Commission Regulation (EC) No 2563/1999 of 3 December 1999 imposing a provisional anti-dumping duty on imports of compact discs boxes originating in the People's Republic of China
Date: 1999-12-03
Institutions: European Commission
Subjects: China, anti-dumping duty, import, originating product, record

4. 12. 1999

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Official Journal of the European Communities

L 310/17

COMMISSION REGULATION (EC) No 2563/1999

of 3 December 1999

imposing a provisional anti-dumping duty on imports of compact discs boxes originating in the
People's Republic of China

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 384/96 of 22
December 1995 on protection against dumped imports from
countries not members of the European Community (1), as last
amended by Regulation (EC) No 905/98 (2) and in particular
Article 7 thereof,

After consulting the Advisory Committee,

Whereas:

Claims for market economy status were received from
four exporting producers, and one exporting producer
requested individual treatment only.

The Commission sent questionnaires
to all parties
known to be concerned. Replies were received from
three Hong-Kong-based
eight Community producers,
exporting producers with manufacturing facilities in the
People's Republic of China and 10 unrelated importers
in the Community.

The Commission sought and verified all the information
it deemed necessary for the purposes of a preliminary
determination of dumping,
injury and Community
interest and carried out verifications at the premises of
the following companies:

(5)

(6)

A. PROCEDURE

(a) C o m m u n i t y p r o d u c e r s

(1)

(2)

(3)

(4)

On 5 March 1999, the Commission announced, by a
notice (hereinafter referred to as ‘the notice of initiation’)
published in the Official Journal of the European Communi-
ties (3), the initiation of an anti-dumping proceeding with
regard to imports into the Community of compact discs
boxes originating in the People's Republic of China.

This proceeding was initiated following a complaint
lodged in January 1999 by the ‘European Plastics
Converters’ (EuPC), on behalf of Community producers
representing a major proportion of Community prod-
uction of compact discs boxes. The complaint contained
evidence of dumping of the said product and of material
injury resulting therefrom, which was considered suff-
cient to justify the initiation of a proceeding.

The Commission officially advised the complainant
Community producers, exporting producers and impor-
ters, suppliers and users known to be concerned as well
as associations concerned and representatives of
the
exporting country, of the opening of the proceeding.
Interested parties were given an opportunity to make
their views blown in writing and to request a hearing
within the time limit set in the notice of initiation. All
parties who so requested were granted a hearing.

In order to allow exporting producers in the People's
Republic of China to submit a claim for market
economy status or
they so
individual
wished, the Commission sent market economy status/
to the Chinese
individual
exporting producers known to be concerned.

claim forms

treatment

treatment

if

(1) OJ L 56, 6.3.1996, p. 1.
(2) OJ L 128, 30.4.1998, p. 18.
(3) OJ C 63, 5.3.1999, p. 5.

— La Française des Plastiques, Louvigné-de-Bais,

France

— La Vendéenne des Plastiques, Chantonnay, France

— NEPCO SA, Pont - L'Évêque, France

— Allainé, SA, Miribel, France

— Neoplastik Verpackungssysteme GmbH & Co.,

Braunschweig, Germany

— EPM BV, Helmond, Netherlands

— Estudios Gema SA, Barcelona, Spain

— White Knight Ltd, Eastbourne, United Kingdom

(b) H o n g

K o n g

m a n u f a c t u r i n g
R e p u b l i c o f C h i n a

e x p o r t i n g
f a c i l i t i e s

p r o d u c e r s w i t h
P e o p l e ' s
i n t h e

— ACME Cassette Manufacturing Ltd, Hong Kong

— Golden Age A-V Products Ltd, Hong Kong

— Viva Magnetics Limited, Kong Kong

(c) I m p o r t e r s / u s e r s

— AVP Europe BV, Sittard, Netherlands

— EMI Compact Disc (Holland) BV, Beek, Nether-

lands

— H.V. T.R.S. BV, Uden, Netherlands

(7)

The investigation of dumping covered the period from 1
March 1998 until 28 February 1999 (hereinafter
referred to as ‘the investigation period’). The examination
of injury covered the period from January 1995 to the
end of the investigation period.

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B. PRODUCT UNDER CONSIDERATION AND LIKE

PRODUCT

mation it deemed necessary for the purposes of a deter-
mination of market economy status and carried out
verifications at their premises.

(8)

(9)

1. Product under consideration

The product under consideration is compact discs boxes
(hereinafter also referred to as ‘CD boxes’), i.e. the plastic
boxes used for the conveyance or packing of all types of
compact discs such as audio CDs, CD-Rs (CD-record-
able), CD-ROMs (CD-read only memory) and DVDs
(digital video disc). The boxes are made of polystyrene,
and generally comprise a case (consisting of a base and a
lid) and tray(s). They are made to contain one or more
compact discs. The trays are placed in the base or in the
lid of the cases and have a hub in the centre to hold the
compact discs. Compact discs boxes are delivered either
as cases and trays assembled together or as cases and
trays separately, the latter due to requirements of indus-
trial users. They are currently classifiable within CN code
ex 3923 10 00. Separate trays, bases and lids are
currently classifiable within CN code ex 3923 90 90.

2. Like product

The product exported to the Community from the
People's Republic of China as well as the one domesti-
cally sold in the analogue country (see recitals 17 and
18 below) and the one manufactured and sold in the
Community by the Community producers were found to
have basically the same physical and technical character-
istics as well as the same uses and are therefore to be
considered as like products within the meaning of
Article 1(4) of Regulation (EC) No 384/96 (hereinafter
referred, to as the ‘basic Regulation’).

C. DUMPING

1. Normal value

(i) Market economy status

(10) Article 2(7)(b) of the basic Regulation states that,

in
anti-dumping investigations concerning imports from
the People's Republic of China, normal value shall be
determined in accordance with Article 2(1) to (6) for
those producers which can show they meet the criteria
laid down in Article 2(7)(c), i.e. that market economy
conditions prevail in respect of the manufacture and sale
of the like product concerned.

(11) As mentioned in recital 4 above, claims for market
economy status were received from four exporting
producers. One of
these claims had to be rejected
because the company concerned was not involved in the
production of the product concerned. Another company
withdrew its claim. For the two remaining companies
(hereinafter referred to as ‘company A’ and ‘company B’)
which had submitted a properly substantiated claim
form on behalf of their respective China-based subsidia-
ries, the Commission sought and verified all the infor-

(12)

Company A is a Hong-Kong-based exporter of CD boxes
performing management, marketing and sales functions,
as well as purchases of raw materials and production
machinery, with a manufacturing facility in the People's
Republic of China. Manufacturing is being carried out
under an inward processing arrangement.

The manufacturing facility did not have legal status as a
company in the People's Republic of China. It was not
entitled to sell on the domestic market in the People's
Republic of China and was under an obligation to
export its entire production. Furthermore,
it did not
Its accounts were
have separately audited accounts.
incorporated into the accounts of the parent company.

For these reasons,
the Commission determined that
company A's manufacturing facility in the People's
Republic of China did not fulfil the criteria to demon-
strate that market economy conditions prevail in respect
of the manufacture and sale of the like product, as set
out in Article 2(7)(c) of the basic Regulation.

(13)

Company B is a Hong-Kong-based exporter of CD
boxes, with two manufacturing facilities (hereinafter
referred to as ‘factory (a)’ and ‘factory (b)’) in the People's
Republic of China. The findings of the Commission were
that management, marketing and sales functions were
performed by the Hong Kong parent company, manu-
facturing being carried out in both manufacturing facili-
ties in the People's Republic of China under inward
processing arrangements.

(14)

Factory (a)

Factory (a) is a limited liability company incorporated in
the People's Republic of China as a wholly owned
company B. All decisions,
foreign subsidiary of
pertaining to prices, inputs, technology, sales and invest-
ment were made by the parent company in Hong Kong
without any interference from the Chinese authorities.
independently audited
The company had a set of
accounts in line with international standards. No signifi-
cant distortions
relating to the former non-market
economy system were found to affect its business opera-
tions. It was subject to the bankruptcy and property
laws of the People's Republic of China since it had
company status in the People's Republic of China. The
Commission had some doubts as to whether the bank-
ruptcy law of the People's Republic of China applicable
to the company guaranteed the necessary degree of legal
certainty and stability for the operation of the company
but the investigation showed that the position of the
company in this regard could on balance be accepted,
Exchange rate conversions were made at the rate deter-
mined by the Bank of China, as applied by the local
banks.

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the reasons mentioned above,

the Commission
For
determined that factory (a) fulfilled the criteria set out in
Article 2(7)(c) of the basic Regulation.

applied to the cost of manufacturing of the subsidiary
concerned.

(15)

Factory (b).

The Commission found that the, situation of factory (b)
was similar to that of
the manufacturing facility of
company A. For this reason, since there would be a high
risk that anti-dumping measures could be circumvented
by channelling exports to the Community through the
Chinese producer with the lower margin, the Commis-
sion services determined one dumping margin for
factory (a) and factory (b).

(16)

The exporting producers concerned and the Community
industry were given an opportunity to comment on the
above
substance were
received.

findings. No continents of

(ii) Analogue country

(17)

In view of the fact that normal value for the People's
Republic of China has to be established pursuant to
Article 2(7)(a) of the basic Regulation, in the notice of
initiation of the proceeding, the Commission proposed
Thailand as an appropriate market economy third
country or analogue country for the purpose of estab-
lishing normal value. No objection to this proposal was
raised by the exporting producers within the time limit
specified in the notice of initiation. The only known
the product concerned, however,
Thai producer of
declined to cooperate with the Commission.

(18) As an alternative, the Commission proposed Canada as
an analogue country. A Canadian producer related to
one of the Chinese exporters expressed his willingness to
cooperate. Canada is one of the few countries outside
the Community and the People's Republic of China
where CD boxes are produced and sold. Canada is also
an open market where CD boxes are imported as well as
exported. Parties to the investigation were informed that
the Commission envisaged selecting Canada and were
given the opportunity to comment. None of the parties
concerned contested the envisaged selection and the
Commission decided to use Canada as an analogue
country.

(iii) Determination of normal value

(20)

(21)

(22)

(23)

the other exporting producers

For
in the People's
Republic of China, normal value was established on the
basis of the domestic prices and costs of the Canadian
producer for products comparable to those sold by the
Chinese exporting producers to the Community. Sates of
the like product were found to have been made in
representative quantities since the total volume of the
Canadian producer's overall domestic sales in the invest-
igation period exceeded the threshold of 5 % of export
sales to the Community laid down in Article 2(2) of the
basic Regulation.

Canadian domestic sales of each type of product which
was exported to the Community by the exporting
producers in the People's Republic of China were consid-
ered representative if they met the same criterion. Three
product types out of four produced on the Canadian
market were found to meet this criterion.

In addition, in order to establish whether sales of these
three types were made in sufficient quantities in the
ordinary course of trade, the domestic selling price was
compared to the full cost of production, i.e. the cost of
manufacturing plus SG & A expenses. Where
the
weighted average sales price was equal to or higher than
the weighted average unit cost of production, and where
more than 80 % of sales for a particular product type
were at or above unit cost, normal value was established
as the weighted average price of all the transactions. It
was found that this was the case for the three product
types. Normal value for these three product types was
therefore established on the basis of all domestic sales.

For the fourth product type produced on the Canadian
domestic market, sales were not representative, i.e. did
not meet the 5 % criterion. Normal value for this type
was consequently constructed in accordance with Article
2(3) of the basic Regulation by adding to the producer's
cost of manufacturing a reasonable amount for SG & A
expenses and for profits. In accordance with Article 2(6)
of the basic Regulation, the SG & A expenses and the
amounts for profit were determined.on the basis of data
pertaining to sales of the like product made in the
ordinary course of trade.

(19)

the producer

For
(company B) which was granted
market economy status in respect of one of its subsidia-
ries in the People's Republic of China (factory (a)), and in
the absence of domestic sales in that country, normal
value was constructed. Constructed normal value was
calculated in accordance with Article 2(3) of the basic
Regulation by adding to this subsidiary's cost of manu-
facturing a reasonable amount for selling, general and
administrative (SG & A) expenses and for profit. The
SG & A expenses and profit were calculated as a
percentage of the cost of manufacturing in the analogue
country on the basis of domestic sales made in Canada
in the ordinary course of trade; this percentage was then

remaining product

(24) Only the above four product types, which represented,
however, 93 % by value of the Chinese exports to the
Community in the investigation period, were produced
and sold in Canada. All
types
exported by the Chinese exporting producers to the
Community were not sold on the Canadian market.
Some of these product types were themselves combina-
tions of product types produced and sold in Canada. For
these, normal value was calculated by combining the
normal valves already obtained for the product types
manufactured in Canada. For the remainder, the normal
value of the closest resembling product type produced in
Canada was used, adjusted as appropriate.

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2. Export price

handling, packing, commissions and credit costs in
accordance with Article 2(10) of the basic Regulation.

(25)

(26)

(27)

status

economy

The cooperating companies which were not granted
market
cooperating
exporting producer that requested individual treatment
only were subsequently examined with a view to deter-
mining whether they could be granted individual treat-
ment.

and another

The Commission found that all of them were manufac-
turing facilities of Hong-Kong companies operating
under
inputs
inward processing arrangements. All
(capital, machinery and raw materials) were provided by
their respective Hong Kong parent company and all
management and operational decisions were made by
the latter. No interference from the Chinese State was
apparent in the running of these plants, which could be
considered as the manufacturing arms of the Hong Kong
parent companies.
It was therefore decided to grant
individual treatment to these companies in respect of
their sales to the Community of the product concerned
originating in the People's Republic of China.

The export prices for all Chinese, exporting producers
concerned were established on the basis of the prices
paid or payable for the product concerned when sold to
the fast independent customer in the Community in
accordance with Article 2(8) of the basic Regulation.

to one or

The company which was granted market economy
status for one of its Chinese subsidiaries (company B),
however, was partly selling the product concerned to the
Community on a consignment basis, i.e. the goods were
destined for a warehouse located in the Community and
not invoiced until the customer took delivery of these at
some later date. It was not possible to attribute these
consignmentsales
the other China-based
subsidiary of the exporting producer concerned. The
Commission therefore decided not to take these sales
into consideration for the determination of the export
price. This was considered reasonable since these
consignment sales only constituted 6,5 % by value of the
exporting producer's total sales to the Community in the
investigation period, and their exclusion does not affect
the representativeness of the findings concerning the
export price. All of
this exporting producer's other
export sales were taken into account in order to estab-
lish its export prices to the Community in accordance
with Article 2(8) of the basic Regulation.

3. Comparison

(28)

For the purposes of a fair comparison between the
normal value and the export price at an ex-works level,
due allowance in the form of adjustments was made for
differences which were claimed and demonstrated to
affect prices and price comparability. These adjustments
were made, where appropriate, in respect of transport,

(29) One exporting producer requested an allowance for the
difference between the prices of the raw material in the
People's Republic of China and in Canada The difference
in raw material prices, however, could not be taken into
account
in the comparison, since the possibility of
obtaining the raw materials at a cheaper price cannot be
considered a natural comparative advantage: Such an
advantage would be, for example, the easier access to
raw materials due to the location of
the exporting
producer. Furthermore, Article 2(7)(a) of the basic Regu-
lation explicitly states that normal value has to be deter-
mined on the basis of the price or the constructed value
in a market economy third country which,
for the
purposes of this investigation, is Canada. This request
was therefore rejected.

4. Dumping margin

(30)

the dumping margin for

In accordance with Article 2(11) and (12) of the basic
Regulation,
the exporting
producers concerned was established on the basis of a
comparison of weighted average nornnal values with
weighted average export prices.

(31)

These margins were expressed as a percentage of the cif
Community frontier price for the exporting producers
concerned.

The individual dumping margins are:

— Donggang Acme Cassette Manufacturing Fty

(exports by ACME)

10,4 %

— Chang An Tang Golden Age Magnetic

Factory (exports by Golden Age)

8,3 %

— Oscar Magnetics Media and Hwa Ying
Plastic Manufacturing Factory (exports
by Viva Magnetics)

6,6 %

The Commission determined one dumpinh margin for
Oscar Magnetics Media and Hwa Ying Plastic Manufac-
turing Factory, calculated as the weighted average of the
dumping margins established for each of
the two
Chinese producers. This was done to preclude the poss-
ibility of channelling of exports through the Chinese
producer with the lower margin.

(32)

For those Chinese exporters which failed to reply to the
Commission's questionnaire, did not makethemselves
known or otherwise did not cooperate with the invest-
igation, dumping was determined on the basis of the
facts available in accordance with Article 18(1) of the
basic Regulation. This was done in order not to reward
non-cooperation. The level of non-cooperation was diffi-
cult to establish because of the absence of Eurostat data
due to CD boxes falling under ‘ex’ CN codes. but it is
clear how ever that some exporting producers known to

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the Commission deliberately did not cooperate with the
investigation. A residual dumping margin was therefore
based on the product type with the highest dumping
margin produced by the company with the highest
dumping margin, after ensuring that
to the
Community of this product type were representative for
that company.

sales

The residual dumping margin for the People's Republic
cif
expressed as
of China,
Community frontier price,

a percentage of
is 20,1 %.

the

D. INJURY

1. Preliminary remark

(33)

(34)

Throughout the following sections, figures are based on
verified company. data from those companies cooper-
ating with the Commission, statistics from Eurostat, as
well as the estimations of market size contained in the
complaint. It should be noted,
in particular, that the.
Eurostat figures used in the following analysis cover a
basket category and should be considered as indicative
only.

2. Definition of the Community industry

The seven original complainant Community producers
completed the Commission's questionnaire. They were
joined by an eighth producer, Estudios Gema SA in
Spain, which also submitted a questionnaire response.
One further Community producer, Les Cartonneries de
Thulin (Carthuplas) made itself known to the Commis-
sion and expressed its support of the complaint but did
not provide a completed questionnaire response. Other
Community producers neither supported nor opposed
the complaint, and are therefore not considered part of
the Community industry for the purposes of this invest-
igation. Nevertheless, some of these other Community
producers did provide information on their overall
production and sales. On this basis, and taking into
account the information in the complaint concerning
other Community producers, the Community producers
supporting the complaint and fully cooperating in the
investigation represented 68 % of
estimated total
Community production of the product concerned in the
investigation period. They therefore represent a major
proportion of Community production, and thus consti-
tute the Community industry,
in accordance with
Articles 4(1) and 5(4) of the basic Regulation.

Hereinafter, the expression ‘Community industry’ will
refer only to the eight producers which actively co-
operated
questionnaire
responses.

submitting

completed

by

3. Community consumption

(35)

The estimates of total Community apparent consump-
tion are based on the estimations of market
size
contained in the complaint, verified production and sales
figures from cooperating producers, sales and produc-
tion information received
from other producers
supporting the complaint but not cooperating in the
investigation, and estimates for non-cooperating produ-
cers.

On this basis, total consumption in the Community.
increased from 1 716 million units in 1995 to 2 357
million units in 1997, before reaching 2 679 million
units in the investigation period, en increase of 56 %
over the whole period analysed.

4. Imports from the country concerned

(a) Development of volumes, values and market shares

(36)

investigation period. The

The volume of imports from the People's Republic of
China increased by 385 % over
the whole period
analysed from 142 million units in 1995 to 313 million
units in 1997, before rising again to 546 million units in
the
corresponding value
increased from ECU 15 344 000 in 1995 to ECU
25 476 000 in 1997, before rising again to ECU
42 900 000 in the investigation period, an increase of
276 % in percentage terms over
the whole period
analysed.

The market share of those imports increased throughout
the period analysed from 8 % in 1995 to 13 % in 1997,
before rising again to 20 % in the investigation period.

(b) Development of prices

(37) Unit values, for imports from the People's Republic of
China fell from ECU 0,073 in 1995 to ECU 0,058 in
1997, before falling again to ECU 0,054 in the invest-
igation period. This
represents a fall of 26 % in
percentage terms over the whole period analysed.

(c) Prices comparison, price undercutting

(38)

Price undercutting was established on the basis of a
comparison of the ex-factory prices of the Community
industry at the same Ievel of trade with prices of imports
from the People's Republic of China at a cif level.

the prices of

the comparison,

to the greatest extent
Throughout
the closest matching product
possible,
types were compared. The export transactions used for
the comparison represented a share of at least 96 % of
the total exports of each exporting producer concerned,
and the great majority of total exports from exporting
producers in the People's Republic of China.

The weighted average level of price undercutting by
Chinese exports on an average direct product type-to-
type comparison was found to be 15 % during the
investigation period.

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5. Situation of the Community industry

(a) Production and capacity utilisation

(39)

(40)

Production of CD boxes is very capital
intensive and
production facilities typically operate 24 hours daily all
year
In such industries, economies of scale
require high levels of output.

round.

Production showed a 37 % increase over the whole
period analysed, rising from 543 million units in 1995
to 697 million units in 1997, before reaching 751
million units in the investigation period. Production
capacity increased from 653 million units in 1995 to
806 million units in 1997, before reaching 897 million
units in the investigation period. The level of capacity
utilisation remained relatively stable over the whole
period examined, rising from 83 % in 1995 to 86 % in
1997, before falling to 84 % in the investigation period.

(b) Sales of the product concerned in the Community:

volume and market share

(41)

The sales volume by the Community industry to unre-
lated, customers increased by 50 % over the whole
period examined, rising from 465 million in 1995 to
656 million in 1997 to 696 million in the investigation
period.

share fluctuated
The Community industry's market
between throughout
the period analysed rising from
27 % in 1995 to 28 % in 1997, before falling to 26 % in
the investigation period.

The composition of this sales volume is analysed further
in recital 53.

raw materials (polystyrene) over the period. Polystyrene
represented around 60 % of the cost of manufacturing
during the investigation period and was by far the most
important cost-driver in CD-box manufacture. In 1995,
its price in the Community was ECU 1,081 per kg,
whereas it had fallen to ECU 0,796 per kg in 1997 and
had fallen further to 0,711 per kg in the investigation
period, i.e. a fall of 34 % over the whole period analysed.

from the fall

in price of polystyrene,

Apart
the
Community industry also adopted measures to improve
its productivity, which increased over the whole period
concerned. Measures to improve productivity included,
for example, improving the design of the boxes with the
aim of reducing the weight of each box.

(e) Profitability

(44) Although the Community industry was profitable
throughout the period under examination, overall profit-
ability declined,
from 6,1 % of turnover in 1996 to
3,8 % in the investigation period, giving an overall
decline over the period examined of 37 %. This negative
development was
even more pronounced in the
Community industry's sales of standard product types
such as the jewel box over the period considered. These
standard product
the
Community industry's total sales, and their profitability
dropped steadily from + 3,85 % in 1996 to losses of
0,45 % in the investigation period. This development is
analysed further in recital 53.

types accounted for 93 % of

(c) Sales of the product concerned in the Community: turn-

(f) Employment

over and prices

(42)

The Community industry's sales values rose from ECU
56 639 000 in 1995 to ECU 60 972 000 in 1997 to
ECU 63 677 000 in the investigation period. It will be
noted that while sales volumes rose by 50 % over this
period, sales values rose by only 12 %.

(45)

Levels of employment in the Community industry have
remained stable at around 277 throughout the period
examined. The relatively low number of employees is
explained by the fact
the injection-moulding
that
production process used by the Community industry is
very much more capital intensive than labour intensive.

The unit values of the Community industry's sales on
the Community market declined from ECU 0,1218 in
1995 to ECU 0,0928 in 1997, a fall of 24 percentage
points and had fallen again, albeit by a smaller magni-
tude, to ECU 0,0915 in the investigation period, giving
an overall decline over the period examined of 25 %.

(g) Labour productivity

(d) Production costs

(43)

The information submitted by the Community industry
shows
that average production costs decreased by
around 20-25 % between 1995 and the investigation
period. These developments in unit costs are explained
to a large extent by the worldwide fall in the price of

(46)

The above employment levels were steady at a time
when the Community industry was increasing its output.
labour productivity was increasing
This implies that
throughout the period considered from 1,998 million
units per employee in 1995 to 2,463 million units per
employee in 1997 to 2,703 million units per employee
in the investigation period, giving an overall
increase
over the period analysed of 35 %.

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(h) Investment

(47)

Investment was reduced from ECU 6 million in 1995 to
ECU 4,7 million in 1997, before rising slightly to ECU
4,8 million in the investigation period, an overall fall of
19 % over the whole period analysed. In relative terms,
investment per unit of output produced and per unit of
output sold also fell over the period examined from ECU
0,1058 in 1995 to ECU 0,0772 in 1997 to ECU 0,0760
in the investigation period.. an overall fall of 28 % over
the whole period analysed.

helped by a drop in input prices. Despite these develop-
ments, however, the Community industry's market share
fell between 1998 and the investigation period, and their
financial situation continued to worsen.

In the light of the above findings, it is concluded that the
Community industry has suffered material injury within
the meaning of Article 3 of the basic Regulation.

E. CAUSATION

6. Conclusion on injury

1. Effect of the dumped imports

(49)

(48)

The development of certain injury indicators suggests a
positive development over the period considered, but
closer examination reveals the difficulties facing the
Community industry. In an area where demand has been
increasing steadily over the period considered (consump-
tion within the Community grew by 56 % between
1995 and, the investigation period), the fact that certain
injury indicators show a development favourable to the
Community industry does not necessarily mean that the
Community industry is not injured. In this context, it
would not have been considered appropriate to place
any emphasis on the positive developments of
the
Community industry's production capacity (+ 37 %),
production volumes (+ 38 %), sates volume (+ 50 %)
and sales value (+ 12 %) as well as the stable employ-
ment levels as they merely reflect the general develop-
ment of the market overall and the fact that production
capacity has to be used in this capital intensive industry.

(a) General

to more than 70 % of

The volume of imports from the People's Republic of
China increased significantly by 385 % between 1995
and the investigation period, reaching a volume of 546
million units (equivalent
the
Community industry's volume of production). The afore-
mentioned development of sales volume corresponded
to as increase in market share from 8 % to 20 %. This
surge in imports occurred while their prices were drop-
ping. The index of
import prices from the People's
Republic of China fell from 100 in 1995 to 74 in the
investigation period. Even at that level, and although the
Community industry's prices fell to the same extent over
the same period, they still substantially undercut (by
15 %)
the Community industry in the
investigation period. This clearly indicated the presence
of a strong downward pressure on the prices of the
Community industry from the dumped imports.

the prices of

What was considered relevant was a significant drop in
the Community industry's CD
the average prices of
boxes, with the index dropping quickly from 100 in
1995 to 76 in 1997 and stabilising at 75 in the invest-
igation period. Silmultaneously, the profitability of the
Community industry declined significantly, droping by
37 % between 1996 and the investigation period. More-
over, at a level of 3,8 % on turnover, profitability falls
far
the
Community industry to continue its production of the
product concerned (see recital 71). This is also reflected
in the almost 20 % decline in the level of investment
between 1995 and the investigation period in a situation
of strong growth in demand.

considered reasonable

short of

that

for

Although therefore the production and sales volumes
remained constant or increased over the period analysed,
this was achieved at the cost of a substantial deteriora-
tion in sales prices, causing a deterioration in financial
insufficient for investment in
performance to a level
plant renewal and maintenance. Indeed, the Community
industry made a remarkable effort, between 1995 and
the investigation period,
to improve its efficiency,
increasing its output level roughly, in line with market
growth with significant reductions in production costs

(50)

Between 1998 and the investigation period, there was a
2 percentage point drop to 26 % in the Community
industry's market share. While this was happening, the
industry's profits declined to 3,8 % on turnover during
the investigation period.

(51) While the Community industry. managed to increase its
production capacity, volume of production and sales
volume broadly in line with the strong increase in
demand, it should be noted that its profitability deteri-
orated significantly. In this connection, the sharp fall in
the price of polystyrene on the Community market over
the period considered (see recital 43) should have been
beneficial
the
price-depressive pressure of the dumped products forced
the Community industry to reduce its prices,
thus
eroding any benefits it should have gained from the fall
in input costs.

to the Community industry. However,

(52) All these factors indicate that the Community industry
was forced to adopt a strategy of trying to match the
price of the dumped imports so as to be able to main-
tain sales volumes. The result was the deterioration in
profits to inadequate levels.

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(b) Standard product types

(53)

Further insight on the impact of the dumped imports can be gained by examining the development
of sales and profitability of those products which form the market standard, i.e, jewel boxes, standard
2-CD boxes, standard multi-boxes and CD-singles boxes, and which represent the area of maximum
competition between the Community industry and the dumped imports.

The table below shows the development of sales of:

— standard product types,

— all product types.

1995

1996

1997

1998

Investigation
period

Community industry's sales of standard product
types in European Community (1 000 units)

462 495

518 761

633 649

668 002

650 080

Indexed (1995 — 100)

100

112

137

144

141

% of all sales which are standard product types

99

98

96

94

93

Community industry's sales of all types in Euro-
pean Community (1 000 units)

464 932

530 323

656 781

711 793

695 878

Indexed (1995 — 100)

100

114

141

153

150

The Community industry's volume of sales of standard products accounted for 93 % of their total
CD-box sales volume in the investigation period. It should be noted that practically 100 % of the
exports in the investigation period from the People's Republic of China were standard products.

In this context, the development of the Community industry's profitability of sales of these standard
products types over time, compared with the Community industry's overall profitability was as
follows.

Development of the Community industry's profitability
of sales in the European Community

1995

1996

1997

1998

(%)

Investigation
period

Standard product types

m/a

3,85

3,11

0,81

– 0,45

All types (from recital 44)

m/a

6,1

5,4

5,0

3,8

These figures show that although financial performance was in continuous decline for all CD boxes,
the return on sales of standard product types was consistently lower than the return on all CD boxes.
The trend of profitability was downwards throughout the period from 1996 to the investigation
period.

Moreover, by the investigation period, sales of standard product types were loss-making. In other
words, 93 % of the Community industry's sales were loss-making. The Community industry was
therefore able to achieve its overall profitability of 3,8 % on just 7 % of its sales volume.

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L 310/25

it

the product
is precisely the types of
However,
concerned which fall under this 7 % which the Chinese
exporting producers did not export to the Community
during the investigation period. The Community indus-
try's losses are incurred only on standard product types,
and the People's Republic of China's exports to the
Community consist solely of these types.

(c) Conclision on the effect of dumped imports

(54) As discussed above,

the

exports

the Chinese

to the
Community are almost exclusively in standard product
types. These ate the core business of the Community
industry, accounting for 93 % of
their sales in the
Community during
investigation period. The
Community industry's sales of these products were loss-
making. In the face of the dumped imports from the
People's Republic of China, the Community industry has
been able to keep going as a viable business because of
the profits it has been able to make on the 7 % of its
business for which during the investigation. period them
were no direct equivalent Chinese imports, namely the
production of non-standard CD boxes.

The Commission concludes from this analysis that a
causal link exists between the material injury suffered by
the Community industry and the dumped imports from
the People's Republic of China.

(55)

The Community industry argues that the above situation
is not a sustainable position in the longer run. Indeed,
the only reason the Community industry is currently
profitable in its non-standard CD-box manufacture is
because it still has a significant output of standard prod-
ucts. The Commission considers that the Community
industry needs the economies of scale which production
of standard products brings in order to be able to make
its non-standard products efficiently. If it is driven out of
its core business of standard products by the dumped
imports, it will lose these economies of scale and will
therefore no longer be able to continue to produce
non-standard products efficiently.

2. Other factors

(a) Other sources of supply to the Community market

of

level

cooperation

(56) As was mentioned at recital 33, Eurostat import statis-
tics can only be considered as indicative. Furthermore,
the
from non-complainant
Community producers was minimal. The Commission
therefore treated these two sources of supply as one
category. For the purposes of this analysis, these ‘other
sources of supply to the Community market’ comprise
imports from third countries other than the People's
Republic of China, and production of other Community

producers who are not cooperating in the present invest-
igation or supporting the complaint.

Estimates for these other sources of supply to the
Community market are based on estimates of imports
from other third countries and estimates of production
of the product concerned by non-cooperating producers
in the Community,
some of which supplied the
Commission with information on their production
levels.

On this basis, the volumes from other sources of supply
are estimated to have increased from 976 million units
in 1995 to 1 183 million units in 1997 to 1 200
million units in the investigation period, an increase of
23 % over the whole period analysed. However, their
share of the Community market fell from 57 % in 1995
to 50 % in 1997 to 45 % in the investigation period.

(57) Other information available to the Commission indicates
that the unit values of these other sources of supply to
the Community market were higher than those of the
Community industry throughout the period considered.
In fact, the prices of both the Community industry and
other sources were undercut by the prices of imports
from the People's Republic of China.

This, combined with the fact that their share of the
Community market was declining, makes it unlikely that
these other sources of supply caused material injury to
the Community industry during the period analysed.

(b) Community industry's sales outside the Community

(58)

(59)

by

outside

industry

the Community

Sales
the
Community were small in comparison with their sales
on the Community market. Throughout the period, sales
turnover outside the Community represented around
2 % of their total sales, and could not, therefore, have
link between the dumped imports
broken the causal
the
subject
Community industry.

to investigation and

injury of

the

(c) Conclusion on causation

the Community
The above examination shows that
industry had to match the prices of the dumped imports
in order to maintain production volumes, sales and
capacity utilisation in an attempt to keep unit produc-
tion costs at a low level. In doing so, the Community
situation worsened considerably,
industry's profits
particularly in its sales of standard CD boxes. The
Commission considers therefore that a causal link exists
between the dumped imports from the People's Republic
of China and the material
injury to the Community
industry.

(60)

(61)

(62)

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F. COMMUNITY INTEREST

1. General considerations

standard CD boxes, such as jewel boxes, where the
Community industry's profitability worsened to such an
extent that their sales of standard CD boxes were loss-
making in the investigation period.

to Article 21 of

the basic Regulation,

the
Pursuant
Commission examined,
the likely positive and
first,
negative effects of taking and of not taking measures,
and second, whether it could be clearly concluded that it
is not in the overall interest of the Community to apply
measures in this particular case.

(64) Under these circumstances, it is considered that if prices
were to rise again following the removal of the trade-
distorting
the
the
Community industry would be able to achieve a satisfac-
tory profit rate and be equipped to address other chal-
lenges it faces on the compact discs packaging market.

imports,

dumped

effects

of

2. Impact of

anti-dumping measures on the
Community industry

3. Impact of anti-dumping measures on importers

traders

The Community industry is a well-established industry
producing CD boxes since the early 1980s. The compa-
nies are typically of medium size, and some are involved
in the production of a range of injection-moulded and
extruded plastic products
their CD-box
production forms a part of a range of products.

such that

industry. Throughout

from the audio industry,

The Community industry has developed into an indus-
trial sector servicing a growing demand for a product
which continues to find applications in many varied
the printed media
fields,
its
industry to the computer
history, the industry has invested in new technologies
and manufacturing techniques which have increased its
productive efficiency. The high quality of its output,
produced efficiently, ensures its viability and competi-
tiveness in the future in a market undistorted by unfair
trading practices. The dramatic rise in labour efficiency
outlined at recital 46 underlines the, commitment the
Community industry has shown in pursuing more effi-
cient production in. the face of unfair competition from
the People's Republic of China.

The Community industry is almost fully utilising its
productive capacity, providing a wide spectrum of high
times.
quality products with very rapid response
Customer service is one area on which the Community
industry has placed particular emphasis in order to
compete with the dumped imports from the People's
Republic of China.

(63) However,

the prices of

the main problem being faced by the
Community industry is inadequate profitability, arising
from the need to reduce prices to match those of the
dumped imports in order to try to maintain market
share and volume of output. Despite this defensive
the Chinese exports to the
strategy,
Community continued to undercut
the
Community industry by 15 %. This price-depressive
pressure led weighted average profits on turnover to fall
to 3,8 % overall by the end of the investigation period,
despite a drop in the cost of raw materials and efforts to
improve productive efficiency. The effect of the dumped
imports was particularly noticeable in the market for

those of

(65)

The Commission sent questionnaires to ten importers in
the Community. Seven questionnaire responses were
returned within the deadline set.

In general, the importers argued that the imposition of
anti-dumping measures would simply lead to price
increases in the final compact discs product for the retail
consumer. It was asserted that any cost increase brought
about by the imposition of anti-dumping measures on
imports from the People's Republic of China would
simply be passed to the next downstream customer. It
was also pointed out by some importers that
the
Community industry is unable to supply the needs of
the major customers for optical media packaging.

(66)

the Community

The Commission does not share the opinions of the
importers/traders. While
industry
supplied an estimated 28 % of Community demand for
the product concerned (and the Community producers
supporting the complaint supplied around 35 % in total)
and imports
from the People's Republic of China
accounted for 20 %, supplies from other sources, which
include third country imparts (see recital 56), accounted
for a further 45 % of demand in the Community.

supplies, or

the Community

These figures indicate that, even if anti-dumping meas-
ures were to cause a fall in import volumes from the
People's Republic of China, the Community's importers/
traders will continue to have unrestricted access to third
countries'
industry's
supplies, as well as supplies from other producers in the
Community. Since sources of supply other than the
People's Republic of China account for 80 % of demand
for
the
the product concerned in the Community,
Commission concludes that competition in supply from
all sources will remain vigorous and effective after the
imposition of anti-dumping measures. The inability of
the Community industry to supply all of the Community
users' needs is not expected to have a negative impact
on importers/traders
if anti-dumping measures are
imposed on imports from the People's Republic of
China.

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4. Impact of anti-dumping measures on users

(67) One of the importers which received a questionnaire is
more appropriately to be considered as a user of the
product concerned. This company cooperated to a
limited extent in the investigation and did not provide a
complete questionnaire response within the deadline set.

This company's Community interest submission centred
on the alleged detrimental effects which anti-dumping
measures would have on users, distributors, importers
and the consumer.
it alleged that anti-
In particular,
dumping measures would have the effect of depriving
users of high-quality product from the People's Republic
of China, forcing them to turn to lower quality end
more expensive Community-made products. Further-
more, contrary to the arguments of
the importers/
traders (see recital 65), users claimed that competitive
pressures in the downstream sectors of the industry were
such that any price increase on CD boxes could not be
easily passed on to consumers,
thus reducing profit
margins and threatening the commercial viability of the
downstream companies concerned.

(68)

The Commission has examined these arguments.

to support

The claim that Community-made CD boxes are of lower
quality than those from the People's Republic of China is
unfounded. The most important determinant of ‘quality’
for a CD-box is its suitability for use in the users'
CD-packaging machinery without breaking and thus
snagging the machinery. The Commission has received
no evidence
the
Community users' packaging machinery cannot use
Community-made CD boxes. Indeed, around 60 % of
this user's CD-box requirements are indeed supplied by
Community-made CD-box manufacturers, and these
boxes can be used in its packaging machinery inter-
changeably with Chinese products. In other words, as far
as the user industry is concerned, there is, in general, no
difference in quality between Chinese CD boxes exported
to the Community and Community-made CD boxes.

allegation that

the

In the absence of any figures on costs of production
submitted by this user, the Commission had to base its
conclusions on the information available which suggests
that the proportion accounted for by CD boxes in the
users' costs of production is estimated to be about 1 %
on a weighted average basis. The CD boxes input, there-
fore, does not account for a major proportion of users'
costs. Such proportions indicate that an average duty
rate of approximately 10 % in respect of the People's
Republic of China may have a maximum impact of a
0,1 % increase in the cost of production of Community
CD-box users. It should also be borne in mind that the
investigation showed that in value terms. roughly 20 %

of these users' CD-box purchases were from the People's
Republic of China. The final impact on the sales prices
of CD boxes therefore is expected to be less than 0,02 %,
even assuming that any increase in cost caused by the
duty is fully passed on. Any cost and price increase,
therefore, is not expected to be disproportionate to the
benefits expected to accrue to the Community industry
from the removal of the injury caused by dumping.

The Commission consequently concludes that imposing
anti-dumping measures will not threaten the commercial
viability of users, or have a noticeable impact on the
profit margins of these companies which, as pointed out
in recital 66 will continue to have unrestrieted access to
other sources of supply.

5. Conclusion on Community interest

(69)

The dumped imports from the People's Republic of
China have been found to have caused injury to the
Community industry, and the Commission considers
that, for the foregoing reasons,
it is not against the
overall interest of the Community to impose provisional
anti-dumping measures.

The Commission will however continue to examine the
Community interest aspects of this proceeding at the
definitive stage of the investigation.

G. PROVISIONAL ANTI-DUMPING MEASURES

1. Injury elimination level

(70)

that

the fact

In assessing the injury elimination level, the Commission
took account of
the weighted average
Community producers' price in the Community declined
significantly over the period 1995 to the investigation
period, in order to match the price levels of the dumped
imports. This worsened the Community industry's profit
situation.

(71) When determining the profit margin, the Commission
examined what amount the Community industry could
reasonably be expected to make is the absence of injur-
ious dumping. The investigation established that a profit
margin of 6 % should provisionally be regarded as repre-
senting an appropriate minimum. This
is a rather
conservative estimate given the fact that this was the
profit rate the Community industry achieved in 1996,
i.e. during a period where the dumped imports from the
People's Republic of China had not yet achieved the high
market share held during the investigation period but
were nevertheless already at
(9 %
market share).

significant

levels

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(72)

The weighted average injury elimination price level for
the Community industry was established using the
Community industry's weighted average cost of produc-
tion per unit on an ex-works basis plus the 6 % profit
margin mentioned, above. This price was compared, on
a direct product type-to-type basis, with the cif prices of
the dumped imports, duty paid at the Community fron-
tier, at the appropriate level of trade. An injury margin
was established for each of
the exporting producers
concerned as a result of the comparison and this margin
was expressed as a percentage of the cif value of their
exports to the Community.

On this basis, the injury margins were higher than the
dumping margins.

after

production and sales entities. The Commission, if appro-
priate, will,
the Advisory
Committee,
amend the Regulation accordingly by
updating the list of companies benefiting from indi-
vidual duty rates.

consultation of

3. Final provision

(77)

In the interest of sound administration. a period should
be fixed within which the interested parties may make
their views known in writing and request a hearing.
Furthermore it should be stated that the findings made
for the purpose of this Regulation are provisional and
may have to be reconsidered for, the purpose of any
definitive measures,

2. Provisional measures

HAS ADOPTED THIS REGULATION:

In accordance with Article 7(2) of the basic Regulation,
as the injury margins were higher than the dumping
margins found for the cooperating Chinese exporters,
the provisional anti-dumping duty should be set at the
level of the latter.

Since CD boxes are often exported in disassembled
form,
the anti-dumping duty should apply to the
assembled product as well as to the disassembled one.

Article 1

1.
A provisional anti-dumping duty is hereby imposed on
imports of compact discs boxes, including those for DVDs and
similar products, of plastics,
falling within CN code
ex 3923 10 00 (TARIC code 3923 10 00*10) and originating
in the People's Republic of China.

This duty also applies to imports of:

(73)

(74)

(75)

The individual company provisional anti-dumping duty
rates specified in this Regulation were established on the
basis of the findings of the present investigation. There-
fore, they reflect the situation found during that invest-
igation with respect to these companies. These duty
rates (as opposed to the country-wide duty applicable to
‘all other companies’) are thus exclusively applicable to
country
imports of products originating
concerned and produced by the companies and thus by
the specific legal entities mentioned. Imported products
produced by any other
specifically
mentioned in the operative part of this Regulation with
its name and address, including entities related to those
specifically mentioned, cannot benefit from these rates
and shall be subject to the duty rate applicable to ‘all
other companies’.

company not

in the

(76) Any claim requesting the application of these individual
company provisional anti-dumping duty rates
(e.g.
following a change in the name of
the entity or
following the setting up of new production or sales
entities) 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,
for exemple, that name change or that change in the

(1) European Commission Directorate-General

Trade Directorate CDM 24 - 8/38
Rue de la Loi/Wetstraat 200
B-1049 Brussels.

— compact-discs cases

assembled together), of plastics,
ex 3923 10 00 (TARIC code 3923 10 00*10),

(consisting of a base and a lid
falling within CN code

— trays, bases and lids of compact-discs boxes, of plastics,
falling within CN code ex 3923 90 90 (TARIC code
3923 90 90*10), whether assembled or not.

2.
The provisional rate of duty applicable to the net free-at-
Community-frontier price, before duty, for products produced
by the following exporting companies shall be as follows.

Companies

Rate of duty
%

Taric
additional code

Viva Magnetics Ltd, Hong Kong

Golden Age A-V Products Ltd,
Hong Kong

6,6

8,3

A046

A047

ACME Cassette Manufacturing Ltd,
Hong Kong

10,4

A048

All other exporting producers in the
People's Republic of China

20,1

A999

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Unless otherwise specified,
3.
concerning customs duties shall apply.

the provisions

in force

4.
The release for free circulation in the Community of the
product referred to in paragraph 1 shall be subject to the
provision of a security, equivalent to the amount of the provi-
sional duty.

Pursuant to Article 21(4) of Regulation (EC) No 384/96, the
parties concerned may comment on the application of this
Regulation within one month of its entry into force.

Article 3

Article 2

Without prejudice to Article 20 of Regulation (EC) No 384/96,
the interested parties may make known their views in writing
and apply to be heard by the Commission within one month of
the date of entry into force of this Regulation.

This Regulation shall enter into force on the day following that
of its publication in the Official Journal of the European Communi-
ties.

Article 1 of this Regulation shall apply for a period of six
months.

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

Done at Brussels, 3 December 1999.

For the Commission

Pascal LAMY

Member of the Commission