no benefits were granted under this scheme. Therefore, thesubsidy margin for Drawmet Wires Ltd is adapted to 8,5 %.
4.Amount of countervailable subsidies
(33) Taking account of the definitive findings relating to the various
schemes as set out above, the amount of countervailable subsidiesfor each of the investigated exporting producers is as follows:
Drawmet Wires 1,4 % 7,1 % 0,0 % 0,0 % 8,5 %
Indore Wire 7,7 % 10,7 % 0,9 % 0,0 % 19,3 %
Isinox Steel 4,3 % 5,8 % 0,0 % 0,0 % 0,1 %
Kei Industries 0,0 % 0,0 % 0,0 % 0,0 % 0,0 %
Macro Bars 9,6 % 12,6 % 0,0 % 3,2 % 25,4 %
Mukand Ltd 7,5 % 5,7 % 0,0 % 0,0 % 13,2 %
Raajratna 23,3 % 13,7 % 0,0 % 5,9 % 42,9 %
Venus Wire 19,8 % 14,3 % 0,0 % 1,3 % 35,4 %
(34) The subsidy amount definitively established for Indian companies
other than those cooperating in this investigation, expressed as apercentage of the net free-at-Community price, is 44,4 %, whichis the sum of the highest amount granted to any cooperatingexporter under each scheme.
II. KOREA
1.Loan programmes
(a)Calculation of benchmark interest rate
(35) The Government of Korea (GOK) claimed that with regard to the
calculation of the subsidy amount in the case of loans, thecost-to-the-government approach rather than the benefit-to-the-recipient approach should have been used, citing Articles 19(4)and 6(1)(a), and Annex I items (k) and (l) of the Agreement onsubsidies and countervailing measures (ASCM).
(36) It is considered that the provisions cited by the GOK are notapplicable to the loan programmes investigated. Article 19(4) ofthe ASCM establishes that no countervailing duty is levied inexcess of the amount of the subsidy found to exist calculated onthe basis of the benefit conferred. This provision was observedsince the explicit rules for the calculation of the subsidy in thecase of loans, i.e. Articles 5 and 6 point (b) of the Basic Regula-tion which incorporate Article 14(b) of the ASCM, werefollowed. These rules clearly establish that the subsidy should becalculated in terms of the benefit which is the difference betweenthe amount the firm receiving the loan pays and the amount thefirm would have paid for a comparable commercial loan. Article19(4) of the ASCM does not create a requirement for calculationof a subsidy on the basis of the cost to the government. Article6(1)(a) of the ASCM concerns a presumption of serious prejudicein certain circumstances, which is not applicable to counter-
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vailing duty proceedings. Item (k) of Annex I to the ASCM
which is reproduced in Annex I to the Basic Regulation providesfor special rules for export credits which are exceptions to thegeneral rules for the calculation of subsidies in the case of loans.Item (l) in itself does not establish that the cost-to-the-govern-ment approach prevails over the explicit rules in Article 5 and 6point (b) of the Basic Regulation, in particular since this item wasalready present in the illustrative list of export subsidies adoptedduring the Tokyo Round of GATT negotiations, at a time whenthe benefit-to-the-recipient approach had not yet been incor-porated into WTO rules.
(37) Furthermore, the GOK claimed that the comparison of interestpaid on a government loan programme to a commercial loanwould wrongly assume that interest rates on all loans in theeconomy would be equal.
(38) The Commission does not assume that all loans are equal butused as a benchmark loans which were considered comparable onthe basis of repayment period, principal amount and purpose ofthe loan as is required under Article 6(b) of the Basic Regulation.
(39) Finally, the GOK claimed that the relevant benchmark interestrate should be that on a comparable loan granted at the same timeas the loan at issue rather than using interest rates prevailing inthe investigation period since during the investigation period, theinterest rate was abnormally high due to the financial crisis.
(40) It was found in the course of the investigation that interest ratesfor loans granted on a commercial basis reflect market conditionsby changing over time. Such loans would have shown the sameinterest rates during the investigation period regardless ofwhether they were granted at the same time as the governmentloan or not. Thus, the Commission would not deviate from.itsnormal practice set forth by the Basic Regulation and the calcula-tion guidelines. Hence, this claim is rejected.
(41) Two Korean exporting producers claimed that the Commission’sclassification of the loans into five categories on the basis of theamount of the principal is arbitrary and inconsistent with theusual practice of Korean banks and that consequently the deter-mination of the interest rate on the basis of the loan amount doesnot constitute an adequate methodology to determine the bench-mark interest rate. One Korean exporting producer claimed thatbecause Korean banks do not take into account the loan amountas a determining factor for the interest rate, the Commissionshould use as the sole benchmark, the producer’s actual averageinterest rate on commercial loans. Two Korean exporting produ-cers also claimed that the Commission should use the interestrates on trade loans as the benchmark interest rate for EXIM-SMloans.
(42) In response to these claims, it is considered that Article 6(b) ofthe Basic Regulation makes it clear that the benchmark for thecalculation of the subsidy is a comparable commercial loanwhich the company could actually obtain on the market. There-fore, the Community’s practice in this area, as set forth in thecalculation guidelines, is to compare loans with a similar amount,purpose and a similar repayment period. The trade loans (i.e.short-term loans for operational purposes) obtained by theKorean exporting-producers differ in purpose (see recital 126 ofthe provisional Regulation) and loan period from EXIM-SMloans at issue and are therefore not comparable loans. Theseclaims are therefore rejected.
(43) The two Korean exporting producers further argued that theCommission used extraordinarily high interest rates resultingfrom the financial crisis in Korea as a benchmark for calculatingthe subsidy on loans concluded before the crisis.
(44) Article 6(b) of the Basic Regulation states that the benefit iscalculated by comparing interest rates on government loans tointerest rates on comparable commercial loans. In order to
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accomplish this, average interest rates on government loans were
compared to average interest rates on comparable commercialloans during the investigation period. This claim is thereforerejected.
(b)Fishing net production loan (FNPL)
(45) The GOK claimed that since this loan was specific to the fishing
net industry, it did not confer a benefit on the exporter of stain-less steel wire nor was it specific to the stainless steel industry.Additionally, a company producing both fishing nets and stain-less steel wire would manage financial resources and theiraccounting separately.
(46) In the course of the investigation it was determined that theexporting producers of stainless steel wire received such a loan,which is countervailable since, as admitted by the GOK, it isspecific to the fishing net industry. It is considered to be irrele-vant that the scheme in question is not specific to the industryproducing the product under investigation as long as theprogramme is specific as such and its benefits can be related tothe production of the product concerned. The latter is the cagesince the subsidised loan reduced the overall financing cost of theproducer which also benefits the product concerned. No evidencewas submitted that the management of financial resources by theexporting producers concerned were conducted in such a waythat the overall financing cost of the company would not beaffected by the grant of the loan. Therefore, this claim is rejected.
(c)SMEs start-up and promotion fund loans (SME-SPFL)
(47) The GOK claimed that type-C loans granted under the Pusan
Metropolitan City Support Fund Establishment and OperationBy-law were not contingent on export performance since eightmain and 12 additional criteria determining the eligibility forsuch a loan are objective and neutral. The only export relatedelement is that additional consideration is taken for SMEs whose.export sales account for more than 20 % of their total turnover.The purpose of the scheme is not to promote exports but to useexport share as an indirect indicator of technology developmentactivities.
(48) It is considered that, even though a condition related to exportperformance is only one among several criteria, it neverthelessmakes the scheme contingent on export performance and there-fore specific. This is clearly set forth in Article 3(4)(a) of theBasic Regulation which states that subsidies which are contingentin law or fact, whether solely or as one of several conditions, onexport performance are deemed to be specific. Since one elementto be taken into consideration by the granting authority is that aminimum share of exports in total turnover is achieved, thisrequirement of contingency upon export performance is fulfilledsince companies might not have obtained benefits withoutexceeding a certain level of export sales. The GOK’s claim istherefore rejected.
(d)Technologydevelopment business loan (TDBL)/science and
technologypromotion fund (STPF)
(49) The GOK claimed that these programmes provide assistance forresearch activities in accordance with Article 8(2)(a) of theASCM and are therefore non-actionable and non-countervailable.Additionally, tecLlriology development, and science and tech-nology promotion are objective and neutral criteria within themeaning of Article 2(1)(b) of the ASCM and the programmes aregenerally available to all industries which invest in technologydevelopment projects and are therefore not specific. With regardto the STPF, the GOK furthermore claimed that since transparentand objective criteria are employed by the Ministry of Scienceand Technology, it cannot exercise any discretion in deciding onpriority projects and that the Commission had failed to present
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any evidence to support its conclusion that this discretion has
been exercised.
(50) The claim of non-actionability for both programmes is rejectedfor the same reasons as stated below under recitals 75 to 77. Noevidence was provided which would cast doubt on the provi-sional finding that the TDBL was specific to certain industriesinvesting in certain projects as determined by the Ministry ofTrade and Industry. Also with regard to the STPF, no informationon any criteria used by the Ministry of Science and Technologywas provided. During the investigation it was verified that theMinistry of Science and Technology did in fact decide from timeto time on priority projects. This is considered to be sufficientevidence to establish that the STPF is de facto specific in the
meaning of Article 3(2)(c) of the Basic Regulation. Hence, theclaim that the schemes are not specific is rejected.
(e)Export financing loans
(51) One Korean exporting producer claimed that the Commission
disregarded certain verified information and made a calculationerror in determining the benefit from the EXIM-SM loans.
(52) It is considered that this claim is valid. Appropriate adjustmentshave accordingly been made to the amount of subsidy for therelevant company.
(53) The GOK claimed that since the EXIM-EC (preshipment),EXIM-SM and EXIM-FIC loans were granted at rates abovethose which EXIM actually paid for the funds, EXIM-EC,EXIM-SM and EXIM-FIC loans are not countervailable. Further-more it is argued that footnote 5 to Article 3(1)(a) of the ASCMstates that measures referred to in Annex I as not constitutingexport subsidies should not be prohibited under this or any otherprovision of the ASCM.
(54) It is considered that these arguments only apply to ‘export credits'as defined in item (k) of Annex I to the Basic Regulation. Asalready explained in the provisional Regulation in recitals 129and 130, EXIM-EC (pre-shipment), EXIM-SM and EXIM-FICloans are not considered to be ‘export credits' and do not fallunder item (k) of Annex I to the Basic Regulation. These claimsare therefore rejected.
(55) The GOK argued that EXIM-FIC is contingent neither on exportperformance nor upon the use of domestic over imported goodswithin the meaning of Article 3(1) of the ASCM. The GOK alsostates that because EXIM-FIC is available to a wide variety ofindustries and since the criterion of foreign investment is objec-tive and neutral within the meaning of Article 2(1)(b) of theASCM, EXIM-FIC is not specific.
(56) In response to these arguments the Commission concluded onEXIM-FIC loans that they are available only to companies whichinvest abroad and are therefore specific within the meaning ofArticle 3(2)(b) of the Basic Regulation since they are not basedon neutral criteria as explained below in recitals 80 to 84. It wasconsidered that EXIM-FIC is not contingent on exportperformance nor on the use of domestic over imported goodswithin the meaning of Article 3.1 of the ASCM.
2.Fixed amount refund system
(57) The GOK argued that this scheme is a drawback system within
the meaning of Annex I(i), Annex II and Annex III to the ASCMand claimed further that the drawback of import charges is notmade in excess of those levied on imported inputs that areconsumed in the production of the exported product, makingnormal allowance for waste.
(58) In response to these arguments it is considered that since there isno obligation to import any inputs for the production of theexported product, the fixed amount refund scheme is neither a
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duty drawback scheme nor a substitution drawback scheme
within the meaning of Annex I(i), Annex Il and Annex III to theASCM. In fact, the Korean fixed amount refund system fallsunder the general definition of a subsidy according to Article 2 ofthe Basic Regulation which incorporated Article l of the ASCM.It constitutes a subsidy as a financial contribution is made by theGOK in the form of grants based on FOB value of exports andconfers a direct benefit on the recipient. It is a subsidy contingentin law on export performance and is therefore deemed to bespecific under Article 3(4)(a) of the Basic Regulation. Conse-quently, the issue of excess remission of import duties, asmentioned in Article 2(1)(a)(ii) of the Basic Regulation, does notarise since this is only relevant for cases of drawback and substi-tution drawback schemes in accordance with Annexes I to IIl tothe Basic Regulation. Therefore these claims are rejected.
(59) The GOK stated that, pursuant to paragraph 2 of Annex II(II) tothe ASCM, if there is no system or procedure to determinewhether an excess payment occurred and the investigatingauthorities deem it necessary, a further examination will becarried out in accordance with paragraph 1 of Annex II(II). TheGOK claimed that since the Commission failed to examinewhether there was in fact an excess drawback of import chargeson inputs consumed in the production of the exported product,these exists no basis to conclude that the Korean fixed amountrefund system constitutes a specific subsidy under Article 3(4)(a)of the Basic Regulation.
(60) It is considered that this argument is irrelevant since paragraph 2of Annex II(Il) to the ASCM relates to a duty drawback schemewhich, as explained above, the programme under consideration isnot. But in any event, even if it were a duty drawback scheme,Annex II(II)(5) and Annex III(Il)(3) to the Basic Regulationprovide that the burden would be on the government of theexporting country to carry out such an examination based onactual transactions. The GOK did not carry out such an exam-ination. Therefore the Commission did not examine whether therewas in fact an excess drawback of import charges on inputsconsumed in the production of the exported product.
(61) One Korean exporting producer stated that the argument of theCommission that there is no system or procedure in place toconfirm which inputs are consumed in the production of theexported product and in what amount, is not valid because dutyrefund is only allowed for the inputs actually used in the produc-tion of exported goods and for import duty actually paid.
(62) In response to these arguments it is considered that under thefixed amount refund system, the amount of the grants received isnot calculated in relation to inputs actually consumed in theproduction process or import duty actually paid but calculated asa lump sum based on overall exports. Therefore, these claims arerejected.
(63) One Korean exporting producer further argued that he did notreceive any benefit from the use of this system claiming that hepaid import duty on the raw materials used in the production ofthe product concerned, exported the product concerned and theduty drawback amount is inferior to the amount that they wouldhave received if the individual system was used. The GOKfurthermore argued that the Korean exporting producer who usedthe fixed amount duty drawback system provided the Commis-sion with the evidence that its drawback of import charges ismuch less than those levied on imported inputs that wereconsumed in the production of the exported product during theinvestigation period.
(64) In response to these arguments it is considered that, for thereasons explained above, payments under the fixed amountrefund system constitute grants which are based on exportperformance and are therefore specific and countervailable underArticle 3(4)(a) of the Basic Regulation. Furthermore, it is irrele-
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vant whether the use of a legitimate duty drawback schemewould have been more advantageous for the exporting producersince he chose to receive benefits under a scheme which is acountervailable subsidy. Hence, these claims are rejected.
3.Tax programmes
(a)Non-specificityof the limitation to manufacturing industry
(65) In its provisional determination, the Commission considered that
certain Articles of the Tax Exemption and Reduction ControlLaw (TERCL) were countervailable as they were specific underArticle 3(2)(a) of the Basic Regulation by virtue of being limitedto certain enterprises including those in the manufacturingindustry. These Articles were:
— Article 7 (special reduction and exemption of tax amount for
small and medium manufacturing industry, etc.),
— Article 8 (reserve for technology development),— Article 9 (tax credit for technology and manpower develop-
ment expenses),
— Article 25 (tax credit for investment in facilities for
increasing productivity),
— Article 27 (temporary investment tax credit).
(66) The GOK claimed that since the provisions of these Articles are,
in practice, available to a significantly wide variety of industries/businesses, they are not specific within the meaning of Article2(1)(a), (b) and (c) of the ASCM and are accordingly not coun-tervailable (these paragraphs of the ASCM are reproduced inArticle 3(2)(a), (b) and (c) of the Basic Regulation). In particular,the GOK emphasised that the concept of ‘manufacturing industry'is a very broadly defined one and, in practice, includes tens ofthousands of sub-category industries.
(67) The basic principle of specificity is that a subsidy that distorts theallocation of resources within an economy by favouring certainenterprises over others should be subject to countervailing meas-ures if it causes injury. Where eligibility for subsidies is limitedwithin an economy on the basis of non-neutral criteria, such adistortion in the allocation of resources is presumed to occur.This principle is the basis for Article 2(1)(a) of the ASCM andArticle 3(2)(a) of the Basic Regulation which provide that asubsidy is specific if the geanting authority, or the legislationpursuant to which the granting authority operates, explicitlylimits access to a subsidy to certain enterprises. In this case, it isconsidered that, while the concept of ‘manufacturing industry'may be a very broadly defined one, it is a fact that the provisionsof the abovementioned Articles of TERCL are further designed torestrict the benefits thereunder to certain enterprises by makingeligibility contingent on other non-neutral criteria, such as invest-ment in certain types of high technology products or overseasinvestment.
(68) It has been argued by GOK that such criteria are neutral, since allcompanies have an equal opportunity to avail themselves of thesubsidies. For example, it is argued that a subsidy for firmswhich invest overseas is non-specific because all firms are able toinvest overseas. However, according to this argument, a subsidylimited to firms in the textile sector is non-specific, because allfirms ‘are able' to diversify into textiles. If specificity under theASCM is to make any sense, it must cover situations wheregovernments make subsidies subject to conditions which theyknow in advance will severely restrict the number of firmseligible to apply; such subsidies are designed to favour certainenterprises over others. For this reason, the type of criteria usedby GOK to designate recipients are not ‘neutral',and as explainedbelow, they are not horizontal in application, as required byArticle 3(2)(b) of the Basic Regulation. It has therefore beenfound that the subsidies under these Articles of TERCL are
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specific; more detailed reasons are given below with regard to the
individual schemes.
(b)Undue process
(69) The GOK has claimed that, as the complainant in this proceeding
did not make any allegations concerning the tax provisions ofcertain Articles of TERCL, they should not be included in anydetermination to be made in this proceeding. The Articlesconcerned are:
— Article 5 (special tax credit for SMEs),
— Article 7 (special reduction and exemption of tax amount for
small and medium manufacturing industry, etc.),
— Article 27 (temporary investment tax credit).
(70) In particular, the GOK states that:
(i) Article 11 of the ASCM (Article 10 of the Basic Regulation)
lists the information to be contained in a complaint,including evidence of the existence of subsidies and theamount and nature of the subsidy in question;
(ii) Article 12(1) of the ASCM (Article 11 of the Basic Regula-
tion) states that interested Members and all interested partiesin a countervailing duty investigation shall be given noticeof the information which the authorities require;
(iii) paragraph 7 of Annex VI of the ASCM (Article 26(3) of the
Basic Regulation) states that it should be standard practiceprior to the (verification) visit to advise the firms concernedof the general nature of the information to be verified and ofany further information which needs to be provided.
(71) The GOK claims that these provisions of the ASCM have beenignored by including the non-alleged programmes in the deter-mination and that, furthermore, both the GOK and some cooper-ating exporting producers did not have the opportunity to defendthemselves appropriately.
(72) In response to the GOK’s claims, it is considered that, whenlodging a complaint, complainants cannot be expected to haveknowledge of every last detail of alleged subsidy programmes ina third country. In this case, the complainant made a largenumber of allegations of tax subsidies granted under the TERCL.The investigation then unearthed other tax subsidies grantedunder certain provisions of the TERCL which had not beenspecifically mentioned in the complaint, but which have a verysimilar effect to the alleged schemes. In view of the nature ofthese subsidies, and in particular the fact that they are grantedunder the general umbrella of the TERCL (against which thecomplainant has made a number of subsidy allegations) it isconcluded that the Commission is entitled to investigate them andrecommend countervailing action if appropriate.
(c)Article 8 of TERCL (reserve for technologydevelopment)
(73) In addition to the GOK’s claim regarding the non-specificity of
the provisions of this Article, the GOK claimed that this Articleis a non-actionable research and development (R&D) subsidywithin the meaning of Article 8(2)(a) of the ASCM (this para-graph of the ASCM is reproduced in Article 4(2) of the BasicRegulation).
(74) It is noted that, if R&D subsidies fulfilling the requirements ofArticle 8(2)(a) of the ASCM are notified to the WTO under theprovisions of Article 8(3) of that Agreement, an investigationcannot even be opened against such subsidies. In regard toArticle 8 of TERCL, it has been noted that Korea has not notifiedthis provision to the WTO under Article 8(3) of the ASCM.Accordingly, the Commission was entitled to initiate an invest-igation of this provision of TERCL. Regarding the GOK’s claimthat this provision is non-actionable, and accordingly is protectedfrom countervailing measures, the GOK is required to demon-
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strate such non-actionability. It was given an opportunity by the
Commission to make such a demonstration at the beginning ofthe investigation, but has not done so. In these circumstances,countervailing measures can be imposed on benefits accruingunder this Article.
(75) As regards the GOK’s non-specificity allegations, the scheme isnot neutral since it differentiates between normal and technology-intensive firms. The latter receive higher rates of benefit. Such adistinction shows that the criteria are not neutral and exclude alarge number of firms for whom such technological developmentis not necessary. For these reasons and those stated in recitals 67to 70 above, it is considered that Article 8 of TERCL is specificand therefore countervailable.
(d)Article 9 of TERCL (tax credit for technologyand manpower
development expenses)
(76) In addition to the GOK’s general claim regarding the non-specif-icity of the provisions of this Article, the GOK claimed that thecriterion of technology and manpower development is an objec-tive and neutral criterion within the meaning of Article 2(1)(b) ofthe ASCM. It is considered that this criterion is not neutral withinthe sense of that Article of the ASCM nor within the sense ofArticle 3(2) point (b) of the Basic Regulation. This latter Articlerequires that objective criteria or conditions must be neutral andalso economic in nature and horizontal in application. The provi-sions of this Article of TERCL are considered not to be hori-zontal in nature as clearly companies in certain industrial sectorswill be more technologically-oriented than those in other sectorsand will therefore be more likely to take advantage of this provi-sion. The GOK, by enacting this provision of TERCL, hasconferred a disproportionate benefit to firms in certain industrialsectors.
(77) It is considered that this scheme is specific as it is limited tocertain enterprises (see recitals 67 to 70) and therefore counter-vailable. The scheme is also specific under Article 3(2)(b) of theBasic Regulation and therefore countervailable.
(e)Article 23 of TERCL (reserve for overseas investment loss)
(78) The GOK noted that the provisions of this Article have not been
effective since January 1998. The GOK claimed also that theprovisions of this Article are available to a wide variety ofindustries and also that the criterion of overseas investment is anobjective and neutral criterion within the meaning of Article2(1)(b) of the ASCM.
(79) The nature of this provision is that of a tax deferral which will beadded back to a company’s tax base after a two-year grace periodin equal amounts over three years. Accordingly, for tax deferredduring the last year of eligibility (tax year 1997), benefitscontinued to accrue during the investigation period (1 April 1997to 31 March 1998) and will continue to accrue for a number ofyears thereafter to companies which availed of this tax provision.
(80) Concerning the GOK’s claim that the provisions of this Articleare available to a wide variety of industries, it is noted that, in itsprovisional findings, the Commission found that the provisions ofthis Article were limited to those Korean companies which investabroad. No new information has been provided that this is not thecase. Similar to the GOK’s claim above regarding the non-specif-icity of the limitation to manufacturing industry (see recitals 67to 70), it is a fact that the provisions of Article 23 of TERCLrestrict the benefits thereunder to certain enterprises. This provi-sion is therefore specific under Article 3(2)(a) of the Basic Regu-lation and therefore countervailable.
(81) The GOK also claimed that the criterion of overseas investmentis an objective and neutral criterion within the meaning of Article2(1)(b) of the ASCM. It is considered that this criterion is not
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neutral within the sense of that Article of the ASCM nor withinthe sense of Article 3(2)(b) of the Basic Regulation. This latterArticle requires that objective criteria or conditions must beneutral and also economic in nature and horizontal in application.The provisions of this Article of TERCL are considered not to beobjective, since it is known in advance that companies which donot invest abroad will be ineligible for the benefit. This criterionis therefore neither neutral nor horizontal in application. TheGOK, by enacting this provision of TERCL, has conferred abenefit on a limited number of enterprises with overseas interests.
(82) It is considered, therefore, that this provision of TERCL isspecific under Article 3(2)(b) of the Basic Regulation and there-fore countervailable.
(f)Article 25 of TERCL (tax credit for investment in facilities for
increasing productivity)
(83) In addition to the GOK’s claim regarding the non-specificity ofthe provisions of this Article, the GOK pointed out that theprovision of preferential treatment for domestic over importedfacilities which was contained in this Article was deleted at theend of 1996 which is before the investigation period. In itsprovisional findings, the Commission indeed noted that the provi-sion in the Article for different rates in force for imported (3 %credit) and indigenously sourced (10 % credit) facilities wasdeleted at the end of 1996. However, as companies whichcommenced investment projects before the end of 1996, butwhich continued after that date, may opt to benefit from the ratesin force prior to that date, benefits continued to accrue during theinvestigation period.
(84) As regards the different rates in force for imported and indige-nously sourced facilities prior to the end of 1996, it has alreadybeen found that the scheme is specific under Article 3(4)(b) ofthe Basic Regulation. Concerning the general claim of non-specificity, it is considered that this scheme is specific as it islimited to certain enterprises (see recitals 67 to 70) and thereforecountervailable. It is known in advance that certain enterprisesare more likely than others to be in a position to benefit from taxadvantages for productivity improvement, just because of thetype of business they are in. Therefore, benefits from this schemewill inevitably be more relevant to some sectors than to others.
(g)Article 27 of TERCL (temporaryinvestment tax credit)
(85) In addition to the GOK’s claim regarding the non-specificity of
the provisions of this Article, the GOK pointed out that theprovision of preferential treatment for domestic over importedfacilities was deleted at the end of 1996. In its provisional find-ings, the Commission considered that benefits accruing underthisArticle should be countervailed as companies may opt to benefitfrom the different rates in force for imported (3 % credit) andindigenously sourced (10 % credit) machinery prior to the end of1996 for investment projects commenced before then. Accord-ingly, benefits continued to accrue during the investigationperiod.
(86) It is considered that this scheme is specific as it is limited tocertain enterprises (see recitals 67 to 70) and therefore counter-vailable. As regards the different rates in force prior to the end of1996, the scheme is specific under Article 3(4)(b) of the BasicRegulation. Concerning the general claim for non-specificity, asin the case of Article 25, this scheme is available only to thosefirms which invest in productivity-improving equipment. Given
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Loans
(export)Loans
(other)Tax
(export)Tax
(other)Duty
drawbackTotale
Subsidythe nature of this condition, it is inevitable that certain enterprises
will be more likely to benefit than others.
4.Amount of countervailable subsidies
(87) Taking account of the definitive findings relating to the various
schemes as set out above, the amount of countervailable subsidiesfor each of the investigated exporting producers is as follows:
Korea Welding 0,47 0,06 0,34 0,08 0 0,95
Shine Metal Prod-
ucts1,63 0 0 0 1,09 2,72
Dae Sung Rope MfgCo., Ltd. 0,09 0,15 0,06 0,55 0 0,85
Korea Sangsa Co.Ltd/Myung Jin Co.,Ltd. 0,17 0 0,15 0,25 0 0,57
Kowel Special SteelWire Co. 0,88 0 0 0,03 0 0,91
SeAH Metal Prod-ucts Co., Ltd. 2,31 0,18 0,02 0 0 2,51
(88) The weighted average countrywide subsidy margin for all the
exporting producers investigated which represent the totality ofexports to the Community originating in Korea expressed as apercentage of the cif price at Community frontier level is de
minimis , i.e. under 1 %. Under these circumstances, the subsidy
margin for Korea has to be considered negligible in accordancewith Article 14(3) of the Basic Regulation.
(E)INJURY
1.Preliminary remarks
(89) On the basis of the above findings regarding Korea, i.e. the
countrywide subsidy margin for this country being below the de
minimis threshold, imports of fine SSW originating in Korea are
no longer considered as subsidised imports. Therefore, contraryto the findings set out in the provisional Regulation, only importsoriginating in India will be taken into account for the purposes ofthe injury assessement set out below.
2.Community industry
(90) In the absence of new evidence or any further substantiated
argument put forward by any of the parties concerned, the factsand findings set out in recitals 206 and 207 of the provisionalRegulation are hereby confirmed, i.e the complainant Communityproducers representing more than 75 % of the total Communityproduction of fine SSW constitute the Community industry, inaccordance with Article 9(1) of the Basic Regulation.
3.Competition aspects
(91) In their comments following the disclosure, the Indian exporting
producers reiterated their claim that all data submitted by theCommunity industry within the framework of the currentproceeding would be artificially inflated as a result of theuniform application of the ‘alloy surcharge' system, and that itwould, therefore, not be possible to conduct any accurate injuryanalysis within the framework of the anti-subsidy proceeding.Since, however, no new arguments have been put forward by anyinterested party and there has been a definitive decision rejectingthe complaint on the case No IV/E-1/36.930 concerning stainless
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steel bright bars, which belong to the same category of products
as SSW, the findings set out in recitals 208 to 215 of theprovisional Regulation are hereby confirmed.
4.Community consumption
(92) Following the disclosure, some interested parties have argued that
the methodology followed for the purpose of determining theCommunity consumption, in particular with regard to the sales ofnon-cooperating Community producers and third countriesimports, was inappropriate.
(93) In this respect, it should be recalled that detailed and verified dataare only available for the Community industry and the cooper-ating exporting producers in the country concerned. Therefore, inline with the consistent practice of the Community institutionsrecourse was made to information available to the Commission,and in particular to independent statistical sources. No interestedparty has provided information that would show that theapproach followed by the Community institutions was unreason-able and not justified in the circumstances of the present case.
(94) Consequently, the findings as set out in recitals 216 and 217 ofthe provisional Regulation are confirmed.
5.Import volume and market shares of the subsidised
imports
(95) The imports originating in India in tonnes developed as follows:52 t in 1994, 117 in 1995, 189 in 1996, 445 in 1997 and 717during the investigation period. They have. therefore increasedsteadily and considerably over the period under consideration, i.e.by around 1 250 %.
(96) The market shares of the imports originating in India increasedconstantly from 0,3 % in 1994 to 0,6 % in 1995, 1,1 % in 1996 to2,2 % in 1997, reaching 3,3 % during the investigation period.
6.Prices of the subsidised imports
(a)Price evolution
(97) Average sales prices per kilo (in ecu) of the imports originating
in India increased between 1994 and 1995 (from 2,57 to 3;52),steadily decreased between 1995 and 1997 (from 3,52 in 1996 to3,04 in 1997) and slightly increased after 1997 up to 3,12 duringthe investigation period.
(b)Price undercutting
(98) As to the methodology followed for the purpose of calculation of
price undercutting margins, some interested parties contested themethodology used by the Commission at the provisional stage.They claimed that these margins were inflated because any nega-tive amount by which the exporting producer’ prices undercutthose of the Community industry were not offset with any posi-tive amounts.
(99) It should be noted that in the methodology described in recitals225 and 226 of the provisional Regulation for the calculation ofthe price undercutting margins the weighted average net salesprices of the subsidised imports were compared, on a model-by-model basis, with the average net sales price by model of theCommunity industry in the Community market. Therefore, thismethodology allowed the amount by which the exporting produ-cers price of one particular model exceeded that of theCommunity industry price to be taken into account on a transac-tion-by-transaction basis.
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(100) Therefore, the conclusions reached with respect to the general
methodology applied set out in recitals 225 to 226 of the provi-sional Regulation are confirmed.
(101) In the absence of any other comments, the actual price undercut-ting margins for imports originating in India set out in recital 227of the provisional Regulation are hereby confirmed.
7.Situation of the Community industry
(102) Since no arguments were put forward by any interested party as
to the provisional findings concerning the economic indicatorsrelating to the situation of the Community industry, the findingsas set out in recitals 228 to 238 of the provisional Regulation arehereby confirmed.
(103) Some interested parties have argued that the economic indicatorsof the Community industry did not allow the conclusion that thisindustry was materially injured. Indeed, they argued that thesituation of the Community industry showed signs of improve-ment in terms of production, sales volume and employment and itwas stable with respect to investments. As to profitability, itsdecreasing trend would be explained by the decision of theCommunity industry to concentrate on products generating highercosts of production.
(104) As set out in recitals 236 to 238 of the provisional Regulation, itis recalled that the conclusion of material injury of theCommunity industry was based on the fact that the Communityindustry, faced with subsidised imports, could not follow thegrowing trend of the market, steadily lost market share between1994 and the investigation period, and was only able to keep itssales volume and prices stable at the expense of its profitabilitywhich became. Indeed, the sales volume of the Communityindustry only increased by 5 % between 1994 and the invest-igation period, whilst the Community market went up by 27 %during the same period. Furthermore, the slight increase ofproduction as well as the stable sales volume and prices are onlydue to the fact that the Community industry tried to keep itsposition on the Community market. Therefore, the decreasingtrend of its profitability cannot be exclusively explained by thefact that the Community industry started to produce also somemodels for which less competition from the subsidised importswas faced.
(105) On the basis of the above, it is concluded that the Communityindustry is suffering material injury as set out in recitals 236 to238 of the provisional Regulation.
(F)CAUSATION
(106) Pursuant to Article 8(6) and (7) of the Basic Regulation, the
Commission services have examined whether imports originatingin India have caused material injury. Known factors other thanthe subsidised imports, which could at the same time be injuringthe Community industry, were also examined in order to ensurethat possible injury caused by these factors is not attributed tosubsidised imports.
(a)Effect of the subsidised imports
(107) The significant increase of the sales volume (around 1 250 %)
and of the market shares of the subsidised imports (from 0,3 % to3,3 %) between 1994 and the investigation period as well as thesubstantial price undercutting found (26 % on weighted averagefor India) coincided with the deterioration of the situation of theCommunity industry in terms of loss of market shares, pricedepression as well as deteriorating profitability.
(108) The market for fine SSW within the Community expanded by27 % between 1994 and the end of the investigation period.Nevertheless, the sales volume of the Community industry, even
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though reflecting to a certain extent the evolution of the market,only increased by 5 %, not following that expansion. By contrast,the subsidised imports originating in India considerably increasedboth in volume and market share over the same period. Thiscoincided with the downward trend of the situation l of theCommunity industry, which lost market shares and had to lowerboth its investments and its prices as from 1996, resulting infinancial losses in 1997.
(109) When faced with low-priced imports originating in India, in1996, the majority of the Community producers tried to maintaintheir sales prices, whereas a few others reduced them. Bothstrategies resulted in a negative impact on profitability eitherdirectly (lower prices) or indirectly (high prices led to lower salesvolume resulting in higher production costs per tonne). As from1996, all Community producers substantially lowered their salesprices, which had a further negative impact on their profitability,even though they tried to concentrate on certain market niches toavoid being affected even more strongly by the effects of thesubsidised imports. This clearly shows the price sensitivity of themarket and the important impact of the price undercutting prac-tised by the Indian exporting producers.
(b)Effect of other factors
(110) In accordance with Article 8(7) of the Basic Regulation, the
Commission services have examined whether factors other thanthe subsidised imports from India might have had an effect on thesituation of the Community industry, with particular regard to therole of other Community producers not cooperating in the invest-igation and of imports from other third countries.
1.Other Communityproducers
(111) Following the adoption of the provisional Regulation, some inter-
ested parties questioned whether the injury suffered by theCommunity industry was caused by the subsidised imports. Inparticular, it was alleged that the injury was caused by otherfactors, namely by other Community producers. It was argued inthis respect that in view of the limited cooperation obtained fromthe Community producers, the assessment of the impact of salesby the non-cooperating Community producers was not fully reli-able.
(112) It should be recalled that detailed and verified data are onlyavailable for the Community industry. Taking into account thehigh level of cooperation obtained from the Community industryensuring representative findings as well as the transparency andthe price sensitivity of the SSW market in the Community, it isnot unreasonable to conclude that other Community producersare likely to have followed a trend similar to that found for theCommunity industry, in particular as regards prices. Furthermore,no interested party has submitted any information that wouldsuggest that the non-complaining producers operated in a morepositive context.
2.Imports from third countries
(113) The market shares of the imports from third countries are as
follows:
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(Market shares) 1994 1995 1996 1997 IP
Korea 7% 9% 16 % 20 % 20 %
Switzerland 3% 3% 3% 3% 3%
Other 2% 3% 3% 2% 3%
Total 12 % 15 % 22 % 25 % 26 %
Korea
(114) Imports originating in Korea were examined in the context of this
investigation and it was concluded that the weighted averagecountrywide subsidy margin is below the de minimis threshold.
As to the development in import volume and correspondingmarket share, imports originating in Korea hake significantlyincreased as shown in the table. These imports have been made atprices undercutting those of the Community industry as set out inrecital 227 of the provisional Regulation. It should be noted thatthe price undercutting margin established for imports originatingin Korea (which amounted to 12 % on weighted average) is at asignificantly lower level than the price undercutting marginestablished for imports originating in India (which amounted to26 % on weighted average) as set out in recital 227 of theprovisional Regulation.
Other third countries
(115) It was provisionally concluded from the above figures that
imports from other third countries, and in particular from Swit-zerland, could not have had a decisive impact on the injurysuffered by the Community industry since they remained stableboth in volume and market shares between 1994 and the invest-igation period, whereas imports from the country concerned wentsteadily up during that period and no indication of any priceundercutting of the Community industry’s sales prices was found.Since no new arguments were put forward by any interestedparty, the findings as set out in recitals 244 and 245 of theprovisional Regulation are hereby confirmed.
(116) On the basis of the above findings, it is concluded that importsfrom third countries, in particular from Korea, have contributedto the injury suffered by the Community industry. However, inview of the market share of the imports originating in India(which accounted for more than 11 % of the total imports volumeinto the Community during the investigation period) and thesignificant undercutting found, it is concluded that this alone wasnot sufficient to break the causal link established between thesubsidised imports from India and the material injury suffered bythe Community industry.
3.Other
(117) No new arguments were put forward by any interested party
regarding whether other factors which might have contributed tothe injury suffered by the Community industry, in particular, acontraction in demand or the changes in the patterns of consump-tion, developments in technology and the export performance andproductivity of the Community industry. Therefore, the findingsset out in recitals 246 to 249 of the provisional Regulation arehereby confirmed.
(c)Conclusion on causation
(118) Thus, other factors than the subsidised imports originating in
India, even though they have contributed to the injury suffered bythe Community industry, were not such as to break the causal
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link between the subsidised imports originating in India and the
material injury suffered by the Community industry therefrom.
(119) In the light of the above, it is concluded that the subsidisedimports originating in India taken in isolation have causedmaterial injury to the Community industry.
(G)COMMUNITY INTEREST
(120) Following the adoption of the provisional Regulation, comments
have been submitted by users with respect to the potential effectof the duties.
(121) As to the Community industry and otheri Community producers,in the absence of any further submissions regarding the impact ofthe duties on their situation, the conclusion is hereby confirmedthat the imposition of measures will enable the Communityindustry to regain a satisfactory profitability margin, and to main-tain and further develop its activities in the Community securingboth employment and investment.
(122) In the absence of any further reaction from unrelated importersand from the suppliers, the findings set out in recitals 256 to 261of the provisional Regulation are confirmed.
(123) Concerning the users, some companies have alleged that theimposition of measures would have a direct impact on theireconomic situation since it would lead to an increase of the priceof their raw material. However, they have also stated that theycould source their supplies from other countries than the countryconcerned. Furthermore, in view of the overall low level of theduties, the impact of any price increase would be limited.
(124) Other users have insisted on the quality and reliability of theCommunity industry’s products, considering therefore that theimposition of the measures would not affect their own situation.
(125) Therefore, the findings set out in recitals 251 to 268 of theprovisional Regulation are confirmed in the sense that there areno compelling reasons against the imposition of countervailingduties.
(H)DEFINITIVE COURSE OF ACTION
1. Korea
(126) In the light of the above findings that the countrywide weighted
average subsidy margin for imports originating in Korea is de
minimis , this proceeding should be terminated in accordance with
Article 14(3) of the Basic Regulation.
2. India
(127) Based on the above conclusions on subsidisation, injury, causal
link and Community interest, it was considered what form andlevel the definitive countervailing measures would have to take inorder to remove the trade-distorting effects of injurious subsidiesand to restore effective competitive conditions on the Communityfine SSW market.
(128) Accordingly, as explained in recital 271 of the provisional Regu-lation a non-injurious level of prices was calculated at a levelwhich covers the Community industry’s cost of production andobtain a reasonable return on sales.
(129) The comparison of the non-injurious price levels with the exportprice of the producers led to injury margins which were in allcases above the subsidy amounts found for the cooperatingexporting producers (ranging from around 20 % to more than70 %).
(130) In accordance with Article 15(1) of the Basic Regulation, theduty rate should correspond to the subsidy amount, unless theinjury margin is lower. This led to the following rates of duty forthe cooperating Indian exporting producers:
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CompanyProposed countervailing
duty
Drawmet Wires Pvt Ltd, Mumbai 8,8
Indore Wire Ltd, Indore 19,3
Isibars/Isinox Ltd, Mumbai 10,1
Kei Industries Ltd, Delhi 0
Macro Bars and Wires Pvt Ltd, Mumbai 25,4
Mukand Ltd, Mumbai 13,2
Raajratna Metal Industries Ltd, Mumbai 42,9
Venus Wire, Indore 35,4
(131) In order to avoid granting a bonus for non-cooperation, it was considered appropriate
to establish the duty rate for the non-cooperating companies at the highest levelestablished per individual subsidy programme for the cooperating companies, i.e. fornon-cooperating companies located in India at 44,4 %.
(132) The individual duty rates specified in this Regulation were established on the basis ofthe findings of the present anti-subsidy investigation. Therefore, they reflect thesituation found during that investigation. These duty rates are thus exclusivelyapplicable to imports of products originating in the country concerned and producedby the specific legal entities mentioned. Products produced by any other company notspecifically mentioned in the operative part of this Regulation, including relatedentities, cannot benefit from these rates and shall be subject to the residual duty rate.
(133) Any claim requesting the application of these individual duty rates (e.g. following achange in the name of the entity) should be addressed to the Commission forthwithwith all relevant information, in particular any modification in the company’s activi-ties linked to production, domestic and export sales associated with that namechange.
(J)COLLECTION OF THE PROVISIONAL DUTIES
(134) In view of the amount of the countervailable subsidies found for the exporting
producers located in India and in the light of the seriousness of the injury caused tothe Community industry, it is considered necessary that the amounts secured by wayof provisional countervailing duties on imports originating in India pursuant toRegulation (EC) No 619/1999 be definitively collected to the extent of the amount ofdefinitive duties imposed, unless the provisional duties rates are lower in which casethe latter should prevail.
(135) As regards the amounts secured by way of provisional countervailing duties onimports originating in Korea, they should be released,
HAS ADOPTED THIS REGULATION:
Article 1
1. A definitive countervailing duty is hereby imposed on imports of stainless steel wire
with a diameter of less than 1 mm, containing by weight 2,5 % or more of nickel, excludingwire containing by weight 28 % or more but no more than 31 % of nickel and 20 % or morebut no more than 22 % of chromium, falling within CN code ex 7223 00 19 (TARIC code7223 00 19*10) and originating in India.
2. The rate of the definitive countervailing duty applicable to the net, free-at-
Community-frontier price, before duty, shall be as follows:
1999R1601 — EN — 23.07.1999 — 000.001 — 23
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Rate of
duty
(%)Taric additional
code
Drawmet Wires Pvt Ltd, B-482, Industrial Area, Bhiwadi, India 8,5 A001
Indore Wire Company Ltd, Near Fort, Indore 452 006 (MP), India 19,3 A004
Isinox Steels Ltd, Indiasteel Complex, Railway Gate No 4, Antop Hill,
Wadala, Mumbai 400 037, India10,1 A002
Mukand Ltd, L.B.S. Marg, Kurla, Mumbai 400 070, India 13,2 A003
Raajratna Metal Industries Ltd, 909, Sakar - III, Nr Income Tax, Ahme-dabad 380 014, Gujarat, India 42,9 A005
Venus Wire Industries Ltd, Block No 19, Raghuvanshi Mill Compound,Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India 35,4 A006
Macro Bars and Wires Pvt Ltd, 702 Bombay Market Building,►
C1Tardeo Road, ◄Mumbai 400 032, India25,4 A008
Kei Industries Ltd, D-90, Okhla Industrial Area Phase-1, New Delhi, India 0 A020
All other Indian companies 44,4 A999
3. Unless otherwise specified, the provisions in force concerning
customs duties shall apply.
4. The individual duty rates (as opposed to the countrywide duty
applicable to ‘others') specified in this Regulation are exclusivelyapplicable to imports of products produced by the specific legalentity/ies mentioned and originating in the country concerned. Productsproduced by any company not specified by its precise name in theoperative part of the Regulation cannot benefit from these rates.
Any claim requesting the application of these individual duty rates (e.g.
following a change in the name of the entity) should be addressed to theCommission (
1) forthwith with all relevant information, in particular any
modification in the company’s activities linked to production, domesticand export sales associated with that name change. The Commissionwill, after consultation of the Advisory Committee, amend the Regula-tion accordingly by updating the list of companies benefiting fromindividual duty rates.
Article 2
1. The amounts secured by way of the provisional countervailing
duties on imports originating in India under Regulation (EC) No 619/1999 shall be definitively collected at the rate of the duties definitivelyimposed. Amounts secured in excess of the definitive rate of counter-vailing duties shall be released.
2. The provisions referred to in Article 1(4) shall also apply to the
definitive collection of the amounts secured by way of the provisionalcountervailing duties.
Article 3
The proceeding concerning imports of stainless steel wire with a diam-
eter of less than l mm originating in Korea shall be terminated. Theamounts provisionally secured by way of the provisional countervailing
(1) European Commission
Directorate-General 1 - External RelationsDirectorate CDM 24 - 8/38Rue de la Loi/Wetstraat 200B-1049 Brussels.
1999R1601 — EN — 23.07.1999 — 000.001 — 24
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duties on imports originating in Korea under Regulation (EC) No 619/1999 shall be released.
Article 4
This Regulation shall enter into force on the day following its publica-
tion in the Official Journal of the European Communities .
This Regulation shall be binding in its entirety and directly applicable in
all Member States.