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
Date: 1998-11-13
Institutions: Council of the European Union
Subjects: India, anti-dumping duty, bar, import, originating product, steel

14. 11. 98

EN

Official Journal of the European Communities

L 304/1

I

(Acts whose publication is obligatory)

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,

B. SUBSEQUENT PROCEDURE

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
the European
not members
Community (1), and in particular Article 15 thereof,

of

Having regard to the proposal submitted by the Commis-
sion after consulting the Advisory Committee,

Whereas:

(1)

(2)

A. PROVISIONAL MEASURES

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 stain-
less steel bars (hereinafter referred to as ‘SSB' or
‘the product concerned') falling within CN codes
7222 20 11, 7222 20 21, 7222 20 31 and 7222 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 %.

Pursuant to Article 12(1) of Regulation (EC) No
2026/97 (hereinafter referred to as the ‘basic Regu-
lation'), provisional anti-dumping duties originally
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 the
product would be subject to both anti-dumping
and countervailing duties
the purpose of
dealing with one and the same situation arising
from dumping or from export subsidisation.

for

(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.

(3)

(4)

(5)

(6)

(7)

(8)

duties,

Following the adoption of the Regulation imposing
provisional
parties
several
submitted comments in writing. The parties who so
requested were granted an opportunity to be heard
by the Commission.

interested

The Commission continued to seek and verify all
information it deemed necessary for its definitive
findings.

Parties were informed of the essential facts and
considerations on the basis of which it was
intended to recommend the imposition of a defini-
tive countervailing duty and the definitive collec-
tion of amounts secured by way of the provisional
duty. They were also granted a period to make
representations subsequent to this disclosure.

The oral and written comments submitted by the
interested parties were considered, and, where
changed
appropriate, definitive
accordingly.

findings were

C. PRODUCT UNDER CONSIDERATION AND

LIKE PRODUCT

The product concerned by the investigation is
stainless steel bars and rods, not further worked
than cold-formed or cold-finished, containing by
weight 2,5 % or more of nickel, of circular cross-
section as well as of other cross sections.

Following the adoption of the Regulation imposing
provisional duties, some Indian exporting produ-
cers argued that
the products exported to the
Community and those sold on the domestic market
in India were not comparable, for instance in terms
of chemical characteristics, and consequently could
not be considered to be a like product.

L 304/2

EN

Official Journal of the European Communities

14. 11. 98

(9)

This claim could not be accepted since it was
found that SSB produced and sold domestically in
India
Indian SSB sold on the
Community market had the same basic physical,
technical and chemical characteristics and uses.

as well

as

(13)

(10) One exporting producer claimed that products
corresponding to the standard DIN 1013 fell
the current anti-subsidy
within the scope of
proceeding 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 of initiation (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,
claim was not
accepted.

this

(11) As no other arguments were presented, the findings
set out in recitals 8 to 11 of the provisional duty
Regulation are confirmed.

(14)

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 counter-
vailable since it was a permitted drawback system
within the meaning of Annex I(i) and Annexes II
and III to the basic Regulation. Furthermore, it
alleged that there was no requirement under Annex
imported inputs are used for export
that
I(i)
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
the imported inputs must have the same quantity
and the same quality and characteristics 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 inputs used in producing
goods for export or inputs having the same quan-
tity and 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
drawback scheme under the provisions of the basic
Regulation.

(1) OJ C 264, 30. 8. 1997, p. 2.

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
granted in respect of the PBS in the parallel anti-
dumping proceeding. However, such an allowance
is not relevant in the assessment of the countervail-
ability of the PBS, which has been established on
the basis of the provisions of the basic Regulation,
for the reasons stated in recital 12. Once such a
countervailable subsidy is
the
benefit to the recipient is the full amount of import
duty not paid by the exporting producer on all
import
is not
In this
adequate to reconstruct the PBS in order to deter-
mine which products are physically incorporated
and which are not.

found to exist,

transactions.

regard,

it

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 materials required 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 II and III to
the basic Regulation and that,
the
Commission had the opportunity to verify all
actual transactions to determine whether there was
an excess drawback.

furthermore,

This argument cannot be accepted as the issue of
excess remission only arises in the context of
assessing properly constituted drawback/substitu-
tion drawback schemes and it has been established
that the PBS 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 (MVA) in the Standard input/output
norms does not render the PBS an import substitu-
there was no minimum
tion subsidy
prescribed domestic input requirement and the
MVA could also be achieved by the use of, for
example, imported inputs.

since

it

that

As the PBS is already considered countervailable on
the basis
is contingent upon export
performance within the meaning of Article 3(4)(a)
of the basic Regulation, it is not necessary to make
a further finding on the issue of an import substitu-
tion subsidy.

14. 11. 98

EN

Official Journal of the European Communities

L 304/3

(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
avail themselves of credits previously granted. The
GOI made reference to Article 17 of the basic
Regulation, which provides that a countervailing
measure remains in force only as long as, and to
the extent that, it is necessary to counteract the
countervailable subsidies which are causing 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, com-
panies can still claim credits under this scheme 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, there-
fore, continue to be granted until that time and
they constitute countervailable subsidies. With
regard to the continuing countervailability of bene-
fits, it is considered that the principle stated in
Article 5 of the basic Regulation applies, i.e. that
the amount of countervailable 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 and replaced by its successor, the
Duty Entitlement Passbook Scheme
(DEPBS),
which is also considered countervailable (see recital
34 of the provisional duty Regulation). Since bene-
fits will continue to be granted in the future under
the DEPBS it is considered necessary to impose
received
measures based on the total benefits
during the investigation period under both the PBS
and the DEPBS because, as prescribed by Article
17 of the basic Regulation, it will still be necessary
to counteract the countervailable subsidies which
are causing 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 to claim passbook credits, and not 31 March
2000 as previously provided for (see recital 16). The
GOI asked,
this development be
that
taken into consideration in making a final determi-
nation.

therefore,

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 considered to be a countervailable
subsidy), and that benefits will continue to be
granted in future under the DEPBS, it is not appro-
priate to disregard benefits which accrued to ex-
porters under the PBS during the investigation
period. Therefore, measures should be imposed on
benefits received during the investigation period
under both the PBS and the DEPBS. Any other
approach would enable subsidising governments to
escape from countervailing measures simply by
changing the name of a scheme during the investi-
gation 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 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 the European Community, which was
brought about by the timing of the use of the
benefit.

the subsidy amount

It should be noted that
is
determined on the basis of the benefit to the re-
cipient company during the period of investigation.
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 receives a
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 the anti-dumping proceeding had
been double-counted with the subsidy amount 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 countervailability in
an anti-subsidy
different
proceeding
analysis, since each procedure is based on separate

require

L 304/4

EN

Official Journal of the European Communities

14. 11. 98

the basic
basic Regulations. Article 2(1)(a)(ii) of
Regulation provides that
the exemption of an
exported product from duties/charges shall not be
deemed to be a subsidy 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 the provisional 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 period but which remained unpaid
under the PBS. Consequently, the establishment 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 and countervailing measures (ASCM)
of the World Trade Organisation (WTO). The GOI
the Community’s
also claimed that
it was not
in
normal practice to include such an amount
calculating the amount of benefit to companies
availing themselves of such subsidy schemes.

an equivalent

With regard to this claim, the interest element is
added in order to reflect the benefit to the recipient
obtained by the subsidised firm by not having to
raise
amount of money from
commercial sources. Indeed, Article 6 of the basic
the
Regulation (which reproduces Article 14 of
ASCM) makes it clear that the benchmark for the
calculation of the subsidy is the equivalent cost of
funds on the commercial market. The Commun-
ity’s established practice in this area since 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 to 39 of
the provisional duty Regulation. These concern the

qualification of 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 the manu-
facture of export goods and that, consequently, the
exemption from import charges of goods imported
under this scheme cannot be considered as a coun-
tervailable subsidy.

contingent

law upon

In regard to this claim, the investigation has shown
that to avail itself of the EPCGS, a company must
make a commitment to export a certain value of
goods within a certain time period. This scheme is
therefore
export
in
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 the basic Regulation and, there-
fore, countervailable. In the light of these facts, the
question of whether capital goods are used ex-
clusively 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 illustra-
tive list of export subsidies) of the basic Regulation
also covers capital goods and that, under this para-
graph, 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 in-
corporated into the exported products.

(24)

The GOI contested the fact that, for calculating the
subsidy amount per unit, in the provisional find-
ings, benefits from the scheme had been allocated
only over export turnover. It claimed that as capital
goods imported 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.

is

upon

solely

contingent

In reply to this, it has been determined that this
export
scheme
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 only since the
subsidy is granted by reference to a certain value of
exports of goods within a certain time period. The
claim, therefore, that benefits under the scheme
should be allocated over total turnover is rejected.

14. 11. 98

EN

Official Journal of the European Communities

L 304/5

(25) One Indian exporting producer submitted that the
depreciation period used in the provisional find-
ings (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 to write off its fixed
assets, should have been used.

findings,

in the stainless

In reply to this claim, it should be noted that in the
the normal depreciation
provisional
period of capital goods
steel
industry concerned was used i.e. 15,5 years, which
is an average based on information provided by the
cooperating Indian exporting 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 the countervailable subsidy
shall be calculated by spreading the subsidy across
a period which reflects the normal depreciation of
such assets in the industry concerned. In view of
this provision,
is not appropriate to use the
company’s specific depreciation periods. The claim
is therefore rejected.

it

(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 further
examined this matter, it is clear that the company
has in fact obtained a benefit 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 fully operational during the
period of investigation does not affect this conclu-
sion.

(27)

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 ASCM of the
WTO. The GOI also 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.

sion made its provisional 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.

findings,

In this regard, it is noted that Article 5 of the basic
Regulation provides that the amount of counter-
vailable subsidies shall be calculated in terms of the
benefit conferred on the recipient which is found
to exist during the investigation period for subsid-
isation. As stated above, in the case of the provi-
sional
the Commission calculated the
benefit on the basis of the tax year 1996/97 (i.e. 1
April 1996 to 31 March 1997) which corresponded
most closely to the investigation period. 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 investi-
gation period of this proceeding, it is appropriate to
make the calculation of the amount of countervail-
able subsidies on the basis of a pro rata of the two
tax rates which applied in the investigation period.
Appropriate adjustments have accordingly been
made to the amount of subsidy for the companies
which availed of this scheme.

(29)

The GOI has claimed that, in the provisional find-
ings, 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 corresponding most
closely to the investigation period was the most
reasonable indicator 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
for
interest for the reasons set out in recital 20 and the
GOI claim has accordingly to be rejected.

is added to this grant

3. Income tax exemption scheme

4. Amount of countervailable subsidies

(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 Commis-

(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 invest-
igated exporting producers is as follows:

L 304/6

EN

Official Journal of the European Communities

14. 11. 98

Passbook

DEPB

EPCGS

Bhansali Bright Bars

13,7 %

Facor (Ferro Alloys Corp.)

84,5 %

Grand Foundry

Isibars

Mukand

Parekh

84,5 %

38,7 %

18,1 %

Panchmahal Steel

0,2 %

Raajratna Metal Industries

44,2 %

Venus Wire Industries

Viraj Impoexpo

22,9 %

25,6 %

1,1 %

1,1 %

0,1 %

0,7 %

Income
tax

Total

0,7 %

14,4 %

85,6 %

84,5 %

1,2 %

41,0 %

1,4 %

19,6 %

0,4 %

0,4 %

0,9 %

2,7 %

46,9 %

1,8 %

24,7 %

1,4 %

27,0 %

(31)

The subsidy amount definitively established for
Indian companies other than those cooperating in
this investigation, expressed as a percentage 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.

(32) One exporting producer, Chandan Steel Ltd, co-
operated in the anti-dumping proceeding, where an
individual dumping margin and an individual
injury margin was provisionally established, but did
not cooperate 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,
free-at-
expressed as a percentage of
Community-frontier price, 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 the injury elimination
level established for this company’s exports of the
product concerned to the Community during the
period of
anti-dumping
is lower than the subsidy
proceeding, since it
amount.

investigation in the

the net,

(33)

For the exporter mentioned in recital 6 of the
provisional anti-dumping duty Regulation (Sindia
Steel Ltd), it was considered appropriate that the
weighted average subsidy amount found for the
cooperating Indian companies should apply for
this company. The subsidy amount definitively
this company, expressed as a
established for

percentage of the net, free-at-Community-frontier
price, is 34,5 %.

E. INJURY

1. Community industry

(34) After additional 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
total Community production. This percentage
suffices to comply with the conditions 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 the volume of
imports from India. Consequently,
the findings
made in recitals 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 Indian producers
concerned
undercutting
margins. The undercutting margins were calculated
the weighted
by comparing per product

significant

showing

type,

14. 11. 98

EN

Official Journal of the European Communities

L 304/7

types

average export prices at Community frontier level
with the weighted average ex-factory sales prices of
the Community industry to unrelated parties.
Indian product
for which no matching
Community product type was found were excluded
from the calculation after it had been established
that the remaining transactions were sufficiently
representative.
If exports were made through
related companies the export prices were duly
adjusted for costs between importation and resale
to
in the
Community as well as for profits accruing. An
adjustment was made to the Community industry’s
sales prices
costs within the
transport
Community. Whereas the Indian exporters sold
exclusively to traders, the Community industry sold
to end-users
the
Community industry’s
to end-users were
adjusted to a trader level. In addition, the Indian
export prices were adjusted for handling charges at
Community border level.

and traders. Consequently,

independent

customer

sales

first

the

for

(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
to their
regularly had to issue credit notes
customers due to late deliveries. However, credit
notes for 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 adjust-
ment cannot be granted. In this respect, it was also
taken into account that the contractual delivery
times of the Indian producers often varied between
four and six months without this having an effect
on the agreed sales price.

cycle

times

in further

(38) All Indian producers also repeated their request for
an adjustment for quality differences. In particular,
they alleged that SSB produced by the Community
producers had a higher machinability which would
reduce
transformation
processes of the SSB. In this respect, it was noted
that some Community producers did indeed sell a
certain proportion of products under a trade mark
indicating higher machinability. However, it was
found that there was no consistent price pattern
indicating that the products with higher machina-
bility were sold at higher prices and would thus
have a higher market value. Consequently, an
adjustment could not be granted, since an 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 differences amongst
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
requested that 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 the sales price that was paid
by the customers. In this respect, it was noted that
the Indian sales prices also contained an alloy
element, even if this was not expressly referred to
in the invoice.

(40)

Taking into account
above, the undercutting margins amount to:

the corrections described

— Bhansali Bright Bars Pvt Ltd/Bhansali

14,5 %
Ferromet Pvt Ltd, Mumbai:
— Chandan Steel Ltd, Umbergaon:
14,9 %
— Facor (Ferro Alloys Corp. Ltd), Nagpur: 13,0 %
13,2 %
— Grand Foundry Ltd, Mumbai:
19,4 %
— Isibars Ltd, Mumbai:
17,8 %
— Mukand Ltd, Mumbai:
13,9 %
— Panchmahal Steel Ltd, Baroda:
5,8 %
— Parekh Bright Bars Pvt Ltd, Thane:
— Raajratna Metal Industries Ltd,

Ahmedabad:

— Venus Wire Industries Ltd, Mumbai:
— Viraj Alloys Ltd/Viraj Impoexpo

Ltd, Mumbai:

15,8 %
12,8 %

15,7 %

(41)

The weighted average undercutting margin calcu-
lated 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)

this

investigation in view of

In their comments following the disclosure, the
Indian companies continued to argue that
the
calculation of undercutting margins as well as the
injury factors, causality and
findings on other
Community interest would be meaningless in the
context of
the
Commission Decision (1) in the competition case
‘Alloy Surcharge'. This Decision stated
IV/35.814,
that Community producers of stainless steel flat
products had modified ‘in a concerted fashion the
reference
alloy
values used to calculate
surcharge, a practice having the object and effect of
restricting and distorting competition within the
common market'.

the

(1) OJ L 100, 1. 4. 1998, p. 55.

L 304/8

EN

Official Journal of the European Communities

14. 11. 98

it

is recalled that

the Decision
In this respect
related to stainless steel ‘flat products' as opposed
to stainless steel bars which belong to the category
of long products. Moreover, the producers of flat
products and the producers of SSB are, to a large
extent, not identical and the number of SSB produ-
cers is significantly higher than that of the flat steel
producers.

The Indian producers have, however, repeated their
allegation that a concerted practice existed for SSB.
Some of these companies have also lodged a formal
complaint with the Commission, pursuant
to
Article 3 of Regulation (EEC) No 17/62 (1),
concerning SSB. In order to support their allega-
tion, the Indian companies submitted that one of
the national steel associations in the Community
circulated to all of its members 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-called yield factor) in order to calcu-
late the alloy surcharge for SSB on the basis of the
alloy surcharge for flat products as a trader in a
different Member State. They alleged that the infor-
mation
a
conclusive
concerted practice in the SSB market.

provided

evidence

of

(43)

(44)

(45)

resulting in different levels of profitability for the
Community industry.

(48)

and Community

In the light of the above it was concluded that the
findings on injury
interest,
including the calculation of undercutting margins,
were not meaningless as alleged by the Indian
companies. Consequently, the Indian request that
the investigation be terminated forthwith could not
be granted. Similarly, it was not possible to suspend
the anti-dumping investigation until the Commis-
sion had concluded its investigation relating to the
alleged anti-competitive behaviour 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. Should the Commis-
the
sion find that a concerted practice existed,
conditions to initiate a review ex officio would be
fulfilled. Such a review would be carried out ex-
peditiously, i.e. within maximum 12 months, in
order to investigate whether and to what extent the
and
relevant
Community interest are affected by such an anti-
competitive practice.

causation

findings

injury,

on

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 not illegal. The
steel
alloy surcharge system allows a stainless
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 to protect itself against the risk of significant
fluctuations in the cost of production. 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. In addition, for ECSC-
products, Article 60 of the ECSC Treaty and the
implementing Community legislation requires the
Community producers to inform the Commission
and anyone interested of the applicable surcharge
(Article 6(b) of Decision No 37/54 (2)).

(50)

4. Situation of the Community industry

Following the adoption of the Regulation imposing
provisional duties no comments were received as
regards the situation of the Community industry in
respect of production volume, capacity and capacity
utilisation, sales volume, market share, sales prices,
profitability,
stocks. Con-
sequently, the findings as laid down in recitals 67
to 78 of
the provisional duty Regulation are
confirmed.

employment

and

(46) Consequently and in accordance with the Commis-
sion Decision in Case IV/35.814, the application of
an alloy surcharge system could only 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,

(1) OJ 13, 21. 2. 1962, p. 204/62.
(2) OJ 18, 1. 8. 1954, p. 470/54.

it was

alleged that

However, the Government of India questioned the
conclusions drawn from these findings,
in par-
the drop in the
ticular
Community production figures cannot be blamed
on the decreasing Indian 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 price
undercutting calculations.

14. 11. 98

EN

Official Journal of the European Communities

L 304/9

5. Conclusions

(55)

(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 Regula-
tion.

F. CAUSATION

investigated.

than that of

significantly better

In addition, the allegation by some Indian produ-
cers that the situation of other Community produ-
the
cers was
Community industry was
In this
respect, it should be recalled that detailed and veri-
fied data is only available for the Community
industry. Taking into account the transparency and
the price sensitivity of
in the
Community, it seemed however, not unreasonable
to conclude that other Community producers are
likely to have followed a trend similar to that of the
Community industry,
regards
prices.

the SSB market

in particular

as

(52)

(53)

the

injury

suffered by

Following the adoption of the Regulation imposing
provisional duties, some Indian companies ques-
tioned whether
the
Community 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 addi-
tion, it was alleged that other Community produ-
followed the same trend as the
cers had not
Community industry.

it

in significant

is worth noting that Indian
In this respect,
imports were present
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 the Community
industry’s prices. Account was further taken of the
fact that 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
prices since 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
for profitability. Consequently, a
causal link between subsidised imports and mate-
rial 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 the thresholds set out in Article 14(4) of
the basic Regulation and/or at higher 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.

(56)

(57)

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
the world 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 also significantly lowered its base prices.

In the light of the above, the findings set out in the
provisional duty Regulation (recitals 80 to 88) are
confirmed,
the low priced subsidised
imports from India have, when taken in isolation,
caused material injury to the Community industry.

that

i.e.

G. COMMUNITY INTEREST

(58)

Following the adoption of the Regulation imposing
provisional duties, no substantiated comments were
received as regards the Community interest 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 the Community
share and
industry to regain the lost market
improve its profitability.

(60)

(61)

In the absence of a reaction from the users and
importers, it was assumed that the impact of any
expected price increase would be limited, 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.

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.

L 304/10

EN

Official Journal of the European Communities

14. 11. 98

H. COUNTERVAILING MEASURES

(67)

(62)

Based on the above conclusions on subsidisation,
injury, causal link and Community interest, it was
considered what form and level the definitive coun-
tervailing measures would have to take in order to
remove the trade-distorting effects of
injurious
subsidies and to restore effective competitive condi-
tions 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 ident-
ical. It should be noted that the non-injurious price
level was calculated on the basis of the average sales
prices per product type minus the actual weighted
average profit margin of the Community industry
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 rela-
tion to the free-at-Community-frontier price level:

— Bhansali Bright Bars Pvt Ltd/Bhansali

Ferromet Pvt Ltd, Mumbai:

— Chandan Steel Ltd, Umbergaon:

18,4 %

19,0 %

— Facor (Ferro Alloys Corp. Ltd), Nagpur: 16,5 %

— Grand Foundry Ltd, Mumbai:

— Isibars Ltd, Mumbai:

— Mukand Ltd, Mumbai:

— Panchmahal Steel Ltd, Baroda:

16,6 %

25,5 %

25,3 %

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 com-
panies is applied. This resulted in an injury margin
of 22,1 %.

In accordance with Article 15(1) of the basic Regu-
lation,
the duty rate should correspond to the
subsidy amount, unless the injury margin is lower.
This led to the following rates of duty for the
cooperating producers:

— Bhansali Bright Bars Pvt Ltd/Bhansali

Ferromet Pvt Ltd, Mumbai:

— Chandan Steel Ltd, Umbergaon:

14,4 %

19,0 %

— Facor (Ferro Alloys Corp. Ltd), Nagpur: 16,5 %

— Grand Foundry Ltd, Mumbai:

— Isibars Ltd, Mumbai:

— Mukand Ltd, Mumbai:

— Panchmahal Steel Ltd, Baroda:

— Parekh Bright Bars Pvt Ltd, Thane:

— Raajratna Metal Industries Ltd,

Ahmedabad:

16,6 %

25,5 %

19,6 %

0,0 %

0,0 %

19,8 %

— Venus Wire Industries Ltd, Mumbai:

16,1 %

— Viraj Alloys Ltd/Viraj Impoexpo

Ltd, Mumbai:

20,2 %

For Sindia Steels Ltd the duty rate should be
22,1 %.

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 rate imposed, i.e. 25,5 % since there
was a high level of cooperation from Indian
exporting producers.

(68)

(69)

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
regards their exports to the Community. According
to the companies, the undertaking would have the
effect that export prices would rise significantly.

than the Community

This offer could not be accepted. In the first place
these companies would continue to receive coun-
tervailable subsidies based on exports to countries
other
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 diffi-
culties to monitor such an undertaking leaving
open the likelihood that circumvention would
occur.

14. 11. 98

EN

Official Journal of the European Communities

L 304/11

Secondly, the undertaking did not provide for any
measure of price discipline and thus it is consid-
ered that the injurious effects of the subsidised
imports would not be removed by the acceptance
of such an undertaking.

another

exporting

After expiry of the deadline to submit proposals for
undertakings
producer
submitted a proposal
for an undertaking. This
company offered to respect certain minimum
prices. This offer was 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 would eliminate the injurious effects
of subsidised imports. Consequently, the offer for
this undertaking could also not be accepted.

J. COLLECTION OF

THE
DUTIES

PROVISIONAL

(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,
is considered necessary
it
that the amounts secured by way of provisional
countervailing duty pursuant to Regulation (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,

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.
listed
Products manufactured by the companies
below shall be subject to the following rates of duty
applicable to the net, free-at-Community-frontier price:

Manufacturer

Rate
of duty
(%)

Taric
additional
code

Bhansali Bright Bars Pvt Ltd/Bhansali Ferromet Pvt Ltd, Mumbai

Chandan Steel Ltd, Umbergaon

Facor (Ferro Alloys Corp. Ltd), Nagpur

Grand Foundry Ltd, Mumbai

Isibars Ltd, Mumbai

Mukand Ltd, Mumbai

Panchmahal Steel Ltd, Baroda

Parekh Bright Bars Pvt Ltd, Thane

Raajratna Metal Industries Ltd, Ahmedabad

Sindia Steels Ltd, Nashik

Venus Wire Industries Ltd, Mumbai

Viraj Alloys Ltd/Viraj Impoexpo Ltd, Mumbai

All other companies

14,4

19,0

16,5

16,6

25,5

19,6

0

0

19,8

22,1

16,1

20,2

25,5

8226

8593

8400

8401

8402

8403

8404

8594

8405

8406

8407

8410

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 in excess of the definitive duty rate shall be released.

L 304/12

EN

Official Journal of the European Communities

14. 11. 98

This Regulation shall enter into force on the day following its publication in the Official
Journal of the European Communities.

Article 3

This Regulation shall be binding in its entirety and directly applicable in all Member
States.

Done at Brussels, 13 November 1998.

For the Council

The President

J. FARNLEITNER