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 the proceeding concerning imports of stainless steel wires with a diameter of less than 1 mm originating in the Republic of Korea
Date: 1999-07-12
Institutions: Council of the European Union
Subjects: India, South Korea, import, monetary compensatory amount, steel, wire

L 189/26

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Official Journal of the European Communities

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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 diameter of less than 1 mm originating in India and terminating the
proceeding concerning imports of stainless steel wires with a diameter of less than 1 mm origin-
ating in the Republic of Korea

THE COUNCIL OF THE EUROPEAN UNION,

(C) PRODUCT CONCERNED AND LIKE PRODUCT

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 2026/97 of 6
October 1997 on protection against subsidised imports from
countries not members of the European Community (1) and in
particular Articles 14 and 15 thereof,

Having regard to the proposal submitted by the Commission
after consulting the Advisory Committee,

Whereas:

(1)

(2)

(3)

(4)

(A) PROVISIONAL MEASURES

The Commission, by Regulation (EC) No 619/1999 (2)
(hereinafter referred to as the ‘provisional Regulation’)
imposed provisional countervailing duties on imports of
stainless steel wires with less than 1 mm (hereinafter
referred to as ‘fine SSW’ or ‘product concerned’), origin-
ating in India and in the Republic of Korea (hereinafter
referred to as ‘Korea’), and falling within CN code
ex 7223 00 19.

(B) SUBSEQUENT PROCEDURE

Subsequent to the disclosure of the essential facts and
considerations on the basis of which it was decided to
impose provisional measures on imports of fine SSW
originating in India and Korea (hereinafter referred to as
‘disclosure’),
submitted
interested
comments in writing. The parties who so requested were
also granted an opportunity to be heard orally.

several

parties

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

the essential

All parties were informed of
facts and
considerations on the basis of which it is intended to
recommend (i)
the imposition of definitive counter-
vailing duties on imports from India and the definitive
collection of amounts secured by way of provisional
duties on these imports and (ii) the termination of the
the
proceeding against
imposition of measures. They were also granted a period
within which they could make representations subse-
quent to this disclosure.

imports from Korea without

(5)

The oral and written comments submitted by the parties
were considered, and, where deemed appropriate, the
findings have been modified accordingly.
provisional

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 79, 24.3.1999, p. 60.

(6)

(7)

(8)

(9)

(10)

The product under consideration is fine SSW, containing
than
by weight 2,5 % or more of nickel, other
containing by weight 28 % or more but no more than
31 % of nickel and 20 % or more but not more than
22 % of chromium.

It was found at the provisional stage of the investigation
that there were differences in physical characteristics and
uses between SSW covered by the present investigation,
i.e. with a diameter of 1 mm or more (large wire) and
SSW with a diameter of less than 1 mm (fine wire). For
these reasons, it also appeared that there was no or only
very limited interchangeability between large and fine
wires' applications. However, it was also stated in the
provisional Regulation that the question whether a clear
dividing line could be drawn between these two prod-
ucts was going to be further investigated up to the
definitive stage.

On the basis of the further information collected from
interested parties, it is concluded that large wire and fine
wire are two different products as they present different
physical
characteristics and are used for different
applications. Firstly, as to the physical characteristics, the
tensile strength, granular structure and 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
engineering applications such as fasteners, wall rein-
forcement products, welding wires, etc. By contrast, fine
wire is as a rule used for precision applications such as
screens and filters (woven wire cloth) with small open-
ings for filtering very fine or small particles (for example
dust filters and chemical filters), medical/surgical applica-
tions, etc.

On the basis of the above it is concluded that fine and
large wires are two different products which have
different characteristics and applications and that they
are not interchangeable from the point of view of SSW
users.

Since no arguments were put forward by any of the
parties concerned with respect
to the Commission's
provisional findings on the product concerned and the
considerations made on the like product, the facts and
findings as set out in recitals 8 to 12 of the provisional
Regulation are hereby confirmed.

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Official Journal of the European Communities

L 189/27

(D) SUBSIDIES

I. INDIA

1. Passbook scheme (PBS) and duty entitlement

passbook scheme (DEPB)

(11)

(12)

these

claimed that

The Government of
India (GOI) and nine exporting
schemes, which are
producers
described in recitals 14 to 25 and 26 to 35 of the
provisional Regulation, were wrongly assessed by the
Commission in terms of the extent of subsidy and the
amount of countervailable benefit.
In particular, they
claim that the Commission's assessment of the benefits
under these schemes was incorrect since only the excess
duty drawback could be considered a subsidy in accord-
ance with Article 2 of Regulation No 2026/97 (herein-
after referred to as ‘the Basic Regulation’).

the Commission concluded that

The Commission used the following method in order to
establish whether the PBS and the DEPB constitute coun-
tervailable subsidies and if so, to calculate the amount of
benefit. Pursuant to Article 2(1)(a)(ii) of the Basic Regula-
these schemes
tion,
involve a financial contribution by the GOI
since
import duties on imports)
government revenue (i.e.
otherwise due are not collected. There is also a benefit to
the recipient since the exporting producers did not have
to pay normal

import duties.

(13) However, Article 2(1)(a)(ii) of

the Basic Regulation
provides for an exception to this general rule for, inter
alia, drawback and substitution drawback schemes
which conform to the strict rules laid down in Annexes
I(i), II (definition and rules for drawback) and IlI (defini-
tion and rules for substitution drawback) to the Basic
Regulation.

(14)

The analysis of the Commission revealed that neither the
PBS nor the DEPB is a drawback or a substitution draw-
back scheme. These schemes lack a built-in obligation to
import only goods that are consumed in production of
the exported goods (Annex II to the Basic Regulation).
Additionally, there is no verification system in place to
check whether the imports are actually consumed in the
production process. It is also not a substitution draw-
back scheme because the importetgoods do not need to
be of
the same quantity and characteristics as the
domestically sourced inputs that were used for export
production (Annex III to the Basic Regulation). Lastly,
exporting producers are eligible for the PBS and DEPB

benefits regardless of whether they import any inputs at
all. It is enough for an exporter to obtain the benefit by
simply exporting goods without the need to show that
any input material was indeed imported; thus, exporting
producers which procure all of their inputs locally and
do not import goods which can be used as inputs are
still entitled to the PBS and the DEPB benefits. Hence,
the PBS and DEPB does not conform to any of the
provisions of Annexes I to III. Since this exception to the
subsidy definition of Article 2 of the Basic Regulation
does therefore not apply, the countervailable benefit is
the remission of total import duties normally due on all
imports.

From the above, it clearly follows that the excess remis-
sion of import duties is the basis for calculating the
amount of the benefit only in the case of bona fide
drawback and substitution drawback schemes. Since it is
established that the PBS and the DEPB do not fall in one
of these two categories, the benefit is the total remission
of import duties, not any supposed excess remission.

The GOI and nine exporting producers have argued that
treatment of
these schemes is inconsistent with the
provisional findings in the parallel anti-dumping invest-
igation since the Commission granted in the anti-
dumping investigation an allowance for import duties
not paid under the PBS and the DEPB for imported
inputs actually consumed in the production of exported
products.

(15)

(16)

(17) However, pursuant to Article 2(10)(b) of the Basic anti-
dumping Regulation, Regulation (EC) No 384/96 (1), an
allowance was only granted where it was shown that the
materials on which import duties were paid were phys-
ically incorporated in the product concerned sold on the
domestic market and that the import duties were not
collected or refunded in respect of the product exported
to the Community. While such an allowance ultimately
will reduce the dumping margins, it is not relevant in thr
anti-subsidy investigation, since the PBS and the DEPB
have already been found to be countervailable, on the
basis of the provisions of the Basic Regulation, for the
reasons stated above. As explained above, once such a
countervailable subsidy is found to exist, the benefit to
the recipient is the full amount of import duty not paid
by the exporting producer on all import transactions. In
this regard, it is not for the Commission to reconstruct
the PBS and the DEPB in order to determine which
products are physically incorporated and which are not.
Furthermore,
the analysis
it should be stressed that
regarding countervailability of a scheme and an allow-
ance for physically incorporated inputs are completely
different with regard to purpose, calculation methodo-
logy and legal basis. The purpose of examining the
allowance at issue in anti-dumping investigations is to
adjust normal values. The examination of the counter-
vailability of a scheme in an anti-subsidy investigation
aims at establishing benefits received by the exporter
thereunder. In addition, the calculation methodology is

(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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Official Journal of the European Communities

22. 7. 1999

in anti-dumping and anti-subsidy investiga-
different
tions. While in anti-dumping cases the allowance is
granted in relation only to exports of
the products
concerned to the Community, in an anti-subsidy invest-
igation benefits are examined in relation to total exports
of all products to all destinations in line with Article
7(2) of the Basic Regulation and the ‘Guidelines for the
calculation of the amount of subsidy in countervailing
duty investigations’ (hereinafter referred to as the ‘Calcu-
lation Guidelines’) (1).

the criteria of Annexes Il and IlI, it should be concluded
that no reasonable verification system exists. The input/
output norms are a list of possible items that can be
consumed in the production process and in what
amounts. However, the input/output norms are not a
verification system in the sense of paragraph 5 of Annex
Il to the Basic Regulation. These norms do not provide
for a verification of
that are actually
consumed in the production process and do not provide
for a verification system whether these inputs were effec-
tively imported.

the inputs

(18)

The GOI and nine exporting producers further argue
that the Commission should have examined whether
there was in fact an excess drawback of import charges
on inputs consumed in the production process.

(19) As already explained in recitals 12 to 15, Annexes II and
III contain the rules to establish whether a scheme
constitutes a duty drawback or a substitution drawback.
The excess remission of import duties is the basis for
calculating the amount of the benefit only in the case of
drawback and substitution drawback schemes. This
argument cannot be accepted as the issue of excess
remission only arises in the context of assessing properly
constituted drawback/substitution drawback schemes,
and it has been established that the PBS and the DEPB
are not drawback or substitution drawback schemes
within the meaning of Annex I(i) and Annexes II and III
to the Basic Regulation.

(20)

The GOI and nine exporting producers claim that the
Commission failed to examine whether the GOI has a
system or procedure in place, to confirm which inputs
are consumed in the manufacturing process of
the
exported products, and in what amounts. The GOI
claims that the standard input/output norms constitute
an adequate verification system.

(22)

The GOI and nine exporting producers allege that the
Commission has incorrectly countervailed the value of
the credit amount in the DEPB licence instead of the net
value upon the sale of
the licence. One company
claimed that the sales tax, which was paid upon the sale
of the licence, should be deducted from the total subsidy
amount.

(23) Under the current provisions of the DEPB, a company,
which has obtained licences, has two options: to import
any product (except the items listed on the negative list)
using the credits to offset the applicable import duties or
transfer the licence to a third party. As explained in
recital 34 of the provisional Regulation, the Commission
considers that ‘the sale of a licence at a price less than
the face value is a pure commercial decision which does
not alter the benefit received from the scheme’. Further-
more, Article 7 of the Basic Regulation lists the elements
that may be deducted from the subsidy amount. Any
application fees or costs necessarily incurred in order to
qualify for or obtain the subsidy may be deducted from
the amount of subsidy. The transfer of a lower amount
of benefit than that actually granted and the sales tax
cannot be considered as justified deductions in the sense
of Article 7 of the Basic Regulation since these elements
are not a cost necessarily incurred in order to qualify for
or obtain the subsidy.

(21)

This argument relates to the issue whether the PBS and
the DEPB can be considered as drawback schemes or
substitution drawback schemes. Since it was established
that the PBS and the DEPB are not drawback or substitu-
tion drawback schemes in the sense of Annexes Il and III
to the Basic Regulation no further examination needs to
be carried out. Even if the PBS and DEPB were to meet

(1) OJ C 394, 17.12.1998, p. 6.

(24)

The GOI and nine exporting producers argue that the
Commission countervailed part of the benefits under
these schemes twice due to the overlap between this
proceeding and the stainless steel bright bars invest-
igation.

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Official Journal of the European Communities

L 189/29

average depreciation period of 12 years. This period was
used in the provisional finding and will be confirmed at
the definitive stage. The subsidy amount under the
EPCGS was allocated over 12 years in accordance with
Article 7(3) of the Basic Regulation.

(30) One company argued that its capital goods were being
depreciated over 21 years and that this depreciation
period should have been used instead of the average of
12 years.

(31) As explained above, the Commission services, in estab-
lishing the provisional findings, determined the normal
depreciation period of capital goods in the stainless steel
wire industry i.e. 12 years on the basis of the average
period used by the cooperating Indian exporting produ-
cers. 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, it is
not appropriate to use the company specific deprecia-
tion 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 stipu-
lated by the Commission and was therefore considered
non-cooperating for the purpose of
the income tax
exemption. After disclosure, this company submitted a
copy of its income tax return that revealed that no
benefits were granted under this scheme. Therefore, the
subsidy margin for Drawmet Wires Ltd is adapted to
8,5 %.

(25)

The Commission followed the same methodology as was
used in antibiotics (1) and stainless steel bars (2). Pursuant
to Article 7(2) of the Basic Regulation, the amount of
countervailable subsidy was determined by allocating the
value of the total subsidy over the level of total exports.
Since the export subsidies were not linked to the export
of the product concerned but all exports of the compa-
nies, the Commission considered it appropriate to use
this methodology. In using this methodology, there was
no double counting of benefits that were already coun-
tervailed in stainless steel bars since the subsidies were
allocated over all exports.

(26) One company, Raajratna Metal Industries Ltd, disputes
the methodology used by the Commission in calculating
the benefit under the passbook and DEPB schemes. They
contend that only credits earned on the product
concerned during the period of investigation should be
taken into account. This amount, the company says,
should then be allocated over the corresponding export
turnover 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 actual benefits that accrued during the
investigation period. As a company cannot be said to
receive a subsidy until the credit is made use of, the
Commission has decided that
is the total debits
utilised that best reflects the true benefit to a company.
The argument is therefore rejected.

it

2. Export promotion capital goods scheme (EPCGS)

Three companies made a claim regarding the export
promotion capital goods scheme (EPCGS), which is
described in recitals 36 to 39 of the provisional Regula-
tion. These concern the allocation of the benefit over the
normal depreciation period of fixed assets.

(28)

(29)

It was argued that there was a discrepancy between the
depreciation period used in the disclosure letter and the
provisional Regulation. The Commission established an
average of the depreciation periods used by all exporting
producers of the product concerned and arrived at an

(33)

(1) OJ L 273, 9.10.1998, p. 4.
(2) OJ L 202, 18.7.1998, p. 44.

4. Amount of countervailable subsidies

Taking account of the definitive findings relating to the
various schemes as set out above, the amount of coun-
tervailable
investigated
subsidies
exporting producers is as follows:

each of

the

for

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22. 7. 1999

Drawmet Wires

Indore Wire

Isinox Steel

Kei Industries

Macro Bars

Mukand Ltd

Raajratna

Venus Wire

Passbook

DEPB

EPCGS

1,4 %

7,7 %

4,3 %

0,0 %

9,6 %

7,5 %

23,3 %

19,8 %

7,1 %

10,7 %

5,8 %

0,0 %

12,6 %

5,7 %

13,7 %

14,3 %

0,0 %

0,9 %

0,0 %

0,0 %

0,0 %

0,0 %

0,0 %

0,0 %

Income
tax

0,0 %

0,0 %

0,0 %

0,0 %

3,2 %

0,0 %

5,9 %

1,3 %

Total

8,5 %

19,3 %

0,1 %

0,0 %

25,4 %

13,2 %

42,9 %

35,4 %

(34)

The subsidy amount definitively established for Indian
companies other than those cooperating in this invest-
igation, expressed as a percentage of the net free-at-
Community price, is 44,4 %, which is the sum of the
highest amount granted to any cooperating exporter
under each scheme.

II. KOREA

1. Loan programmes

(35)

(36)

(a) Calculation of benchmark interest rate

loans,

The Government of Korea (GOK) claimed that with
regard to the calculation of the subsidy amount in the
the cost-to-the-government approach
case of
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 on subsidies
and countervailing measures (ASCM).

It is considered that the provisions cited by the GOK are
not applicable to the loan programmes investigated.
Article 19(4) of the ASCM establishes that no counter-
vailing duty is levied in excess of the amount of the
subsidy found to exist calculated on the basis of the
benefit conferred. This provision was observed since the
explicit rules for the calculation of the subsidy in the
case of loans, i.e. Articles 5 and 6 point (b) of the Basic
Regulation which incorporate Article 14(b) of
the
ASCM, were followed. These rules clearly establish that
the subsidy should be calculated in terms of the benefit
which is the difference between the amount the firm
receiving the loan pays and the amount the firm would
have paid for a comparable commercial
loan. Article
19(4) of the ASCM does not create a requirement for
calculation of a subsidy on the basis of the cost to the
government. Article 6(1)(a) of the ASCM concerns a
presumption of serious prejudice in certain circum-

stances, which is not applicable to countervailing duty
proceedings. Item (k) of Annex I to the ASCM which is
reproduced in Annex I to the Basic Regulation provides
for special rules for export credits which are exceptions
to the general rules for the calculation of subsidies in the
case of loans. Item (l) in itself does not establish that the
cost-to-the-government
the
explicit rules in Article 5 and 6 point (b) of the Basic
Regulation,
in particular since this item was already
present in the illustrative list of export subsidies adopted
during the Tokyo Round of GATT negotiations, at a
time when the benefit-to-the-recipient approach had not
yet been incorporated into WTO rules.

approach prevails over

Furthermore, the GOK claimed that the comparison of
interest paid on a government loan programme to a
loan would wrongly assume that interest
commercial
loans in the economy would be equal.
rates on all

The Commission does not assume that all
loans are
equal but used as a benchmark loans which were consid-
ered comparable on the basis of repayment period, prin-
cipal amount and purpose of the loan as is required
under Article 6(b) of the Basic Regulation.

Finally, the GOK claimed that the relevant benchmark
interest rate should be that on a comparable loan
granted at the same time as the loan at issue rather than
using interest rates prevailing in the investigation period
since during the investigation period, the interest rate
was abnormally high due to the financial crisis.

It was found in the course of the investigation that
interest rates for loans granted on a commercial basis
reflect market conditions by changing over time. Such
loans would have shown the same interest rates during
the investigation period regardless of whether they were
granted at the same time as the government loan or not.
Thus,
the Commission would not deviate from.its
normal practice set forth by the Basic Regulation and the
calculation guidelines. Hence, this claim is rejected.

(37)

(38)

(39)

(40)

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L 189/31

(41)

(42)

the
Two Korean exporting producers claimed that
Commission's classification of the loans into five catego-
ries on the basis of the amount of the principal
is
arbitrary and inconsistent with the usual practice of
Korean banks and that consequently the determination
of the interest rate on the basis of the loan amount does
not constitute an adequate methodology to determine
the benchmark interest rate. One Korean exporting
producer claimed that because Korean banks do not take
into account the loan amount as a determining factor
for the interest rate, the Commission should use as the
sole benchmark, the producer's actual average interest
rate on commercial loans. Two Korean exporting produ-
cers also claimed that the Commission should use the
interest rates on trade loans as the benchmark interest
rate for EXIM-SM loans.

In response to these claims, it is considered that Article
6(b) of the Basic Regulation makes it clear that the
benchmark for
the subsidy is a
the calculation of
comparable commercial loan which the company could
actually obtain on the market. Therefore, the Commun-
ity's practice in this area, as set forth in the calculation
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 the Korean exporting-producers differ in purpose (see
recital 126 of
the provisional Regulation) and loan
period from EXIM-SM loans at issue and are therefore
not comparable loans. These claims are therefore
rejected.

(43)

The two Korean exporting producers further argued that
the Commission used extraordinarily high interest rates
resulting from the financial crisis in Korea as a bench-
mark for calculating the subsidy on loans concluded
before the crisis.

(47)

(44) Article 6(b) of the Basic Regulation states that the benefit
is calculated by comparing interest rates on government
loans to interest rates on comparable commercial loans.
In order to accomplish this, average interest rates on
government loans were compared to average interest
rates on comparable commercial loans during the invest-
igation period. This claim is therefore rejected.

would manage financial resources and their accounting
separately.

(46)

In the course of the investigation it was determined that
the exporting producers of stainless steel wire received
such a loan, which is countervailable since, as admitted
by the GOK, it is specific to the fishing net industry. It is
considered to be irrelevant that the scheme in question
is not specific to the industry producing the product
under investigation as long as the programme is specific
as such and its benefits can be related to the production
of the product concerned. The latter is the cage since the
subsidised loan reduced the overall financing cost of the
producer which also benefits the product concerned. No
evidence was submitted that the management of finan-
cial resources by the exporting producers concerned
were conducted in such a way that the overall financing
cost of the company would not be affected by the grant
of the loan. Therefore, this claim is rejected.

(c) SMEs start-up and promotion fund loans (SME-SPFL)

The GOK claimed that type-C loans granted under the
Pusan Metropolitan City Support Fund Establishment
and Operation By-law were not contingent on export
performance since eight main and 12 additional criteria
determining the eligibility for such a loan are objective
and neutral. The only export related element 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 use export share as an indirect indicator of tech-
nology development activities.

(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 stainless steel wire nor was it specific to the
stainless
company
industry. Additionally,
producing both fishing nets and stainless steel wire

steel

a

(48)

It is considered that, even though a condition related to
export performance is only one among several criteria, it
nevertheless makes the scheme contingent on export
performance and therefore specific. This is clearly set
forth in Article 3(4)(a) of the Basic Regulation which
states that subsidies which are contingent in law or fact,
whether solely or as one of several conditions, on export
performance are deemed to be specific. Since one
element to be taken into consideration by the granting
authority is that a minimum share of exports in total
turnover is achieved, this requirement of contingency
upon export performance is fulfilled since companies
might not have obtained benefits without exceeding a
certain level of export sales. The GOK's claim is there-
fore rejected.

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22. 7. 1999

(d) Technology development business

loan (TDBL)/science

and technology promotion fund (STPF)

not be prohibited under this or any other provision of
the ASCM.

(54)

(55)

(56)

(57)

(58)

(49)

(50)

non-countervailable. Additionally,

The GOK claimed that these programmes provide assis-
tance for research activities in accordance with Article
8(2)(a) of the ASCM and are therefore non-actionable
and
tecLlriology
development, and science and technology promotion are
objective and neutral criteria within the meaning of
Article 2(1)(b) of the ASCM and the programmes are
generally available to all industries which invest in tech-
nology development projects and are therefore not
specific. With regard to the STPF, the GOK furthermore
claimed that since transparent and objective criteria are
employed by the Ministry of Science and Technology, it
cannot exercise any discretion in deciding on priority
projects and that the Commission had failed to present
any evidence to support its conclusion that this discre-
tion has been exercised.

The claim of non-actionability for both programmes is
rejected for the same reasons as stated below under
recitals 75 to 77. No evidence was provided which
would cast doubt on the provisional finding that the
TDBL was specific to certain industries investing in
certain projects as determined by the Ministry of Trade
and Industry. Also with regard to the STPF, no informa-
tion on any criteria used by the Ministry of Science and
Technology was provided. During the investigation it
was verified that the Ministry of Science and Technology
did in fact decide from time to time on priority projects.
This is considered to be sufficient evidence to establish
that the STPF is de facto specific in the meaning of
Article 3(2)(c) of the Basic Regulation. Hence, the claim
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 calculation error in determining the benefit
from the EXIM-SM loans.

(52)

It is considered that this claim is valid. Appropriate
adjustments have accordingly been made to the amount
of subsidy for the relevant company.

(53)

The GOK claimed that since the EXIM-EC (preshipment),
EXIM-SM and EXIM-FIC loans were granted at rates
above those which EXIM actually paid for the funds,
EXIM-EC, EXIM-SM and EXIM-FIC loans are not counter-
vailable. Furthermore it is argued that footnote 5 to
Article 3(1)(a) of the ASCM states that measures referred
to in Annex I as not constituting export subsidies should

is considered that

these arguments only apply to
It
‘export credits’ as defined in item (k) of Annex I to the
Basic Regulation. As already explained in the provisional
Regulation in recitals 129 and 130, EXIM-EC (pre-ship-
ment), EXIM-SM and EXIM-FIC loans are not considered
to be ‘export credits’ and do not fall under item (k) of
Annex I to the Basic Regulation. These claims are there-
fore rejected.

The GOK argued that EXIM-FIC is contingent neither on
export performance nor upon the use of domestic over
imported goods within the meaning of Article 3(1) of
the ASCM. The GOK also states that because EXIM-FIC
is available to a wide variety of industries and since the
criterion of foreign investment is objective and neutral
within the meaning of Article 2(1)(b) of the ASCM,
EXIM-FIC is not specific.

to these

arguments

In response
the Commission
concluded on EXIM-FIC loans that they are available
only to companies which invest abroad and are there-
fore specific within the meaning of Article 3(2)(b) of the
Basic Regulation since they are not based on neutral
criteria as explained below in recitals 80 to 84. It was
considered that EXIM-FIC is not contingent on export
performance nor on the use of domestic over imported
goods within the meaning of Article 3.1 of the ASCM.

2. Fixed amount refund system

The GOK argued that this scheme is a drawback system
within the meaning of Annex I(i), Annex II and Annex
III to the ASCM and claimed further that the drawback
of import charges is not made in excess of those levied
on imported inputs that are consumed in the production
of the exported product, making normal allowance for
waste.

In response to these arguments it is considered that
since there is no obligation to import any inputs for the
production of the exported product, the fixed amount
refund scheme is neither a duty drawback scheme nor a
substitution drawback scheme within the meaning of
Annex I(i), Annex Il and Annex III to the ASCM. In fact,
the Korean fixed amount refund system falls under the
general definition of a subsidy according to Article 2 of
the Basic Regulation which incorporated Article l of the
ASCM. It constitutes a subsidy as a financial contribu-
tion is made by the GOK in the form of grants based on
FOB value of exports and confers a direct benefit on the
recipient. It is a subsidy contingent in law on export

22. 7. 1999

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Official Journal of the European Communities

L 189/33

performance and is therefore deemed to be specific
under Article 3(4)(a) of the Basic Regulation. Conse-
quently, the issue of excess remission of import duties,
as mentioned in Article 2(1)(a)(ii) of the Basic Regula-
tion, does not arise since this is only relevant for cases of
drawback and substitution drawback schemes in accord-
ance with Annexes I to IIl to the Basic Regulation.
Therefore these claims are rejected.

(59)

(60)

The GOK stated that, pursuant to paragraph 2 of Annex
II(II) to the ASCM, if there is no system or procedure to
determine whether an excess payment occurred and the
investigating authorities deem it necessary, a further
examination will be carried out in accordance with para-
graph 1 of Annex II(II). The GOK claimed that since the
Commission failed to examine whether there was in fact
an excess drawback of
import charges on inputs
consumed in the production of the exported product,
these exists no basis to conclude that the Korean fixed
amount refund system constitutes a specific subsidy
under Article 3(4)(a) of the Basic Regulation.

It is considered that this argument is irrelevant since
paragraph 2 of Annex II(Il) to the ASCM relates to a
duty drawback scheme which, as explained above, the
programme under consideration is not. But in any event,
even if it were a duty drawback scheme, Annex II(II)(5)
and Annex III(Il)(3) to the Basic Regulation provide that
the burden would be on the government of
the
exporting country to carry out such an examination
based on actual transactions. The GOK did not carry out
such an examination. Therefore the Commission did not
examine whether there was in fact an excess drawback
of import charges on inputs consumed in the produc-
tion of the exported product.

in place

(61) One Korean exporting producer stated that the argu-
ment of the Commission that there is no system or
to confirm which inputs are
procedure
consumed in the production of the exported product
and in what amount, is not valid because duty refund 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 the fixed amount refund system, the amount of
the grants received is not calculated in relation to inputs
actually consumed in the production process or import

duty actually paid but calculated as a lump sum based
on overall exports. Therefore, these claims are rejected.

(63) One Korean exporting producer further argued that he
did not receive any benefit from the use of this system
claiming that he paid import duty on the raw materials
used in the production of
the product concerned,
exported the product concerned and the duty drawback
amount is inferior to the amount that they would have
received if the individual system was used. The GOK
furthermore argued that the Korean exporting producer
who used the fixed amount duty drawback system
provided the Commission with the evidence that its
drawback of import charges is much less than those
levied on imported inputs that were consumed in the
production of the exported product during the invest-
igation period.

(64)

In response to these arguments it is considered that, for
the reasons explained above, payments under the fixed
amount refund system constitute grants which are based
on export performance and are therefore specific and
countervailable under Article 3(4)(a) of the Basic Regula-
tion. Furthermore, it is irrelevant whether the use of a
legitimate duty drawback scheme would have been more
advantageous for the exporting producer since he chose
to receive benefits under a scheme which is a counter-
vailable subsidy. Hence, these claims are rejected.

3. Tax programmes

(a) Non-specificity of the limitation to manufacturing industry

(65)

In its provisional determination,
the Commission
considered that certain Articles of the Tax Exemption
and Reduction Control Law (TERCL) were countervail-
able as they were specific under Article 3(2)(a) of the
Basic Regulation by virtue of being limited to certain
enterprises
in the manufacturing
those
industry. These Articles were:

including

— Article 7 (special reduction and exemption of tax
and medium manufacturing

small

amount
industry, etc.),

for

— Article 8 (reserve for technology development),

— Article 9 (tax credit for technology and manpower

development expenses),

— Article 25 (tax credit for investment in facilities for

increasing productivity),

— Article 27 (temporary investment tax credit).

L 189/34

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Official Journal of the European Communities

22. 7. 1999

(66)

industries/businesses,

The GOK claimed that since the provisions of these
Articles are, in practice, available to a significantly wide
variety of
they are not specific
within the meaning of Article 2(1)(a), (b) and (c) of the
ASCM and are accordingly not countervailable (these
the ASCM are reproduced in Article
paragraphs of
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 of thousands of sub-category industries.

of TERCL are 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 of certain Articles of TERCL, they should
not be included in any determination to be made in this
proceeding. The Articles concerned are:

— Article 5 (special tax credit for SMEs),

The basic principle of specificity is that a subsidy that
distorts the allocation of resources within an economy
by favouring certain enterprises over others should be
subject to countervailing measures if it causes injury.
Where eligibility for subsidies is limited within an
economy on the basis of non-neutral criteria, such a
distortion in the allocation of resources is presumed to
occur. This principle is the basis for Article 2(1)(a) of the
ASCM and Article 3(2)(a) of the Basic Regulation which
the geanting
specific if
provide that a subsidy is
authority, or the legislation pursuant
to which the
granting authority operates, explicitly limits access to a
subsidy to certain enterprises. In this case, it is consid-
ered that, while the concept of ‘manufacturing industry’
may be a very broadly defined one, it is a fact that the
provisions of the abovementioned Articles of TERCL are
further designed to restrict the benefits thereunder to
certain enterprises by making eligibility contingent on
other non-neutral criteria, such as investment in certain
types of high technology products or overseas invest-
ment.

(67)

(68)

It has been argued by GOK that such criteria are neutral,
since all companies have an equal opportunity to avail
it is argued
themselves of the subsidies. For example,
that a subsidy for firms which invest overseas is non-
specific because all firms are able to invest overseas.
However, according to this argument, a subsidy limited
to firms in the textile sector is non-specific, because all
firms ‘are able’ to diversify into textiles. If specificity
under the ASCM is to make any sense, it must cover
situations where governments make subsidies subject to
conditions which they know in advance will severely
restrict the number of firms eligible to apply; such subsi-
dies are designed to favour certain enterprises over
others. For this reason, the type of criteria used by GOK
to designate recipients are not ‘neutral’, and as explained
below, they are not horizontal in application, as required
by Article 3(2)(b) of the Basic Regulation. It has there-
fore been found that the subsidies under these Articles

(71)

(72)

— Article 7 (special reduction and exemption of tax
and medium manufacturing

small

amount
industry, etc.),

for

— 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 the amount and nature of the subsidy
in question;

(ii) Article 12(1) of the ASCM (Article 11 of the Basic
Regulation) states that interested Members and all
interested parties in a countervailing duty invest-
igation shall be given notice of 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 practice prior to the (verification) visit
to advise the firms concerned of the general nature
of the information to be verified and of any further
information which needs to be provided.

The GOK claims that these provisions of the ASCM have
been ignored by including the non-alleged programmes
in the determination and that, furthermore, both the
GOK and some cooperating exporting producers did not
have the opportunity to defend themselves appro-
priately.

In response to the GOK's claims, it is considered that,
when lodging a complaint, complainants cannot be
expected to have knowledge of every last detail of
alleged subsidy programmes in a third country. In this
case, the complainant made a large number of allega-
tions of tax subsidies granted under the TERCL. The
investigation then unearthed other tax subsidies granted
under certain provisions of the TERCL which had not
been specifically mentioned in the complaint, but which

22. 7. 1999

EN

Official Journal of the European Communities

L 189/35

have a very similar effect to the alleged schemes. In view
of the nature of these subsidies, and in particular the fact
that they are granted under the general umbrella of the
TERCL (against which the complainant has made a
number of subsidy allegations) it is concluded that the
Commission is entitled to investigate them and recom-
mend countervailing action if appropriate.

(73)

(74)

(c) Article 8 of TERCL (reserve for technology development)

In addition to the GOK's claim regarding the non-specif-
icity of the provisions of this Article, the GOK claimed
that this Article is a non-actionable research and devel-
opment (R&D) subsidy within the meaning of Article
8(2)(a) of the ASCM (this paragraph of the ASCM is
reproduced in Article 4(2) of the Basic Regulation).

It is noted that, if R&D subsidies fulfilling the require-
ments of Article 8(2)(a) of the ASCM are notified to the
WTO under the provisions of Article 8(3) of that Agree-
ment, an investigation cannot even be opened against
such subsidies. In regard to Article 8 of TERCL, it has
been noted that Korea has not notified this provision to
the WTO under Article 8(3) of the ASCM. Accordingly,
the Commission was entitled to initiate an investigation
of this provision of TERCL. Regarding the GOK's claim
that this provision is non-actionable, and accordingly is
the GOK is
protected from countervailing measures,
required to demonstrate such non-actionability. It was
given an opportunity by the Commission to make such
a demonstration at the beginning of the investigation,
but has not done so. In these circumstances, counter-
vailing measures can be imposed on benefits accruing
under this Article.

(75) As regards the GOK's non-specificity allegations,

and technology-intensive

the
scheme is not neutral since it differentiates between
normal
latter
receive higher rates of benefit. Such a distinction shows
that the criteria are not neutral and exclude a large
number of firms for whom such technological develop-
ment is not necessary. For these reasons and those stated
in recitals 67 to 70 above, it is considered that Article 8
of TERCL is specific and therefore countervailable.

firms. The

(d) Article 9 of TERCL (tax credit
manpower development expenses)

for

technology and

(76)

In addition to the GOK's general claim regarding the
non-specificity of the provisions of this Article, the GOK
claimed that the criterion of technology and manpower
development is an objective and neutral criterion within
the meaning of Article 2(1)(b) of the ASCM. It is consid-
ered that this criterion is not neutral within the sense of
that Article of the ASCM nor within the sense of Article
3(2) point (b) of the Basic Regulation. This latter Article

requires that objective criteria or conditions must be
neutral and also economic in nature and horizontal in
application. The provisions of this Article of TERCL are
considered not to be horizontal
in nature as clearly
companies in certain industrial sectors will be more
technologically-oriented than those in other sectors and
will therefore be more likely to take advantage of this
provision. The GOK, by enacting this provision of
TERCL, has conferred a disproportionate benefit to firms
in certain industrial sectors.

(77)

It is considered that this scheme is specific as it is limited
to certain enterprises (see recitals 67 to 70) and there-
fore countervailable. The scheme is also specific under
Article 3(2)(b) of the Basic Regulation and therefore
countervailable.

(78)

(79)

(80)

(e) Article 23 of TERCL (reserve for overseas investment loss)

The GOK noted that the provisions of this Article have
not been effective since January 1998. The GOK claimed
also that the provisions of this Article are available to a
wide variety of industries and also that the criterion of
overseas investment is an objective and neutral criterion
within the meaning of Article 2(1)(b) of the ASCM.

The nature of this provision is that of a tax deferral
which will be added back to a company's tax base after a
two-year grace period in equal amounts over three years.
Accordingly, for tax deferred during the last year of
eligibility (tax year 1997), benefits continued to accrue
during the investigation period (1 April 1997 to 31
March 1998) and will continue to accrue for a number
of years thereafter to companies which availed of this
tax provision.

Concerning the GOK's claim that the provisions of this
Article are available to a wide variety of industries, it is
noted that, in its provisional findings, the Commission
found that the provisions of this Article were limited to
those Korean companies which invest abroad. No new
information has been provided that this is not the case.
Similar to the GOK's claim above regarding the non-
specificity of the limitation to manufacturing industry
(see recitals 67 to 70), it is a fact that the provisions of
Article 23 of TERCL restrict the benefits thereunder to
certain enterprises. This provision is therefore specific
under Article 3(2)(a) of the Basic Regulation and there-
fore countervailable.

(81)

The GOK also claimed that the criterion of overseas
investment is an objective and neutral criterion within
the meaning of Article 2(1)(b) of the ASCM. It is consid-
ered that this criterion is not neutral within the sense of
that Article of the ASCM nor within the sense of Article

L 189/36

EN

Official Journal of the European Communities

22. 7. 1999

the Basic Regulation. This

latter Article
3(2)(b) of
requires that objective criteria or conditions must be
neutral and also economic in nature and horizontal in
application. The provisions of this Article of TERCL are
considered not to be objective, since it is known in
advance that companies which do not invest abroad will
be ineligible for the benefit. This criterion is therefore
neither neutral nor horizontal in application. The GOK,
by enacting this provision of TERCL, has conferred a
benefit on a limited number of enterprises with overseas
interests.

able. It is known in advance that certain enterprises are
more likely than others to be in a position to benefit
from tax advantages for productivity improvement, just
because of the type of business they are in. Therefore,
benefits from this scheme will inevitably be more rele-
vant to some sectors than to others.

(g) Article 27 of TERCL (temporary investment tax credit)

(82)

It is considered, therefore, that this provision of TERCL
is specific under Article 3(2)(b) of the Basic Regulation
and therefore countervailable.

(85)

(f) Article 25 of TERCL (tax credit for investment in facilities

for increasing productivity)

(83)

that

treatment

the provision of preferential

In addition to the GOK's claim regarding the non-specif-
icity of the provisions of this Article, the GOK pointed
out
for
domestic over imported facilities which was contained in
this Article was deleted at the end of 1996 which is
before the investigation period. In its provisional find-
ings, the Commission indeed noted that the provision in
the Article for different rates in force for imported (3 %
credit) and indigenously sourced (10 % credit) facilities
was deleted at the end of 1996. However, as companies
which commenced investment projects before the end of
1996, but which continued after that date, may opt to
benefit from the rates in force prior to that date, benefits
continued to accrue during the investigation period.

(84) As regards the different rates in force for imported and
indigenously sourced facilities prior to the end of 1996,
it has already been found that the scheme is specific
under Article 3(4)(b) of the Basic Regulation. Concerning
the general claim of non-specificity, it is considered that
this scheme is specific as it is limited to certain enter-
prises (see recitals 67 to 70) and therefore countervail-

(86)

(87)

that

treatment

the provision of preferential

In addition to the GOK's claim regarding the non-specif-
icity of the provisions of this Article, the GOK pointed
out
for
domestic over imported facilities was deleted at the end
of 1996. In its provisional findings, the Commission
considered that benefits accruing underthis Article
to
should be countervailed as companies may opt
benefit from the different rates in force for imported
(3 % credit) and indigenously sourced (10 % credit)
machinery prior to the end of 1996 for investment
projects commenced before then. Accordingly, benefits
continued to accrue during the investigation period.

It is considered that this scheme is specific as it is limited
to certain enterprises (see recitals 67 to 70) and there-
fore countervailable. As regards the different rates in
force prior to the end of 1996, the scheme is specific
under Article 3(4)(b) of the Basic Regulation. Concerning
the general claim for non-specificity, as in the case of
Article 25, this scheme is available only to those firms
which invest
in productivity-improving equipment.
Given the nature of this condition, it is inevitable that
certain enterprises will be more likely to benefit than
others.

4. Amount of countervailable subsidies

Taking account of the definitive findings relating to the
various schemes as set out above, the amount of coun-
investigated
subsidies
tervailable
exporting producers is as follows:

each of

the

for

Loans
(export)

0,47

1,63

0,09

0,17

0,88

2,31

Loans
(other)

0,06

0

0,15

0

0

0,18

Tax
(export)

Tax (other)

Duty
drawback

Totale
Subsidy

0,34

0

0,06

0,15

0

0,02

0,08

0

0,55

0,25

0,03

0

0

1,09

0

0

0

0

0,95

2,72

0,85

0,57

0,91

2,51

Korea Welding

Shine Metal Products

Dae Sung Rope Mfg
Co., Ltd.

Korea Sangsa Co. Ltd/
Myung Jin Co., Ltd.

Kowel Special Steel
Wire Co.

SeAH Metal Products
Co., Ltd.

22. 7. 1999

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Official Journal of the European Communities

L 189/37

(88)

The weighted average countrywide subsidy margin for
all the exporting producers investigated which represent
the totality of exports to the Community originating in
Korea expressed as a percentage 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 accordance with
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 subsi-
dised imports. Therefore, contrary to the findings set out
in the provisional Regulation, only imports originating
in India will be taken into account for the purposes of
the injury assessement set out below.

(90)

(91)

2. Community industry

forward by any of

In the absence of new evidence or any further substan-
tiated argument put
the parties
concerned, the facts and findings set out in recitals 206
the provisional Regulation are hereby
and 207 of
confirmed,
i.e the complainant Community producers
representing more than 75 % of the total Community
fine SSW constitute the Community
production of
industry,
in accordance with Article 9(1) of the Basic
Regulation.

3. Competition aspects

In their comments following the disclosure, the Indian
exporting producers reiterated their claim that all data
submitted by the Community industry within the frame-
work of the current proceeding would be artificially
inflated as a result of the uniform application of the
‘alloy surcharge’ system, and that it would, therefore, not
be possible to conduct any accurate injury analysis
within the framework of the anti-subsidy proceeding.
Since, however, no new arguments have been put
forward by any interested party and there has been a
definitive decision rejecting the complaint on the case
No IV/E-1/36.930 concerning stainless steel bright bars,
which belong to the same category of products as SSW,
the findings set out in recitals 208 to 215 of the provi-
sional 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 the Community consumption, in partic-
ular with regard to the sales of non-cooperating
Community producers and third countries imports, was
inappropriate.

(93)

In this respect, it should be recalled that detailed and
verified data are only available for the Community
industry and the cooperating exporting producers in the
country concerned. Therefore, in line with the consistent
practice of the Community institutions recourse was
made to information available to the Commission, and
in particular to independent statistical sources. No inter-
ested party has provided information that would show
that the approach followed by the Community institu-
tions was unreasonable and not justified in the circum-
stances of the present case.

(94)

Consequently, the findings as set out in recitals 216 and
217 of the provisional Regulation are confirmed.

(95)

(96)

5. Import volume and market shares of the subsi-

dised imports

The imports originating in India in tonnes developed as
follows: 52 t in 1994, 117 in 1995, 189 in 1996, 445
in 1997 and 717 during the investigation period. They
have. therefore increased steadily and considerably over
the period under consideration, i.e. by around 1 250 %.

The market shares of the imports originating in India
increased constantly from 0,3 % in 1994 to 0,6 % in
1995, 1,1 % in 1996 to 2,2 % 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 to 3,04 in 1997) and
slightly increased after 1997 up to 3,12 during the
investigation period.

(b) Price undercutting

(98) As to the methodology followed for the purpose of
calculation of price undercutting margins, some inter-
ested parties contested the methodology used by the
Commission at the provisional stage. They claimed that
these margins were inflated because any negative
exporting producer' prices
amount by which the
undercut those of the Community industry were not
offset with any positive amounts.

(99)

It should be noted that in the methodology described in
recitals 225 and 226 of the provisional Regulation for
the calculation of the price undercutting margins the
weighted average net sales prices of
the subsidised
imports were compared, on a model-by-model basis,
the
with the average net sales price by model of
Community industry in the Community market. There-
fore, this methodology allowed the amount by which
the exporting producers price of one particular model
exceeded that of the Community industry price to be
taken into account on a transaction-by-transaction basis.

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Official Journal of the European Communities

22. 7. 1999

(100) Therefore, the conclusions reached with respect to the
general methodology applied set out in recitals 225 to
226 of the provisional Regulation are confirmed.

industry, were also examined in order to ensure that
possible injury caused by these factors is not attributed
to subsidised imports.

(101)

In the absence of any other comments, the actual price
undercutting margins for imports originating in India set
out in recital 227 of the provisional Regulation are
hereby confirmed.

7. Situation of the Community industry

(102) Since no arguments were put forward by any interested
findings concerning the
party as to the provisional
economic indicators relating to the situation of
the
Community industry, the findings as set out in recitals
228 to 238 of the provisional Regulation are hereby
confirmed.

(103) Some interested parties have argued that the economic
indicators of the Community industry did not allow the
this industry was materially injured.
conclusion that
Indeed, they argued that the situation of the Community
industry showed signs of
in terms of
production, sales volume and employment and it was
stable with respect to investments. As to profitability, its
decreasing trend would be explained by the decision of
the Community industry to concentrate on products
generating higher costs of production.

improvement

the Community industry,

(104) As set out in recitals 236 to 238 of the provisional
Regulation, it is recalled that the conclusion of material
injury of the Community industry was based on the fact
that
faced with subsidised
imports, could not follow the growing trend of the
market, steadily lost market share between 1994 and the
investigation period, and was only able to keep its sales
volume and prices stable at the expense of its profit-
ability which became. Indeed, the sales volume of the
Community industry only increased by 5 % between
the
1994 and
Community market went up by 27 % during the same
period. Furthermore, the slight increase of production as
well as the stable sales volume and prices are only due
to the fact that the Community industry tried to keep its
the
position on the Community market. Therefore,
decreasing trend of its profitability cannot be exclusively
explained by the fact
the Community industry
started to produce also some models for which less
competition from the subsidised imports was faced.

period, whilst

investigation

that

the

(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 % to 3,3 %) between 1994 and the
investigation period as well as the substantial price
undercutting found (26 % on weighted average for India)
coincided with the deterioration of the situation of the
Community industry in terms of loss of market shares,
price depression as well as deteriorating profitability.

(108) The market

for

the

fine SSW within the Community
expanded by 27 % between 1994 and the end of the
investigation period. Nevertheless, the sales volume of
the Community industry, even though reflecting to a
certain extent
the market, only
evolution of
increased by 5 %, not
following that expansion. By
contrast,
the subsidised imports originating in India
considerably increased both in volume and market share
over the same period. This coincided with the down-
ward trend of the situation l of the Community industry,
which lost market shares and had to lower both its
investments and its prices as from 1996, resulting in
financial

losses in 1997.

(109) When faced with low-priced imports originating in
India, in 1996, the majority of the Community produ-
cers tried to maintain their sales prices, whereas a few
others reduced them. Both strategies resulted in a nega-
tive impact on profitability either directly (lower prices)
or indirectly (high prices led to lower sales volume
resulting in higher production costs per tonne). As from
1996, all Community producers substantially lowered
their sales prices, which had a further negative impact
on their profitability, even though they tried to concen-
trate on certain market niches to avoid being affected
even more strongly by the effects of
the subsidised
imports. This clearly shows the price sensitivity of the
market and the important impact of the price undercut-
ting practised by the Indian exporting producers.

(105) On the basis of the above,

it is concluded that the
Community industry is suffering material injury as set
out in recitals 236 to 238 of the provisional Regulation.

(b) Effect of other factors

(F) CAUSATION

(106) Pursuant to Article 8(6) and (7) of the Basic Regulation,
the Commission services have
examined whether
imports originating in India have caused material injury.
Known factors other than the subsidised imports, which
could at the same time be injuring the Community

(110)

In accordance with Article 8(7) of the Basic Regulation,
the Commission services have examined whether factors
other than the subsidised imports from India might have
had an effect on the situation of
the Community
industry, with particular regard to the role of other
Community producers not cooperating in the invest-
igation and of imports from other third countries.

22. 7. 1999

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Official Journal of the European Communities

L 189/39

1. Other Community producers

(111) Following the adoption of the provisional Regulation, some interested parties questioned whether the
injury suffered by the Community industry was caused by the subsidised imports. In particular, it
was alleged that the injury was caused by other factors, namely by other Community producers. It
was argued in this respect that in view of the limited cooperation obtained from the Community
producers, the assessment of the impact of sales by the non-cooperating Community producers was
not fully reliable.

(112)

It should be recalled that detailed and verified data are only available for the Community industry.
Taking into account the high level of cooperation obtained from the Community industry ensuring
representative findings as well as the transparency and the price sensitivity of the SSW market in the
Community, it is not unreasonable to conclude that other Community producers are likely to have
followed a trend similar to that found for the Community industry, in particular as regards prices.
Furthermore, no interested party has submitted any information that would suggest
the
non-complaining producers operated in a more positive context.

that

2. Imports from third countries

(113) The market shares of the imports from third countries are as follows:

(Market shares)

1994

1995

Korea

Switzerland

Other

7 %

3 %

2 %

9 %

3 %

3 %

Total

12 %

15 %

1996

16 %

3 %

3 %

22 %

1997

20 %

3 %

2 %

25 %

IP

20 %

3 %

3 %

26 %

K o r e a

(114)

Imports originating in Korea were examined in the
context of this investigation and it was concluded that
the weighted average countrywide subsidy margin is
below the de minimis threshold. As to the development
in import volume and corresponding market share,
imports originating in Korea hake significantly increased
as shown in the table. These imports have been made at
prices undercutting those of the Community industry as
set out in recital 227 of the provisional Regulation. It
the price undercutting margin
should be noted that
established for imports originating in Korea (which
amounted to 12 % on weighted average) is at a signifi-
cantly lower level than the price undercutting margin
established for
imports originating in India (which
amounted to 26 % on weighted average) as set out in
recital 227 of the provisional Regulation.

any price undercutting of
the Community industry's
sales prices was found. Since no new arguments were
put forward by any interested party, the findings as set
out in recitals 244 and 245 of the provisional Regula-
tion are hereby confirmed.

injury

suffered by

contributed to the

(116) On the basis of the above findings, it is concluded that
imports from third countries, in particular from Korea,
have
the
Community industry. However, in view of the market
the imports originating in India (which
share of
accounted for more than 11 % of the total
imports
volume into the Community during the investigation
period) and the significant undercutting found,
is
concluded that this alone was not sufficient to break the
causal link established between the subsidised imports
from India and the material
injury suffered by the
Community industry.

it

O t h e r

t h i r d c o u n t r i e s

3. Other

(115)

It was provisionally concluded from the above figures
that imports from other third countries, and in partic-
ular from Switzerland, could not have had a decisive
impact on the injury suffered by the Community
industry since they remained stable both in volume and
market shares between 1994 and the investigation
period, whereas imports from the country concerned
went steadily up during that period and no indication of

(117) No new arguments were put forward by any interested
party regarding whether other factors which might have
contributed to the injury suffered by the Community
industry, in particular, a contraction in demand or the
changes in the patterns of consumption, developments
in technology and the export performance and produc-
tivity of the Community industry. Therefore, the findings
set out in recitals 246 to 249 of the provisional Regula-
tion are hereby confirmed.

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Official Journal of the European Communities

22. 7. 1999

(c) Conclusion on causation

2. India

(118) Thus, other factors than the subsidised imports origin-
ating in India, even though they have contributed to the
injury suffered by the Community industry, were not
such as to break the causal 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 subsi-
dised imports originating in India taken in isolation have
caused material

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 effect of the duties.

(121) As to the Community industry and otheri Community
producers,
in the absence of any further submissions
regarding the impact of the duties on their situation, the
conclusion is hereby confirmed that the imposition of
measures will enable the Community industry to regain
a satisfactory profitability margin, and to maintain and
further develop its activities in the Community securing
both employment and investment.

(122)

In the absence of any further reaction from unrelated
importers and from the suppliers, the findings set out in
recitals 256 to 261 of the provisional Regulation are
confirmed.

(123) Concerning the users, some companies have alleged that
the imposition of measures would have a direct impact
on their economic situation since it would lead to an
increase of the price of their raw material. However, they
have also stated that they could source their supplies
than the country concerned.
from other countries
Furthermore,
low level of the
the impact of any price increase would be
duties,
limited.

in view of the overall

(124) Other users have insisted on the quality and reliability of
the Community industry's products, considering there-
fore that the imposition of the measures would not
affect their own situation.

(125) Therefore, the findings set out in recitals 251 to 268 of
the provisional Regulation are confirmed in the sense
that there are no compelling reasons against the imposi-
tion of countervailing duties.

(H) DEFINITIVE COURSE OF ACTION

1. Korea

(127) Based on the above conclusions on subsidisation, injury,
causal link and Community interest, it was considered
what form and level the definitive countervailing meas-
ures would have to take in order to remove the trade-
distorting effects of injurious subsidies and to restore
effective competitive conditions on the Community fine
SSW market.

(128) Accordingly, as explained in recital 271 of the provi-
sional Regulation a non-injurious level of prices was
calculated at a level which covers the Community indus-
try's cost of production and obtain a reasonable return
on sales.

(129) The comparison of the non-injurious price levels with
the export price of the producers led to injury margins
which were in all cases above the subsidy amounts
found for the cooperating exporting producers (ranging
from around 20 % to more than 70 %).

(130)

In accordance with Article 15(1) of the Basic Regulation,
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 Indian
exporting producers:

Company

Proposed
countervailing
duty

Drawmet Wires Pvt Ltd, Mumbai

Indore Wire Ltd, Indore

Isibars/Isinox Ltd, Mumbai

Kei Industries Ltd, Delhi

Macro Bars and Wires Pvt Ltd, Mumbai

Mukand Ltd, Mumbai

Raajratna Metal Industries Ltd, Mumbai

Venus Wire, Indore

8,8

19,3

10,1

0

25,4

13,2

42,9

35,4

(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 termi-
nated in accordance with Article 14(3) of
the Basic
Regulation.

(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 level
established per individual subsidy programme for the
cooperating companies, i.e. for non-cooperating compa-
nies located in India at 44,4 %.

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EN

Official Journal of the European Communities

L 189/41

(132) The individual duty rates specified in this Regulation
were established on the basis of the findings of the
present anti-subsidy investigation. Therefore, they reflect
the situation found during that investigation. These duty
rates are thus exclusively applicable to imports of prod-
ucts originating in the country concerned and produced
entities mentioned. Products
by the
specific
specifically
produced by any other
mentioned in the operative part of
this Regulation,
including related entities, cannot benefit from these rates
and shall be subject to the residual duty rate.

company not

legal

duties on imports originating in India pursuant to Regu-
lation (EC) No 619/1999 be definitively collected to the
extent of the amount of definitive duties imposed, unless
the provisional duties rates are lower in which case the
latter should prevail.

(135) As regards the amounts secured by way of provisional
countervailing duties on imports originating in Korea,
they should be released,

(133) 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 the Commission forthwith
with all relevant information, in particular any modifica-
tion in the company's activities linked to production,
domestic and export sales associated with that name
change.

HAS ADOPTED THIS REGULATION:

Article 1

(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 to the
Community industry, it is considered necessary that the
amounts secured by way of provisional countervailing

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, excluding
wire containing by weight 28 % or more but no more than
31 % of nickel and 20 % or more but no more than 22 % of
chromium,
falling within CN code ex 7223 00 19 (TARIC
code 7223 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:

Producer

Rate of duty
(%)

Taric
additional
code

Drawmet Wires Pvt Ltd, B-482, Industrial Area, Bhiwadi, India

Indore Wire Company Ltd, Near Fort, Indore 452 006 (MP), India

Isinox Steels Ltd, Indiasteel Complex, Railway Gate No 4, Antop Hill, Wadala,
Mumbai 400 037, India

Mukand Ltd, L.B.S. Marg, Kurla, Mumbai 400 070, India

Raajratna Metal Industries Ltd, 909, Sakar - III, Nr Income Tax, Ahmedabad
380 014, Gujarat, India

Venus Wire Industries Ltd, Block No 19, Raghuvanshi Mill Compound, Senapati
Bapat Marg, Lower Parel, Mumbai 400 013, India

Macro Bars and Wires Pvt Ltd, 702 Bombay Market Building, Taredo Road,
Mumbai 400 032, India

Kei Industries Ltd, D-90, Okhla Industrial Area Phase-1, New Delhi, India

All other Indian companies

8,5

19,3

10,1

13,2

42,9

35,4

25,4

0

44,4

A001

A004

A002

A003

A005

A006

A008

A020

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 exclusively applicable to imports of products produced by the specific legal entity/ies
mentioned and originating in the country concerned. Products produced by any company not specified by
its precise name in the operative part of the Regulation cannot benefit from these rates.

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Official Journal of the European Communities

22. 7. 1999

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 the Commission (1) forthwith with all relevant information, in particular
any modification in the company's activities linked to production, domestic and export sales associated
with that name change. The Commission will, after consultation of the Advisory Committee, amend the
Regulation accordingly by updating the list of companies benefiting from individual 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 definitively
imposed. Amounts secured in excess of the definitive rate of countervailing duties shall be released.

The provisions referred to in Article 1(4) shall also apply to the definitive collection of the amounts

2.
secured by way of the provisional countervailing duties.

The proceeding concerning imports of stainless steel wire with a diameter of less than l mm originating in
Korea shall be terminated. The amounts provisionally secured by way of the provisional countervailing
duties on imports originating in Korea under Regulation (EC) No 619/1999 shall be released.

Article 3

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

Article 4

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

Done at Brussels, 12 July 1999.

For the Council

The President

S. NIINISTÖ

(1) European Commission

Directorate-General 1 - External Relations
Directorate C
DM 24 - 8/38
Rue de la Loi/Wetstraat 200
B-1049 Brussels..