Commission Decision No 284/2000/ECSC of 4 February 2000 imposing a definitive countervailing duty on imports of certain flat rolled products of iron or non-alloy steel, of a width of 600 mm or more, not clad, plated or coated, in coils, not further worked than hot-rolled, originating in India and Taiwan and accepting undertakings offered by certain exporting producers and terminating the proceeding concerning imports originating in South Africa
Date: 2000-02-04
Institutions: European Commission
Subjects: flat product, import, iron and steel product, monetary compensatory amount, third country

L 31/44

EN

Official Journal of the European Communities

5. 2. 2000

COMMISSION DECISION No 284/2000/ECSC

of 4 February 2000

imposing a definitive countervailing duty on imports of certain flat rolled products of iron or
non-alloy steel, of a width of 600 mm or more, not clad, plated or coated, in coils, not further
worked than hot-rolled, originating in India and Taiwan and accepting undertakings offered by
certain exporting producers and terminating the proceeding concerning imports originating in
South Africa

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and
Steel Community,

Having regard to Commission Decision No 1889/98/ECSC of 3
September 1998 on protection against subsidised imports from
countries not members of
the European Coal and Steel
Community (1), and in particular Articles 13, 14 and 15
thereof,

(4)

the proceeding. The Commission sent questionnaires to
all these parties and to those who made themselves
known within the time limit set in the Notice of Initia-
tion. Pursuant to Article 11(5) of the Basic Decision, the
Commission also gave the parties directly concerned the
opportunity to make their views known in writing and
to request a hearing.

Certain exporting producers, complaining Community
producers
in
writing.

submitted comments

and importers

After consulting the Advisory Committee,

Whereas:

A. PROCEDURE

1. Initiation

(1)

(2)

(3)

On 8 January 1999, the Commission announced by
means of a notice (hereinafter referred to as the ‘Notice
of Initiation’) published in the Official Journal of the Euro-
pean Communities (2)
the initiation of an anti-subsidy
proceeding with regard to imports into the Community
of certain flat rolled products of iron or non-alloy steel,
of a width of 600 mm or more, not clad, plated or
coated,
further worked than hot-rolled,
originating in India, South Africa and Taiwan.

in coils, not

the product

The proceeding was initiated as a result of a complaint
lodged by Eurofer on behalf of Community producers
representing a major proportion of the total Community
concerned within the
production of
meaning of Articles 9(1) and 10(7) Decision (EC) No
1889/98/ECSC (hereinafter referred to as the ‘Basic Deci-
sion’). The complaint contained evidence of subsidisa-
tion of the product concerned and of material
injury
resulting therefrom, which was considered sufficient to
justify the initiation of a proceeding.

2. Investigation

The Commission officially advised the exporting produ-
cers in the exporting countries (hereinafter referred to as
the ‘exporting producers’) and importers as well as their
representative associations known to be concerned, the
representatives of
the exporting countries and the
complaining Community producers of the initiation of

(1) OJ L 245, 4.9.1998, p. 3.
(2) OJ C 5, 8.1.1999, p. 2.

All interested parties who requested a hearing within the
time limit set and who indicated that they were likely to
be affected by the result of the proceeding and that there
were particular reasons why they should be heard, were
granted such a hearing.

(5)

All parties were informed of
facts and
considerations on the basis of which it was intended to
recommend:

the essential

(i) the imposition of definitive countervailing duties on

imports from India and Taiwan,

(ii) the

acceptance of

an undertaking offered by

exporting producers in India and

(iii) the termination of the proceeding against imports

from South Africa.

Parties were also granted a period within which they
could make representations subsequent to this disclo-
sure.

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

The Commission sought and verified all the information
it deemed necessary for the purpose of a definitive deter-
mination.

(6)

(7)

Verification visits were carried out at the premises of the
following companies:

— Complaining Community producers

— Aceralia Corporacion Sid., Madrid, Spain

— British Steel Plc, London, United Kingdom

— Cockerill Sambre SA, Brussels, Belgium

5. 2. 2000

EN

Official Journal of the European Communities

L 31/45

— Hoogovens Steel BV, Ĳmuiden, Netherlands

— ILVA Spa, Genoa, Italy

— Sidmar NV, Gent, Belgium

— Salzgitter AG, Salzgitter, Germany

— Stahlwerke Bremen GmbH, Bremen, Germany

— SOLLAC, Paris, France

— Thyssen Krupp Stahl AG, Duisburg, Germany

7208 10 00, 7208 25 00, 7208 26 00, 7208 27 00,
7208 36 00, 7208 37 10, 7208 37 90 (1), 7208 38 10,
7208 38 90, 7208 39 10, 7208 39 90.

(10) Hot-rolled coils are generally obtained in steel mills by
hot rolling semifinished steel products after the final
rolling pass or after pickling or continuous annealing.
Hot-rolled coils are wound into a regular coil.

— Exporting producers

(a) India

Essar Steel Ltd, Hazira

Tata Iron & Steel Company Ltd, Calcutta

Steel Authority of India Ltd, New Delhi

(b) South Africa

Iscor Ltd, Pretoria

Highveld Steel & Vanadium Corp. Ltd, Witbank

(c) Taiwan

China Steel Corp., Kaohsiung

Yieh Loong Enterprise Co. Ltd, Kaoshiung,

— Unrelated importer — user company in the Community

Marcegaglia SpA, Gazoldo degli Ippoliti, Italy,

— Importers related to the exporting producers

South Africa: Macsteel

International UK Ltd,

London, United Kingdom

Macsteel International Belgium NV,
Antwerpen, Belgium

Macsteel
GmbH, Düsseldorf, Germany.

International Stahlhandel

(8)

The investigation of subsidy covered the period from 1
January 1998 to 31 December 1998 (hereinafter
referred to as the ‘investigation period’ or ‘IP’). The
examination of injury covered the period from 1 January
1995 up to the end of the subsidy investigation period
(hereinafter also referred to as the ‘period examined’).

B. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

(9)

The product concerned is certain flat rolled products of
iron or non-alloy steel, of a width of 600 mm or more,
not clad, plated or coated, in coils, not further worked
than hot-rolled (hereinafter
‘hot-rolled coils’). This
currently classifiable within CN codes
product

is

For steel mills, which produce a great range of
flat
products of steel, hot-rolled coils are used as a pre-
material for manufacturing other steel products (wide
and narrow strips, all cold-rolled products, tubes, etc.).
Hot-rolled coils can be of various grades and dimen-
sions. The vast majority of imports from third countries
into the Community consist of ‘structural steels’ (such as
S235 and S275 according to ‘Euronorm’ EN 10025) and
‘mild steels’ (such as DD11, DD12, DD13 according to
EN 10011 and the ‘Deutsche Industrie-Norm’ DIN 1614/
1). Coils are conventionally between 1,5 and 15 mm
thick and from 600 to 2 050 mm wide. Each of the CN
codes listed above corresponds to a specific product type
as differentiated by width and thickness within the
above ranges.

(11)

The product concerned is also classified into two distinct
categories according to its finishing: black hot-rolled
coils (hereafter referred to as ‘black coils’) which are the
basic product and pickled hot-rolled coils (hereafter
referred to as ‘pickled coils’) which, after being hot-
rolled, go through an additional surface treatment called
pickling. The distinction between black coils and pickled
coils is also reflected in the structure of the Combined
Nomenclature as coils classified under the two categories
belong to specific and separate CN codes.

(12) Although imports from the countries concerned are
mainly black coils,
investigation showed that
the
imports cover all the CN codes and thus all the different
products listed above. Notwithstanding the fact that each
CN code corresponds to a distinguishable type of hot-
rolled coil, it was found that they all have identical or
similar physical and technical characteristics, uses and
applications. Accordingly, all types of hot-rolled coils
form one single product falling under the CN codes
listed in recital 9.

2. Like product

(13)

(14)

The investigation has shown that the hot-rolled coils
imported from the countries concerned are identical to
or comparable to the Community-produced products, in
particular in terms of the grades and the range of dimen-
sions available.

the product
Some exporting producers claimed that
is not inter-
concerned which they produce and sell
changeable and not comparable as
such with the
Community-produced product. They claimed that the
production process of the Community producers was

(1) See corrigendum published in OJ C 107, 16.4.1999, p. 6.

L 31/46

EN

Official Journal of the European Communities

5. 2. 2000

more advanced and even used different technology, thus
producing a higher quality product. They mentioned
that users sometimes had to re-roll the imported prod-
ucts before they could be processed further. They there-
fore claimed that their product was not a like product to
that of the complaining Community producers.

regarding export and import policy. These are summar-
ised in ‘Export and Import Policy’ documents which are
issued every five years and updated every year. Two
Export and Import Policy documents are relevant to the
investigation period of this case i.e. the five-year plans
relating to the years 1992-1997 and 1997-2002.

(15) Obviously, any difference in the production process
resulting in surface or chemical defects may lead to a
lower market value. However, the investigation showed
that, in general both the Community-produced product
and the imported product still have the same basic
physical characteristics and uses, even though the prod-
ucts are not identical, in particular in terms of quality,
shipments of a given
across
supplier. This, however, cannot lead to the conclusion
that hot-rolled coil
countries
concerned is not a like product to that produced by the
Community industry and sold in the Community.

suppliers and across

imported from the

(20)

The last scheme, the Income Tax Scheme, is based on
the Income Tax Act of 1961 which is amended yearly
by the Finance Act.

b) Passbook Scheme (PBS)

(21) One instrument under the Export and Import Policy
involving export-related assistance is the PBS which
entered into force on 30 May 1995.

(16)

The investigation also showed that
the grades and
dimensions of the product concerned imported from the
countries concerned are identical or comparable to the
products sold on the domestic market of the countries
concerned.

(22)

(17) On this basis,

it was concluded that hot-rolled coils
produced in the countries concerned, hot-rolled coils
exported to the Community from these countries and
hot-rolled coils produced and sold by the complaining
Community producers on the Community market, are
alike within the meaning of Article 1(5) of the Basic
Decision.

C. SUBSIDY

1. INDIA

a) Introduction

(18) On the basis of

the information contained in the
complaint and the replies to the Commission's question-
naire, the Commission investigated the following five
schemes, which allegedly involve the granting of export
subsidies:

— Passbook Scheme

— Duty Entitlement Passbook Scheme

— Export Promotion Capital Goods Scheme

— Export Processing Zones/Export Oriented Units

— Income Tax Scheme.

Eligibility

The PBS is available to certain categories of exporters i.e.
those which manufacture in India and subsequently
export (Manufacturer-exporters) and exporters, whether
manufacturers or only traders, granted an ‘Export
House/Trading House/Star Trading House/SuperStar
Trading House certificate’. The latter category of expor-
ters, which is defined in the Export and Import Policy
document, has to provide in particular proof of prior
export performance.

Practical

implementation

(23) No producer/exporter of the product concerned applied
for or made use of the PBS. There is therefore no need
for the Commission to assess this part of the scheme in
the context of the investigation.

c) Duty Entitlement Passbook Scheme (DEPB)

(24) Another instrument under the Export

Import Policy
involving export related assistance is the DEPB which
became effective on 7 April 1997. The DEPB constitutes
the successor to the PBS which was terminated on 31
March 1997. The DEPB is of two types:

— DEPB on pre-export basis

— DEPB on post-export basis.

i ) D E P B o n p r e - e x p o r t b a s i s

Eligibility

(19)

The first four schemes are based on the Foreign Trade
(Development and Regulation) Act 1992 (effective from
7 August 1992) which repealed the Imports and Exports
Control Act of 1947. The Foreign Trade Act authorises
the Government of India (GOI) to issue notifications

(25)

The DEPB scheme on pre-export basis is available to
manufacturer-exporters (i.e. every manufacturer in India
who exports) or merchant-exporters (i.e. traders) linked
with manufacturers. To be eligible under this scheme,
the company must have exported during a three-year
period prior to submitting a claim for a licence.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/47

Practical

implementation

(26) Any eligible exporter can apply for a licence. The
licence, which is issued automatically, grants a credit
amount that may be used to offset customs duties due
on future imports of goods. The value of the licence is
calculated on the basis of 5 % of the average yearly value
of all exports, made by the applicant, during the
previous three years.

The licence, which is non-transferable,
is valid for a
period of 12 months from the date of issue. Once the
credit on the licence has been exhausted, a fee is payable
to the relevant authority. The company may then apply
for a further credit amount, again calculated on the basis
of 5 % of
the average value of exports during the
previous three years.

The DEPB on pre-export basis allows duty-free imports
of inputs required for the production of goods in the
factory of the company concerned. Determination of
what products may be imported duty free is made by
reference to the inputs listed in the Standard Input-
Output Norm (SION) (1) and varies dependent upon the
product to be manufactured. Such duty-free inputs may
not themselves then be transferred, loaned, sold, parted
with, or disposed of in any manner whatsoever by the
company, other
the
finished product.

than as a constituent part of

The use of the scheme also carnes with it an export
obligation. When the licence is used for duty-free
imports,
the holder undertakes to use the goods as
inputs for finished products destined for export. Export
will attract a benefit based on the type and quantity of
finished product. The benefit is calculated by reference
to the SION. Once the licence holder has made exports
of such a value which will entitle him to a benefit
equivalent to the credit already given under DEPB on
pre-export basis, his obligation is fulfilled.

be imported duty-free under a DEPB pre-export license.
There is no requirement to import all of the inputs on
the SION list. The only limits to the quantity of any
particular input that may be imported under the scheme
is the value of the licence granted and the corresponding
commitment to export the finished product.

(32) A company which can obtain its inputs at a lower price
than that set in the SION programme, or which can
obtain some of the inputs on the domestic market,
would be able to import excess duty-free inputs that
could be used in its domestic production. There would
appear to be no provision within the SION programme
to prevent such a situation arising. Neither was evidence
found of any other system or procedure in place to
confirm either which duty-free inputs are actually
consumed in the production process of the exported
finished product or in what quantities.

(33) Annex II (II)(5) and Annex III (II)(3) of the Basic Decision
provide that, where it is determined that the government
of the exporting country does not have a verification
system in place, a further examination by the exporting
country based on actual inputs involved, or actual trans-
actions, respectively, will normally need to be carried
out in the context of determining whether an excess
payment occurred. The GOI did not carry out such an
examination.

(34) However, the only Indian exporter in this investigation
to use the scheme has provided to the Commission
proof that they received no excess benefit. The company
was able to establish that all benefits under the DEPB
pre-export scheme during the POI were offset by the
duty normally payable only on inputs consumed in
therefore no
finished exported product. There was
subsidy conferred on this company.

i i ) D E P B o n p o s t - e x p o r t b a s i s

Conclusion on DEPB pre-export basis

Eligibility

The GOI asserts that the DEPB pre-export scheme is a
permitted remission/drawback or substitution drawback
scheme within the provisions of Annex I(i) to the Basic
Decision, and, as such, is non-countervailable. Annex II
and III to the Basic Decision give guidelines on the
determination of whether such schemes are export
subsidies.

The DEPB pre-export
is a value based scheme. The
SOGN sets notional costings based on what are consid-
ered to be the value of inputs that have to be imported
to manufacture a particular product. Once the SION rate
has been set for a particular finished product, inputs can

(1) For an explanation of the SION programme please see Commission
Regulation (EC) No 1156/98, (OJ L 202, of 18.7.1998, p. 40).

(35)

The DEPB on post-export is available to manufacturer-
exporters (i.e. every manufacturer in India who exports)
or merchant-exporters (i.e. traders).

Practical

implementation of DEPB post-export basis

(36) Under this scheme, any eligible exporter can apply for
credits which are calculated as a percentage of the value
of exported finished products. Such DEPB rates have
been established by the Indian authorities for most prod-
ucts, including the products concerned, on the basis of
the SION. A licence stating the amount of credit granted
is issued automatically.

(27)

(28)

(29)

(30)

(31)

L 31/48

EN

Official Journal of the European Communities

5. 2. 2000

(37) DEPB on post-export basis allows for the use of such
credits for any subsequent imports (e.g. raw materials or
capital goods) not on the Negative List of Imports. Such
imported goods can be sold on the domestic market
(subject to sales tax) or used otherwise.

(44)

(38) DEPB credits are freely transferable. The DEPB licence is
valid for a period of 12 months from the date of
granting of the licence.

(39) When all credits have been used, the company has to

pay a fee to the relevant authority.

Conclusion on DEPB on post-export basis

is

clearly

scheme

This
contingent upon export
performance. Credit is automatically calculated on the
independent of
basis of a formula using SION rates,
whether the inputs were imported, whether import duty
was paid on them, or whether the inputs were actually
used for export production or in what quantities. Indeed
a company can claim a licence irrespective of whether it
makes any imports or purchases imported goods from
other sources. The scheme cannot therefore be consid-
ered as a duty drawback or substitution scheme, since
the remission of import duties is not limited to that
payable on goods consumed in the production process
and therefore an excess remission is involved, in accord-
ance with Article 2(1)(a)(ii). It is therefore countervail-
able under Article 3(4)(a) of the Basic Decision, since it
involves
revenue foregone and is contingent upon
export performance.

decision which does not alter the amount of benefit
received from the scheme.

It

In order to establish the full benefit to the recipient
under this scheme, this amount has been adjusted by
adding interest during the investigation period.
is
normal practice to reflect the benefit to the recipient of
one-time grants by adding the annual commercial
interest to the nominal amount of the grant, on the
assumption that the grant is considered to have been
made on the first day of
the investigation period.
However, in the present case, it is clear that individual
grants can be made at any time between the first and the
the investigation period. Consequently,
last day of
instead of adding commercial
to the whole
amount, it is considered appropriate to assume that an
average grant would have been received at the mid-point
of the investigation period, and therefore the interest
should cover a period of six months, equivalent to half
of the commercial rate during the IP in India, i.e. 7 %.
This amount has been allocated over total exports
during the IP.

interest

(45)

The Government of India and three exporters claimed
that this scheme was wrongly assessed by the Commis-
sion 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 draw-
back could be considered a subsidy in accordance with
Article 2 of the Basic Decision.

(46) Article 2(1)(a)(ii) provides for an exception for, inter alia,
drawback and substitution drawback schemes which
conform to the strict rules laid down in Annex I(i) and
Annex II (definition and rules for drawback) and Annex
III (definition and rules for substitution drawback).

Calculation of the subsidy amount for DEPB post-export basis

The benefit to the exporters has been calculated in two
separate ways according to the use the company has
made of the DEPB licences.

(47) As the analysis of the Commission revealed that the
DEPB post export scheme is not a properly constituted
drawback or a substitution drawback scheme, the ques-
tion of any excess duty drawback does not arise, and the
full benefit is countervailable. As explained in recital 40,
excess remission of
import duties is inherent in the
scheme.

In the event that the company used the licences to make
duty-free imports, the benefit was calculated on the basis
of the amount of customs duty normally due on imports
made during the
investigation period but which
remained unpaid under the DEPB.

In the event the company sold its licences, the benefit
was calculated on the basis of the amount of credit
granted in the licence regardless of the sales price of the
licence. The three exporting producers and the GOI
claimed that the benefit should be limited to the effec-
tive sales price of the licence which is usually less than
the face value of the credits in the licence. However, this
claim cannot be granted since the sale of a licence at a
price less than the face value is a pure commercial

(48)

Three companies benefited from this scheme during the
investigation period and obtained subsidies of between
4,1 % and 12,3 %.

d) Export

Promotion Capital Goods

Scheme

(EPCGS)

(49) Another instrument under the Export

Import Policy
involving export related assistance is the EPCGS intro-
duced on 1 April 1990 and amended on 5 June 1995.

(40)

(41)

(42)

(43)

5. 2. 2000

EN

Official Journal of the European Communities

L 31/49

Eligibility

(50)

The EPCGS is available to manufacturer/exporters (i.e.
every manufacturer in India who exports) or merchant/
exporters (i.e. traders). Since 1 April 1997, manufac-
turers linked with merchant/exporters can also benefit
from the scheme.

Practical

implementation

(57)

(51)

To benefit from the scheme, a company must provide to
the relevant authorities details of the type and value of
capital goods which are to be imported. Depending on
the level of export commitment which the company is
prepared to undertake, the company will be allowed to
import capital goods at either a zero rate of duty or a
reduced rate. A licence authorising the import at prefer-
ential rates is issued automatically.

(52)

In order to meet the export obligation, goods exported
must have been produced using the imported capital
goods.

(53) An application fee is payable to obtain a licence.

(54)

(55)

(56)

Conclusion on EPCGS

The EPCGS is a countervailable subsidy as the payment
by an exporter of a reduced or zero rate of duty consti-
tutes a financial contribution by the GOI, revenue other-
wise due is foregone and a benefit is conferred on the
fully
recipient by lowering the duties payable or
exempting him from paying the import duties.

is

subsidy

contingent

The
in law upon export
performance within the meaning of Article 3(4)(a) of the
Basic Decision, since it cannot be obtained without a
commitment to export goods, and is therefore deemed
to be specific.

Calculation of the subsidy amount

The benefit to the exporters has been calculated on the
basis of the amount of unpaid customs duty due on
imported capital goods by spreading this amount across
a period which reflects the normal depreciation of such
capital goods in the industry of the product concerned.
This period has been established by using the weighted
average (on the basis of production volume of the prod-
ucts concerned) of depreciation periods for capital goods
actually imported under the EPCGS by each company,

resulting into a normal depreciation period of 15,5
years. The amount so calculated which is attributable to
the investigation period has been adjusted by adding
interest during the investigation period in order to estab-
lish the full benefit to the recipient under this scheme.
Given the nature of this subsidy, which is equivalent to a
one-time grant, the commercial interest rate during the
investigation period in India, i.e. 14 % was considered
appropriate. The amount of subsidy has then been allo-
cated over total exports during the investigation period.

The GOI and three exporters claimed that any benefit
should be allocated over total company turnover, on the
basis that any machinery imported under the EPCG
scheme would be used for both export and domestic
production. It is further claimed that the true purpose of
the scheme is to assist Indian companies to update their
technology and to become more competitive on the
international market (as well as to prevent a loss of
foreign exchange), and that the scheme should not be
considered as an export subsidy. However, this argument
is rejected. As outlined above, in order to avail of the
scheme, an undertaking to export has to be given.
Therefore, the subsidy is deemed to be contingent upon
export, and, in accordance with paragraph F(b)(I) of the
Calculation Guidelines (1), the benefit has then been allo-
cated over export turnover for the investigation period.

(58)

scheme
Two companies availed themselves of
during the investigation period and obtained subsidies of
between 0,0 % and 0,8 %.

this

e) Export Processing Zones (EPZ)/Export Oriented

Units (EOU)

(59) Another instrument under the Export

Import Policy
alleged in the complaint to involve export-related assis-
tance is the EPZ/EOU scheme, which was introduced on
22 June 1994.

(60)

The Commission established that no producer of the
product concerned was established in an EPZ or was an
EOU. There is therefore no need for the Commission to
assess this scheme in the context of the investigation.

f) Income Tax Exemption Scheme (ITES)

(61)

The Income Tax Act 1961 is the legal basis under which
the ITES operates. The Act, which is amended yearly by
the Finance Act, sets out the basis for the collection of
taxes as well as various exemptions/deductions which
can be claimed. Among the exemptions which can be
claimed by firms are those covered by Sections 10A,
10B and 80HHC of the Act.

(62)

The Commission established that no producer of the
product concerned made a claim under the ITES during
the IP. There is therefore no need for the Commission to
assess this scheme in the context of the investigation.

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

L 31/50

EN

Official Journal of the European Communities

5. 2. 2000

g) Amount of countervailable subsidies

(63)

In view of the above, the total amount of countervailable subsidies for each of the investigated
exporters is as follows.

DEPB
(Pre-Export)

DEPB
(Post-Export)

Essar Steel Ltd

Steel Authority of India Ltd

Tata Iron and Steel Co. Ltd

0,0

0,0

0,0

4,1

12,3

8,7

EPCGS

0,8

0,0

0,0

(%)

Total

4,9

12,3

8,7

2. SOUTH AFRICA

a) Introduction

(64) On the basis of

the information contained in the
complaint and the replies to the Commission's question-
naire, the Commission investigated the following alleged
subsidy schemes:

interest rates

— tax holiday for investments in manufacturing
— loans at preferential
— import duty exemption
— assistance with export marketing
— preferential freight and electricity costs
— price rebates on exported secondary steel products.

the

the time of

Industrial
Three programmes, namely the Regional
Simplified
(RIDP),
Development
Programme
Industrial Development Programme (SRIDP),
Regional
Incentive Scheme, were not
and the General Export
investigated. At
the
the opening of
proceeding, the Government of South Africa (GOSA)
had already provided evidence showing that
these
programmes were discontinued between November
1996 and July 1997. The Commission,
therefore,
accepted that
the exporters concerned could have
received no benefit from them during the investigation
period.

(65)

(66)

b) Termination

(70)

For those schemes found to be used by the companies
under investigation, it was determined that the cumula-
tive level of benefit varied from 0,10 % to 0,48 %. As
this would represent a de minimis level of subsidisation
in accordance with Article 14(5) of the Basic Decision,
the Commission did not need to further analyse the
countervailability of each individual scheme. Instead, the
Commission decided that
this proceeding should be
terminated in respect of South Africa without the impo-
sition of duties.

— tax credits and exemptions

— accelerated depreciation

— import duty exemption

— matching funds

— tax credit for investment in scant natural resources

areas

— loans at preferential

interest rates

— subsidies for companies located in industrial parks

and export processing zones.

(68)

Further details of these schemes are set out below.

(69)

The first six schemes are based on the Statute for
Upgrading Industries. The last scheme is based on the
Statute for the Establishment and Administration of
Science-based Parks and the Statute for the Establish-
ment and Management of Export Processing Zones.

b) Tax credits for the purchase of automation and

pollution control equipment

Legal basis

The basic instrument involving economic development
of the Taiwanese industry is the Statute for Upgrading
Industries (SUI) which entered into force on 1 January
1991 and was last amended on 27 January 1995. The
Statute is supplemented by the Enforcement Rules of the
Statute for Upgrading Industries as last amended on 27
January 1995. The tax credits are covered by Article 6 of
the SUI. Furthermore, the practical implementation of
the scheme is regulated by the Measures Governing the
Application of Tax Deductions promulgated on 15 April
1991 by the Executive Yuan which was last amended on
27 February 1995.

3. TAIWAN

a) Introduction

Eligibility

(67) On the basis of

the information contained in the
complaint and the replies to the Commission's question-
naire,
the
services
the Commission
following alleged subsidy schemes:

investigated

(71)

The tax credits are available to all manufacturing compa-
nies. There is no specific export requirement nor is
availability dependent on certain product
types or
minimum production quantity or turnover.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/51

(72) However, pursuant to Article 6 of the SUI, tax exemp-
tions are only granted for the following limited number
of investments:

— investment in equipment for automation of produc-

tion

— investment in equipment for pollution control.

(73)

The SUI states that the investment in the equipment
should exceed TWD 600 000 (New Taiwan Dollars). The
tax credits for the different types of investment can be
cumulated. The amount of tax credit is limited to 50 %
of the total amount of tax payable in any current year.

Amount of tax credit

(74) Any eligible company which invests in the abovemen-
tioned equipment types may credit 10 % to 20 % of the
the corporate income tax
purchase amount against
In case the amount of
payable for the current year.
income tax payable is less than the deductible amount,
the benefit may be carried over during the next four
years.

(75)

The amount of tax credit is determined as follows.

For the purchase of domestically manufactured auto-
mated equipment or pollution control equipment, the
credit rate is 20 %. For the purchase of foreign made
automated or pollution control equipment, the credit
rate is 10 %. For the purchase of technology for automa-
tion production, the permissible credit is at the rate of
10 %.

Practical

implementation

(76)

In order to obtain the tax credits, a company makes an
application for the issuance of a tax deduction certificate
to the Industrial Development Bureau (IDB) of
the
Ministry of Economic Affairs within six months of the
date of delivery of the equipment or the date of comple-
tion of the project. Prior to issuing the tax deduction
certificate, the local tax authorities will verify whether
the equipment falls within the criteria of Article 6 of the
SUI and has effectively been installed. Once the certifi-
cate is issued, the tax credit can be deducted in the tax
declaration for the current year (item 95 on the tax
declaration).

Countervailability

(77)

The tax credits under Article 6 of the SUI constitute
countervailable subsidies in the sense of Article 3(4)(b)
of the Basic Decision. The tax credits constitute subsidies
which are contingent upon the use of domestic over
imported goods. Although the programme provides for

for

imported as well as domestically
a tax credit
produced equipment, the subsidy is doubled for the
purchase of domestic equipment and therefore, directly
provides an incentive for the purchase of Taiwanese
made equipment. The verification revealed that
the
Taiwanese authorities tend to favour the purchase of
domestically manufactured equipment over imported
machinery by providing for a differentiated level of
benefit (20 % for domestic versus 10 % for imported
equipment).

(78)

The scheme constitutes a subsidy as the financial contri-
bution by the Government of Taiwan (GOT) in the form
of tax credits confers a benefit upon exporters. It is a
subsidy contingent in law upon the use of domestic over
imported goods and is therefore deemed to be specific
under Article 3(4)(b) of the Basic Decision.

(79)

For the abovementioned reasons, it is considered that
the tax credits constitute countervailable subsidies.

Calculation of the benefit

(80)

(81)

The amount of subsidy should be calculated on the basis
of the amount of tax unpaid during the investigation
period (the investigation period in this proceeding corre-
sponds with a tax year in Taiwan i.e. 1 January 1998 to
31 December 1998). The total amount of subsidy
should be allocated over total sales since this subsidy
benefits both domestic and export sales.

The GOT and one company claim that the Commission
should have calculated the benefit from the subsidy to
be the difference between the two rates i.e. 20 % tax
credit for domestically purchased equipment and 10 %
for imported equipment. The Commission countervailed
the full amount of tax credits since the tax credit of
20 % for domestically purchased equipment cannot be
considered as a deviation from a standard tax credit rate
of 10 %. The two tax credit rates should be considered
as separate programmes which are both specific for
domestically purchased equipment and imported equip-
ment respectively. In the absence of the 20 % tax credit
for domestically-produced equipment, a company would
have received no tax credit, since the 10 % rate only
applies to imported machinery; it is not a general rate.
Therefore, the Commission concluded that the amount
of the subsidy is the total revenue foregone by the GOT.

(82) One company benefited from this scheme and obtained

a benefit of 2,19 %.

L 31/52

EN

Official Journal of the European Communities

5. 2. 2000

c) Tax credits for investment in certain enterprises

(88)

Eligibility

(83)

(invested company). The

Pursuant to Article 8 of the SUI, the tax credit is avail-
able to any investor which buys registered stocks issued
technology-based enterprise or an
by an important
important invested enterprise designated by the govern-
ment
investing company
should hold the registered stocks for a period of at least
two years. There is no precise definition of important
invested
technology-based enterprise. An important
enterprise may be any enterprise with a capital of TWD
2 billion providing it has been designated as such by the
GOT.

(89)

Amount of tax credit

(84) Any eligible company which invested in the abovemen-
tioned enterprises may credit 20 % of the price paid for
the acquisition of such stocks against
the corporate
income tax payable.

(85)

(86)

(87)

Practical

implementation

In order to obtain the tax credits, the ‘invested’ company
(i.e. the company in which the investment is made)
makes an application for the issuance of a tax deduction
certificate to IDB. Prior to issuing the tax certificate, IDB
will verify whether the company qualifies as a tech-
nology-based enterprise or whether the invested enter-
prise was designated as an important invested company
by the government authorities. Once the certificate is
issued to the invested company, the investor may claim
the tax credit which can be deducted in the tax declara-
tion for the current year (item 95 on the tax declara-
tion).

Countervailability

The tax credits under Article 8 SUI constitute counter-
vailable subsidies in the sense of Article 3(2)(a) of the
Basic Decision. The GOT has limited access to the
subsidy to enterprises which make a specific investment.
The verification revealed that the Taiwanese authorities
in effect favour investment in certain sectors and enter-
prises.

The scheme constitutes a subsidy as the financial contri-
bution by the GOT in the form of tax credits confers a
benefit to exporters. It is a subsidy which is specific to
certain enterprises in Taiwan pursuant to Article 3(2)(a)
of the Basic Decision.

The GOT claims that this programme does not consti-
tute a subsidy since there is no financial contribution to
invested companies. This is not correct. As explained
above, a company which invests in certain enterprises
obtains a tax credit for 20 % of the amount invested. A
tax credit clearly constitutes a financial contribution by
the GOT, i.e. revenue foregone in the sense of Article
2(1)(a)(ii) of the Basic Decision and a benefit is thereby
conferred to the investing company.

The GOT and one company claim that this programme
is generally available and therefore non-specific, as it is
open to all companies investing in certain enterprises.
The Commission, however, found that the access to this
programme is explicitly limited to companies which
invest in certain enterprises, since not all investments in
stocks are eligible for tax credits. Only investments in a
limited number of enterprises, i.e. important technology-
based or important invested enterprises will qualify for a
tax credit. The Commission agrees with the GOT that
the definition of the eligible enterprises,
is clear and
objective. However, the definition is not neutral or hori-
zontal on application, as required by Article 3(2)(b) of
the Basic Decision, since it limits the number of invest-
ments which may result in a tax credit, on the basis of
the activity of the firms concerned. If the investing enter-
prise wishes to obtain the subsidy, its freedom of choice
is restricted on a sector-specific basis. Article 2 of the
Criteria for determining the scope of major technology
enterprises with respect to manufacturing industry and
to 11
technical-service industry limits the tax credit
specific type of investments. Consequently, the access to
this programme is dependent upon making investment
in certain enterprises; it is not generally available and is
therefore countervailable under Article 3(2)(a) of
the
Basic Decision.

(90)

For the abovementioned reasons, it is considered that
the tax credits constitute countervailable subsidies.

Calculation of the benefit

(91)

The benefit to the exporters should be calculated on the
basis of the tax credit that was effectively granted to the
exporters during the investigation period. The amount of
benefit should be allocated over the total turnover of the
company during the investigation period.

(92) One company benefited from this scheme and obtained

a benefit of 1,34 %.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/53

d) Tax credits for R & D and personnel training

Countervailability

Legal basis

(93)

The tax credits for R & D and personnel training are
covered by Article 6 of the SUI. Furthermore, the prac-
tical implementation of the scheme is regulated by the
Measures governing the application of tax deduction for
company investment in R & D, personnel training and
establishing a world-wide brand image (hereinafter
referred to as ‘the Measures’) promulgated on 15 April
1991 by the Executive Yuan which was last amended on
28 May 1997.

Eligibility

(94)

The tax credits are available to all manufacturing indus-
tries as well as agriculture and services. There is no
specific export requirement nor is availability depending
on certain product
types or minimum production
quantity or turnover.

Amount of tax credit

(95) As regards investments in R & D, if the total expenditure
for R & D reaches TWD 2 000 000 or 2 % of the net
business revenue in the same taxable year, 15 % thereof
may be deducted from the corporate income tax payable
for that year.
the total expenditure reaches TWD
2 000 000 and exceeds 3 % of the net business revenue,
20 % of the exceeding amount may be deducted from
the corporate income tax.

If

(96)

(97)

(98)

Pursuant to Article 6 of the Measures, if the total expen-
diture invested by a company in personnel
training
reaches TWD 600 000 in the tax year, 15 % of the
investment may be deducted from the corporate income
tax payable.

For both types of tax credit, if the amount of corporate
income tax for the current year is less than the deduct-
ible amount, the benefit may be carried over during the
next four years.

Practical

implementation

In order to obtain the tax credits, a company attaches a
special application to the corporate income tax return.
The local tax authorities will verify whether the expenses
the SUI and
fall within the criteria of Article 6 of
Articles 2 and 3 of the Measures and will determine the
amount which can be deducted. Once the local tax
authorities approve the amount, the tax credit can be
deducted in the tax declaration for the current fiscal
year.

(99)

and

service

agricultural

The tax credits for R & D and personnel training under
Article 6 of the SUI do not constitute countervailable
subsidies. The tax credits are generally available for all
industries
manufacturing,
investing in R & D and personnel training. Furthermore,
the eligible expenses are described in detail in Article 2
(R & D) and Article 3 (personnel training) of the Meas-
ures, and the eligible activities are of a type which may
be undertaken by firms in all sectors of the industry.
There is no discretion for the tax authorities to deter-
mine which investment is eligible or not. Finally, the
verification revealed that the tax credits have in fact been
used by all sectors of industry.

e) Other tax credits

(100) The following tax credits and exemptions were found to
exist but not to have been used by the exporting produ-
cers of the product concerned:

— tax credit for the establishment of internationally

recognised brands,

— five year tax exemption for certain designated enter-

prises under Article 8 of the SUI,

— five year corporate tax exemption under Articles 15
and 17 of the Statute for the Establishment and
Administration of a Science-based park.

(101) Since it was found that these programmes were not
used, the countervailability of the credits has not been
examined.

f) Accelerated depreciation

Eligibility

(102) Article 5 of the SUI provides for the acceleration of
depreciation if a manufacturing company invests in
certain types of fixed assets. The eligible fixed assets are
equipment for use in R & D, inspection of pilot prod-
ucts, energy saving or alternative energy purposes.

Practical

implementation

(103) A company which has invested in eligible equipment has
to make an application to IDB or the Energy Commis-
sion which includes a description of the machinery and
a copy of the catalogue for the machinery. IDB or the
Energy Commission verifies whether the machinery is
eligible and issues a certificate. When the corporate
income tax return is filed with the tax authorities, the
company submits the certificate(s) and a list of all items
which were approved for accelerated depreciation. The
local tax authorities will verify again whether the machi-
nery falls within the criteria of Article 5 of the SUI and
whether the accelerated depreciation has been applied
correctly.

L 31/54

EN

Official Journal of the European Communities

5. 2. 2000

Amount of benefit

concerned used the

(104) Pursuant to Article 51 of the Tax Code, a company can
use three methods to depreciate its assets: the straight-
line method, the fixed percentage on diminishing book-
value method or the working-hour method. The verifica-
tion revealed that all exporting producers of the prod-
straight-line depreciation
ucts
method which provides for the depreciation of a fixed
amount during the service life of
the equipment.
According to the Table of Service Life of Fixed Assets,
each type of machinery has a fixed service life of
between two and fifty years. For the machinery used in
the steel industry, the depreciation period is seven years
on average.

(105) The benefit under the accelerated depreciation provi-
sions consists of a reduced depreciation period of two
years instead of
the normal depreciation period (i.e.
seven years on average in the steel industry) established
in the Table of Service Life of Fixed Assets.

Countervailability

(106) The accelerated depreciation provisions under Article 5
of the SUI constitute a countervailable subsidy. The veri-
fication revealed that despite the apparently objective
criteria set out in Article 5 of the SUI, one company
for accelerated depreciation to
used the provisions
depreciate all machinery and equipment
in a new
production line as well as buildings. This machinery is
used for the production of steel products and has no
direct effect on R & D, pilot products or energy saving.
The Energy Commission and the local tax authorities
approved this request. It appears that these investments
do not fall within the criteria of Article 5 of the SUI, i.e.
equipment used for energy saving, pilot products or
investments in R & D. Therefore, it should be concluded
that the granting authority has discretion in the decision
to grant the benefit of accelerated depreciation, and is
able to favour certain enterprises over others.

IDB. After verification,

(107) After disclosure, the GOT claims that the certificate for
accelerated depreciation was granted by the Energy
Commission and not
the
Commission services agree with the GOT that the certifi-
cate was granted by the Energy Commission for the
alleged purchase of energy saving equipment. Neverthe-
less,
the
the Commission still has to conclude that
subsidy involved is countervailable in the sense of
Article 3(2)(a) of the Basic Decision, since the criteria
appear not to be adhered to by the granting authority in
all cases and access to the subsidy is therefore effectively

limited, by means of discretion, to certain enterprises.
The company which made use of this programme accel-
erated its depreciation on a large number of items which
can clearly not be classified as energy savings equip-
ment, such as buildings. Therefore,
the Commission
concludes that this programme confers a benefit to the
product concerned and is countervailable.

it did not benefit

(108) One company submits that although it applied the accel-
erated depreciation,
from the
programme since its overall depreciation amount under
accelerated depreciation was less during the POI than
would have been the case under the normal depreciation
method. In establishing whether a benefit was conferred
to this company, the Commission, in accordance with
its normal methodology, took into account only the tax
saving incurred by all
items which were still being
depreciated during the POI, comparing the amounts
depreciated under the normal and accelerated schedules.
All items which were, according to the accounts of the
company, already fully written off and have under
standard accountancy principles no value, were excluded
from the calculation of
the
company's argument is not founded.

the benefit. Therefore,

(109)

It is considered therefore, that the benefit of accelerated
depreciation constitutes a specific and consequently
countervailable subsidy in the sense of Article 3(2)(a) of
the Basic Decision.

Calculation of the benefit

(110) As explained above, the benefit to the exporters should
be calculated as the difference between the amount of
tax that would have been payable in the investigation
period if the normal depreciation rate was used and the
amount of tax effectively paid under accelerated depre-
ciation. The calculation of the difference was made on
the basis of all fixed assets (buildings and machinery)
which were still being depreciated in the investigation
period. The amount of benefit should be allocated over
the total turnover of the company.

(111) One company made use of
obtained a benefit of 0,60 %.

this programme and

g) Import duty exemption

Legal basis

(112) Chapters 84, 85 and 90 of the Customs Import Tariff
and Classification of Import and Export Commodities of
the Republic of China (hereinafter ‘the Customs Code’).

5. 2. 2000

EN

Official Journal of the European Communities

L 31/55

Eligibility

(113) Pursuant

to the abovementioned provisions of

the
Customs Code,
a manufacturing company which
imports machinery for the development of new prod-
ucts, quality upgrading, increase of production, achieve-
ment of energy conservation, promotion of recycling or
improvement of production techniques, which is not yet
being manufactured locally,
from import
duties.

is exempt

Practical

implementation

(114) A company which intends to import machinery or
equipment makes an application to IDB prior to the
importation of the machinery. If IDB is satisfied that the
issue a
machinery is not produced in Taiwan,
certificate which is sent to the applicant and the customs
department. The customs services will verify whether the
imported machinery is
to the machinery
described in the IDB certificate. This verification is
undertaken on a random basis.

identical

it will

Amount of duty exemption

the GOT were to decide to abolish the import duty on
such machines,
this would be a different matter.
However, as long as the duty is ‘otherwise due’ and firms
are exempted from it, this is a subsidy under Article
2(1)(a)(ii).

(118) One company claims that this programme is outside the
scope of the investigation since the programme was not
specifically mentioned in the complaint which led to the
initiation of the investigation. The Commission notes
that the complainant listed the import duty exemption
for machinery and equipment in the complaint (page 9
Section B.2.2.2). Although the complainant stated that
such a programme is available for companies located in
tax exempt zones, science-based industrial parks or
bonded factories, the Commission considers that this
information constitutes sufficient evidence to commence
an investigation regarding import duty exemption for
it is the role of the investi-
machinery. Furthermore,
gating authority to determine the correct legal basis and
practical
implementation of any programme which is
alleged in the complaint. For these reasons, the Commis-
sion has included this programme in the investigation
and the claim of the exporter cannot be accepted.

(119) Therefore, it is considered that the import duty exemp-
tion on machinery constitutes a countervailable subsidy
in the sense of Article 3(2)(a) of the Basic Decision.

(115) The amount of subsidy is the amount of import duties
which would normally be payable without the benefit of
the exemption. The normal duty rate for machinery lies
between 2 % and 20 %.

Calculation of the benefit

Conclusion

(116) The import duty exemption pursuant to the Customs
Code constitutes a countervailable subsidy. Due to the
nature of the subsidy, the programme as established will
automatically be disproportionately used by certain
industry sectors. The industry sectors whose machinery
is produced in Taiwan will not be eligible to use this
programme. Consequently, eligibility for the import duty
exemption is limited to industries which are obliged to
import machinery since the machinery is not available
on the local market. Industries which import machinery
which is also produced in Taiwan cannot obtain the
benefit.

(117) The GOT claims that the import duty exemption for
imported machinery does not constitute a subsidy in the
sense of Article 2(1)(a) of the Basic Decision. However,
for the Commission, it is clear that an exemption from
import duties constitutes revenue foregone for the GOT
whereby a benefit is conferred to the importer of the
machinery. This constitutes a subsidy in the sense of
Article 2(1)(a)(ii) of the Basic Decision. The GOT further
claims that if the programme was a subsidy, it is not
the Basic
countervailable under Article 3(2)(a) of
Decision. The Commission is of the view that an import
duty exemption for certain imported machinery which is
not produced domestically provides by definition for a
benefit to certain companies which are active in an
industry where the machinery is not made in Taiwan. If

(120) The benefit to the exporters should be calculated as the
amount of import duties payable without the benefit of
the exemption under this scheme. This amount should
be allocated over the normal service life of the machi-
nery in this industry,

i.e. seven years.

(121) Two companies made use of

this programme and

obtained benefits of 0,27 % and 0,32 %.

h) Other subsidies

(122) The complainant alleged that the exporting producers of
the product concerned benefited from a number of other
subsidy programmes. The questionnaire response and
the verification visits at the GOT and at the exporters
revealed that the programmes listed below were not
used by the exporting producers.

(123) Loans at preferential interest rates. During the verifica-
tion visits, it was established that loans were provided by
the Chiao Tung Bank and the Medium Business Bank of
Taiwan to one exporter but at normal commercial
conditions.

(124) Benefits for companies in export processing zones (EPZ)
and industrial parks. None of
the companies under
investigation (nor their related companies) were located
in an EPZ or industrial park.

L 31/56

EN

Official Journal of the European Communities

5. 2. 2000

(125) Benefits for companies located in areas with slow devel-
opment or with scant natural resources. The verification
revealed that none of the companies was located in an
area with slow development or scant natural resources.

(126) No ‘matching funds’ were provided to the companies

concerned.

Import duty exemption for raw materials — It was
established that none of
concerned
obtained benefits under this programme.

exporters

the

i) Total amount of subsidy

(127) The amount of subsidy was calculated according to the
methodology set out above.
in order to
encompass the full benefit to the companies concerned,
interest was added at the average commercial
interest
rate in Taiwan during the investigation period, i.e. 8 %.

In addition,

(128) One exporter claims that the addition of an interest
amount results in an overestimating of
the subsidy
amount. In regard to this claim, the interest element is
added in order to reflect the benefit to the recipient
obtained by not having to raise an equivalent amount of
money from commercial sources. Indeed, Article 6 of
the Basic Decision makes it clear that the benchmark for
the calculation of the subsidy is the equivalent cost of
funds on the commercial market. It should also be stated
that the ASCM does not preclude the addition of an
amount for interest for the purpose of calculating the
total amount of benefit to a recipient under a subsidy
scheme. Thus, the Community's consistent practice in
this area since the adoption of
revised legislation
following the conclusion of the Uruguay Round, has
been to add an amount for interest in calculating the
total benefit in such cases. This claim should therefore
be rejected.

(129) The following subsidy rates for the cooperating compa-

nies were established:

China Steel Corporation

Yieh Loong
Enterprise Co. Ltd

(%)

Tax credit (automation and pollution control equipment)

Tax credit (investment in certain enterprises)

Accelerated depreciation

Import duty exemption

Total amount of subsidy

2,19

1,34

0,60

0,27

4,40

0

0

0

0,32

0,32

(130) For information, it should be noted that the weighted
average country-wide subsidy margin for
the two
for
exporting producers investigated, which account
about half of the exports to the Community originating
in Taiwan, expressed as a percentage of the cif price at
Community frontier level
is 2,77 %. which is signifi-
cantly above the de minimis threshold for Taiwan (i.e.
1 %). In addition, it cannot be excluded that the country-
wide margin would be higher
taking into account
possible benefits received by non-cooperators.

D. COMMUNITY INDUSTRY

1. Determination of

relevant Community

the
market

(131) For

the

purposes

establishing whether

the
of
Community industry had suffered injury and,
in this
context, for determining consumption and the various
economic indicators related to the situation of
the
Community industry,
it had to be examined whether
production of
this industry destined for the captive
market should be excluded for the purposes of this
analysis or whether injury and consumption should be

assessed in relation to the entire production of
Community industry.

the

(132) There are 16 producers of hot-rolled coils in the
Community. Around 70 % of the hot-rolled coils manu-
factured by these producers are used in a captive market,
i.e. they are further transformed by these producers in
an integrated process (hereinafter referred to as ‘captive
market’). These hot-rolled coils
follow an internal
process of transfers to downstream processing works,
for which no invoices are issued since the transfers
occur within the same legal entity. The remaining
production (hereinafter referred to as ‘free market’) is
sold to both related and unrelated parties.

(133)

In this respect, the complainant claimed that two sepa-
rate markets should be distinguished. It claimed that the
hot-rolled coils destined for a captive market were not in
direct competition with subsidised imports. Conse-
quently, the imports subject to investigation could not
affect
the complainant has
In parallel,
claimed that the remaining production was sold on the
free market where competition with subsidised imports

this market.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/57

takes place. The main purchasers on the free market are
independent cold-rolling mills such as tube makers, steel
service centres (hereinafter referred to as ‘SSCs’), steel
merchants and stockholders. Only the hot-rolled coils
sold on the free market are subject to the complaint.

(134) Exporting producers and importers of hot-rolled coils
onto the Community market claimed that the definition
of the product concerned and the like product covered
all hot-rolled coils. They claimed in particular that there
was no clear separation between the captive and free
markets and that the definition of the free market made
by the complainant was arbitrary. They therefore
requested that the assessment of the Community market
should include the captive market and the free market
taken together.

(135)

In support of this claim, reference was made to the
Gimelec judgment (1) of the European Court of Justice.
They stated that
the
Court referred to the following factors to rule out the
existence of two separate markets:

in the abovementioned ruling,

— the product concerned was sold on the same market

and used for the same purposes,

— the Community

product
concerned both to related and unrelated customers
and charged more or less the same price,

producers

sold

the

— companies on the downstream market used to buy
the product
concerned not only from related
Community suppliers but also from importers or
other unrelated producers.

producers

that Community

(136) Some exporting producers claimed that, in the light of
the above judgement, the legal conditions to separate the
markets were not met in the present case. They consid-
ered
choose,
depending on market conditions, to sell alternatively to
the free and captive markets since Community produc-
tion of the two categories of hot-rolled coils is alike. It
was claimed that the alleged movements between the
two segments of the market legally prevented the exclu-
sion of part of Community production from the exam-
ination of injury, and in particular from Community
consumption.

could

(137)

In this respect the Commission made the following find-
ings:

(a) given the high level of integration existing in the
steel industry in general and in the production of the
product concerned in particular,
the Community
producers of the product concerned merely physi-
cally transferred, without invoicing, hot-rolled coils
intended for the captive market. No invoices were
issued since the parties involved did not have sepa-
rate legal identities. As a result, there were, within
the captive market, no prices for transfers compar-
able to those in the free market.

(1) Case C-315-90 of 27.11.1991.

(b) the Community industry did not produce for stock-
piling hot-rolled coils which could subsequently be
delivered either for captive use or sold on the free
market. This is because all users of hot-rolled coils,
including the integrated processes of the Community
industry, have technical constraints for the produc-
tion of downstream products. As a result, move-
ments, if any, of hot-rolled coils between the two
markets are insignificant.

(c) the

investigation showed that

the Community
producers did not purchase the product concerned
for the captive market
from independent parties
inside or outside of the Community. As a result
hot-rolled coils intended for the captive market were
not in competition with other hot-rolled coils avail-
able in the Community. Consequently, the captive
market can clearly be distinguished from the free
market.

(138) On this basis the Commission considers that the separa-
tion between the free and the captive market is fully in
line with the requirements of the Basic Decision and the
Community institutions' past practice.

(139) For the purposes of establishing the economic indicators
relevant for the injury analysis such as development of
sales, profitability, etc.,
the Commission considered
whether sales from Community producers to related
parties having separate legal entities, should in general
be included in the determination of the free market. It
was found that such sales were made at prices more or
less the same as those charged to independent parties. In
addition, in line with claims by certain exporting produ-
cers the investigation has confirmed that these related
parties are free to source their purchases from either
the
related or unrelated suppliers
Community. Consequently, it was concluded that sales
from Community producers to related parties having
separate legal entities were in competition with sales
from independent suppliers such as those located in the
countries concerned and that these sales should there-
fore be included in the determination of sales in the free
market.

in or outside

(140) One Community producer claimed, however, that its
sales to related parties should be considered as belonging
It was argued that the prices
to the captive market.
invoiced to its related parties were not the market prices
and were significantly different from those applied to
independent customers. The producer added that the
parent company did not allow any related parties to
purchase hot-rolled coils from independent parties on
the free market. Consequently, hot-rolled coils sold to
related parties were not
any direct
competition from other hot-rolled coils. They should
therefore be excluded from the determination of the free
market.

affected by

L 31/58

EN

Official Journal of the European Communities

5. 2. 2000

(141) The investigation confirmed that

the policy of

that
group was not to allow its related parties to purchase
hot-rolled coils on the free market. Furthermore, the
analysis of sales prices showed that the prices invoiced
to these related parties were in many instances signifi-
cantly different from market prices charged to indepen-
dent parties. Moreover, all the sales were made to related
users who used the products captively without reselling
them onwards, as such. Consequently, the Commission
concluded that
the hot-rolled coils
sales of
concerned could not be considered as being sold on the
free market and should therefore not be included in the
determination of the free market.

the

(142)

In conclusion, hot-rolled coils used by Community
producers as pre-material for further transformation in
an integrated process within one single legal entity were
considered to be part of a captive market. The same
applies to sales by the aforementioned Community
producer who could demonstrate that
its sales to a
related customer did indeed belong to a captive market.
All other sales of the producers in the Community were
considered to be part of the free market. Consequently,
the situation of the Community industry in terms of the
development of the various economic indicators such as
production, sales, market share and profitability was
examined with respect to the free market.

(143)

It should be noted that the above findings regarding the
separation and the determination of the above markets
are reflected in the data collected in the framework of
the ECSC Treaty, in particular for the surveillance of the
steel markets. Indeed, such data differentiates the use of
the hot-rolled coils basically along the same lines.

2. Definition of the Community industry

of the said companies as Community producers of the
product concerned.

(147) Accordingly,

it was considered that

there were no
grounds for excluding any producers from the definition
of Community production of hot-rolled coils. In accord-
ance with Article 9(1) of
the Basic Decision all 16
producers operating in the Community market represent
total Community production.

b) Community industry

(148) The complaint was lodged on behalf of 11 out of the 16
Community producers of hot-rolled coils while the
remaining 5 supported the complaint.

(149) The Commission received 10 replies to questionnaires
from the complainant Community producers. One small
producer decided not to provide the Commission with a
response.

(150) Two of the 10 Community producers that replied to the
Commission's questionnaire, were unable to provide all
data requested during the investigation in a format
which would allow its aggregation with the data avail-
able for the other Community producers.

(151) Some exporting producers claimed that at

least one
Community producer included in the definition of the
Community industry set out above received preferential
treatment in relation to the requirements imposed on
interested parties during anti-subsidy investigations. In
particular
said Community
producer did not provide the Commission with a reply
to its questionnaire within the statutory deadlines for the
imposition of provisional duties. They considered that
this constitutes discriminatory treatment and violates
Article 11(2) of the Basic Decision.

they argued that

the

a) Total Community production

(144) Several exporting producers claimed that a number of
producers in the Community should be excluded from
the definition of Community production given that they
had imported hot-rolled coils
countries
concerned.

from the

(152)

(145) The Commission found that none of

the producers
investigated had imported hot-rolled coils from the
countries
concerned during the period examined.
However, certain SSCs and tube producers related to
these Community producers had made such imports
during that period.

(146)

In line with the findings on the definition of the relevant
Community markets outlined in recitals 131 to 143, the
investigation confirmed, however,
these related
parties had acted independently from the producers
related to them in their operations on the free market.
Consequently, the purchases could not affect the status

that

(153)

It should be noted that all the Community producers
included in the definition of the Community industry
replied to the Commission's questionnaire within the
deadlines set forth in the Basic Decision and therefore
within the deadline for the imposition of provisional
measures. The Commission considers that all interested
parties in the present proceeding in similar situation
were given equal treatment. Consequently, any claims
suggesting an infringement to Article 11(2) of the Basic
Decision and discriminatory treatment by the Commis-
sion are not founded.

industry

In conclusion, the eight Community producers having
fully cooperated in the investigation make up the
Community
this
proceeding. They fulfil the requirement of Article 10(7)
of
the Basic Decision, since during the investigation
period they accounted for around 65 % of the total
Community production of the product concerned.

purposes

the

for

of

5. 2. 2000

EN

Official Journal of the European Communities

L 31/59

(154) These producers are accordingly considered as

the
Community industry and are referred to as such herein-
after as they represent a major proportion of
total
Community production within the meaning of Article
9(1) of the Basic Decision.

(160)

In this respect it should be noted that the evidence
submitted by the Indian exporting producers provided
no grounds for considering their
imports into the
Community as negligible, in particular given the meth-
odology used to determine the relevant Community
market set out in recitals (131) to (143). Indeed, the
information and the replies to the
relevant Eurostat
show imports
Commission's questionnaire did not
below the de minimis
the
imports from India were considered to be above the de
minimis threshold set out in Articles 10(10) and 14(4) of
the Basic Decision.

threshold Consequently,

b) Cumulative assessment of imports

(161) The Commission considered whether imports of hot-
rolled coils originating in India and Taiwan should be
assessed cumulatively in accordance with Article 8(4) of
the Basic Decision.

(162)

It was therefore examined whether all criteria were met
to cumulate imports from the countries concerned. The
results of the examination showed that:

— the margin of subsidy relating to each country, as

shown above, was more than de minimis,

— the volume of imports from each country was not
negligible when compared to Community consump-
tion,

— the analysis of

the

Indeed,

exporting

conditions of

competition
between imported hot-rolled coils and the conditions
of competition between imported hot-rolled coils
and the like Community product also indicated that
imports from the countries concerned should be
countries
the
cumulated.
concerned mainly sold hotrolled coils on the free
Community market directly to unrelated customers,
such as cold rolling mills, tube makers, SSCs and
steel merchants. Hot-rolled coils were also imported
via related sales companies, which subsequently sold
the product concerned to the same categories of
customers mentioned above. The
investigation
showed that the Community industry was selling the
like product through the same sales channels and to
the same categories of customers. Finally,
it was
found that a similar pricing policy was followed for
all these sales.

(163) Accordingly, contrary to the suggestion made by some
exporting producers, the Commission concluded that all
conditions justifying the cumulation of the imports from
the abovementioned countries were met.

E. INJURY

1. Apparent consumption

(155) Apparent

in the
consumption of hot-rolled coils
Community was established on the basis of the total
sales made by the 16 Community producers on the free
market and total imports of the product concerned into
the Community as indicated in the Eurostat import stat-
istics and the exporting producers' replies to the ques-
tionnaires.

(156) From 1995 up to the investigation period, apparent
consumption in the Community increased by 9 %,
namely from 18,4 million tonnes to 20,1 million
tonnes. In 1995 the free market was characterised by
exceptionally high sales prices and good demand, partic-
ularly for Community-produced hot-rolled coils. The
following year, however,
the market
decreased by 11 %.

the volume of

(157) Between 1996 and the investigation period, apparent
consumption increased steadily. The main growth
occurred between 1996 and 1997 when the market
increased by 22 %. Between 1997 and the investigation
period,

it increased by only 0,4 %.

2. Imports from the countries concerned

a) Negligible imports

(158) Based on the provisions of Article 10(10) of the Basic
Decision, the assessment of whether or not imports were
negligible was made in relation to apparent consump-
tion of
the product concerned on the Community
market.

(159) On the basis of Eurostat statistics imports from India
were slightly above the 1 % threshold foreseen in Article
10(10) of the Basic Decision. Exporting producers in
India claimed that their imports were negligible and that
they should be excluded from the scope of the invest-
the
igation. Since India is a developing country,
Commission also examined in accordance with Article
14(4) of the Basic Decision, whether imports from India
represented less than 4 % of total imports, the de minimis
threshold for developing countries. In fact, imports from
India represent 5,4 % of total

imports.

L 31/60

EN

Official Journal of the European Communities

5. 2. 2000

c) Volume of the imports concerned

(164) Based on Eurostat import statistics, between 1995 and
the investigation period, the volume of imports into the
Community from the countries concerned increased
from 8 000 tonnes to 844 000 tonnes. The main
increase occurred between 1997 and the investigation
period (+ 797 000 tonnes).

(165) The analysis of

the developments during the invest-
igation period indicated that imports from all the coun-
tries concerned were made mainly during the first half of
the investigation period (551 000 tonnes); they subse-
quently dropped by 47 % in the second half of the
investigation period but were still significantly higher
than in the second half of 1997.

(166) As already mentioned in recital 11, the various types of
hot-rolled coils are commonly classified into two distinct
categories: black coils and pickled coils. The invest-
igation showed that black coils covered around 90 % of
all hot-rolled coils
countries
concerned.

imported from the

(171) The Commission found that, in general, a price adjust-
ment for differences in quality was not justified, particu-
larly as such differences were not apparent to users, and
as it emerged from the investigation that any alleged
difference in quality does not necessarily affect the use of
the product concerned.

(172) Accordingly,

the

comparison
expressed as a percentage of Community industry prices
are as follows:

results of

the price

— India: 6,7 %

— ESSAR: 6,1 %

— Tata: 6,1 %

— SAIL: 19,1 %

— Taiwan: 4,3 %

— Yieh Long: 3,9 %

— CSC: 7,5 %

d) Market share of imports

3. Situation of the Community industry between

1995 and investigation period

(167) The market share held by the exporting producers
increased from 0,01 % to 4,2 % between 1995 and the
investigation period. The actual
increases in import
volume thus allowed the countries concerned to gain
4,2 percentage points of the share of the Community
market.

(168) The main increases in market share occurred between
1997 and the investigation period, when the countries
concerned gained 4 percentage points market share.

e) Price undercutting

(169)

In order to evaluate any possible price undercutting,
prices of comparable types of hot-rolled coils were, as
far as possible, compared under similar sales conditions
on the Community market, in the same Member State
and to the same customers. The prices of the exporting
free-at-Community-frontier were compared
producer
with the Community industry's ex-factory prices. Where
necessary, exporting countries' sales prices were adjusted
to a free at Community-frontier level, customs duty paid
and including relevant
these
prices were also adjusted to ensure comparison at the
same level of trade as that of the Community industry.
All adjustments were based on the evidence collected
and verified by the Commission during the investigation.

import costs. Similarly,

(170) As already mentioned in recital 14 some exporting
producers
they
produced and sold on the Community market were not
of a comparable quality to that of
the Community
industry.

the hot-rolled coils

suggested that

a) Production

(173) The investigation showed that Community industry's
production peaked at 12,5 million tonnes in 1997. For
the remainder of the period examined the Community
industry's production remained stable at around 11,4
million tonnes although a fall
in consumption was
observed in 1996. It should be noted that this produc-
tion was either sold on the free market or exported to
third countries.

(174) As the production capacity of the Community industry
is used for hot-rolled coils intended for both the free and
the captive market, it was also considered necessary to
analyse information on such captive production in order
to ascertain that any drop in the production intended for
the free market was not due to an increased need for the
captive market.

(175)

It was found that between 1995 and the investigation
period, this production increased by 2 %, or by around
0,6 million tonnes. This indicated a relatively stable
captive production. As regards the trends in captive
production between 1997 and the investigation period,
these were similar to those observed above for the
production intended for the free market.

(176) Consequently, the decrease in production intended for
the free market is not due to a greater need for captive
production.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/61

b) Capacity and capacity utilisation

(177)

It is to be noted that production facilities can be used for
products destined for both the free and the captive
markets, as well as for other products not concerned by
this proceeding (including other steel grades and other
steel products). Capacity utilisation related to the
product concerned has therefore been established on the
basis of the capacities officially declared to the Commis-
sion within the framework of the ECSC Treaty. These
capacities are established according to specific para-
meters and must not be confused with the gross or
nameplate capacity. The gross or nameplate capacity is
the highest possible capacity achievable without taking
into account factors such as the personnel available,
holiday periods, set-up times, maintenance, etc.

(178) The capacity utilisation rate of the Community industry
was 87 % between 1995 and the investigation period,
except in 1997 when the Community industry's produc-
tion was at its peak and the rate reached 93 %. At that
time, both the consumption of hot-rolled coils destined
for the free market and those destined for the captive
market were high.

(179) The high utilisation rates were found to be normal
bearing in mind that in heavy industry, particularly in
the steel industry, high capacity utilisation is necessary
to reduce the impact of the high fixed costs of produc-
tion.

c) Orders received and sales volume

the reduction in the
between orders and deliveries,
orders received indicated a reduction of the level of the
economic activity, which will be examined below.

i i ) S a l e s

(182) During the period examined, the volume of sales slightly
increased from 9,6 million tonnes to 9,7 million tonnes,
an increase of 1 %.

(183) Within that period, the trend in sales volume broadly
consumption. However,
reflected the
between 1997 and the
the
Community industry's sales decreased by 12 % while
consumption increased slightly.

investigation period,

evolution of

(184) The Community industry submitted that the injury indi-
cator concerning sales set out above has been estab-
lished on the basis of transactions delivered and invoiced
during the periods specified. In this context, it is impor-
tant to point out, that the Community industry has
organised its production process in such a way that
users' orders made on a given date are delivered and
invoiced and thus sold to them, with a time lag of at
least three months. Therefore, in order to make a mean-
ingful assessment of the development, which occurred
during any given period, not only the actual sales but
also the orders received during such a period have to be
analysed. It is considered that any development observed
with respect to these orders is bound to translate into
corresponding developments of sales with a time lag
thereafter.

i ) O r d e r s r e c e i v e d

i i i ) D i f f e r e n t i a t i o n o f

t y p e o f s a l e s

(180)

For

this

purpose,

examined.

In order to complement the analysis on sales, the devel-
the orders received by the Community
opment of
industry was
the
Community industry submitted data which is also avail-
able under the framework of the surveillance of the
Community steel market under
the ECSC Treaty.
Although these data do not reflect exactly the situation
with respect to the product concerned but encompassed
a slightly broader category of products, it was found that
this aggregation of data could be considered repres-
entative for the situation of
the product concerned.
These data showed that 1997 was a year were the level
of orders was high as compared to the situation found
during the investigation period. Contrary to the stable
the apparent consumption between
development of
1997 and the investigation period shown above, orders
received by the Community industry declined by 17 %
between 1997 and the investigation period.

(185) The Community industry argued that in order to assess
the actual injury it suffered, the development of sales for
different types of hot-rolled coils under investigation,
namely black coils as compared to pickled coils, should
be analysed separately. The claim was that given the
high share of subsidised imported black coils in total
imports, the development of the Community industry'
sales volume and sales prices for that type of coils would
indicate a particularly injurious situation.

(186)

Investigation of this particular issue showed that from
1995 up to the investigation period (1998), the volume
of black coils sold by the Community industry on the
free market decreased by 13 %, whereas the volume of
pickled coils sold increased by 34 %. In absolute terms,
this represents a decrease of around 1 million tonnes in
sales of black coils and an increase of around 0,5 million
tonnes in sales of pickled coils.

(181) The above finding suggests that the economic activity of
the Community industry was more regular and evenly
spread throughout the year 1997 when the volume of
orders
received developed more in line with sales
volume. Furthermore, given the existence of a time lag

(187)

It also confirmed that the share between the sales of
black coils and pickled coils for the Community industry
was more balanced than that of the exporting producers.
From 1995 up to 1997 the share in sales volume was

L 31/62

EN

Official Journal of the European Communities

5. 2. 2000

70 % of black coils against 30 % of sales of pickled coils.
During the investigation period this share became 60 %
and 40 % respectively for black and pickled coils. This
development in total sales clearly shows that during the
investigation period a shift occurred from black to
i.e. from a category of products where
pickled coils,
imports where more present to one were they where less
prominent.

d) Price evolution

(188) During the period examined the Community industry's
weighted average sales price decreased by 10 %. In 1995
sales prices were at their highest for ten years. They
continued to follow a decreasing trend until 1997 (–
17 % and – 3 % compared to 1995 and 1996 respec-
tively) but recovered from 1997 up to the end of the
investigation period (+ 9 %).

e) Market share

(189) From 1995 up to the investigation period, the market
share held by the Community industry decreased by 3,7
percentage points, dropping from 52,0 % in 1995 to
48,3 % in the investigation period.

(190) Between 1995 and 1996 and between 1996 and 1997
the market share held by the Community industry
increased by 1,1 and 1,8 percentage points respectively.

(191) Between 1997 and the investigation period, however,
the Community industry lost all the market share previ-
ously gained and fell to a lower level than that in 1995.
The losses amounted to 6,6 percentage points. Further
analysis of this situation indicated that market share was
lost due to a decrease in sales both to related and
unrelated customers on the Community free market.

f) Profitability

(192) The average return on sales made by the Community
industry for the product concerned from 1995 up to the
investigation period decreased by 39 %. The high profits
(20,7 %) achieved in 1995 were the result of high prices
on the market at that time. In 1996, despite a downturn
in the market and a reduction in sales prices (15 %), the
Community industry remained profitable. However, the
recovery in sales volume in 1997 did not allow that
industry to increase its profit margin since its sales
prices again decreased by 3 %.

(193) During the investigation period profitability recovered
slightly from its 1997 level. The increase in sales prices
during the investigation period (9 % compared to 1997)
allowed the Community industry to achieve a profit
margin of 12,9 %. The Community industry claimed that
this level of profit was reasonable.

(194) Some

that

suggested

exporting

producers

the
Community industry achieved an extremely high level of
profitability during the investigation period and that the
development of
should have
indicator
warranted immediate termination of
the proceeding.
They said that such profit was significantly higher than
that considered reasonable by the Commission in past
cases involving steel products.

alone

this

(195)

it should be noted that

In this respect
the relevant
provisions of the Basic Decision and the WTO Agree-
ment state that the determination of
injury shall be
based on positive evidence of

(a) the volume of subsidised imports and the effect of
subsidised imports on prices on the Community
market for like products; and

(b) the consequent

impact of

those imports on the
Community industry. Moreover, they specify that
consideration shall be given to whether there has
been a significant increase in the volume of subsi-
dised imports, either in absolute terms or relative to
consumption in the Community. Furthermore, they
also specify that consideration shall be given to
whether there has been significant price undercutting
by subsidised imports or whether the effect of such
imports was to depress prices to a significant degree
or to prevent price increases. No one or more of
these factors can necessarily give decisive guidance.
Finally, they state that the examination of the impact
of subsidised imports on the domestic industry shall
include an evaluation of all the relevant economic
factors and indices having a bearing on the state of
the industry, including the magnitude of the actual
margins of subsidy, actual and potential decline in
sales, profit, output, market share, productivity, utili-
sation of capacity, factors affecting prices, etc. The
Basic Decision specifically states that this is list is not
exhaustive, nor can any one or more of these factors
necessarily give decisive guidance.

(196)

subsidised

In the present case, the investigation has shown that
significantly
imports of
imports have
increased in absolute and relative terms.
In addition,
low-priced subsidised imports were found to signifi-
the Community industry's prices.
cantly undercut
Furthermore, significant margins of subsidy were found
to exist for most of the exporting producers concerned.
All the above conditions being met, the Commission has
evaluated the potential and actual developments of a
number of relevant economic factors in its investigation
before reaching its definitive conclusions. Accordingly, it
is considered that the suggestion by some exporting
producers that only the level of profitability should have
warranted the termination of the proceeding is clearly
against the provisions of the Basic Decision.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/63

(197) Furthermore, the economic situation of the Community
industry during the investigation period, in particular its
price and profitability situation, must be seen in the light
of the structure of the hot-rolled coils market and the
developments that occurred in the economic situation of
the Community industry during the investigation period,
as set out in point 4 below.

(198) Finally, it is considered that the comparison of a specific
indicator pertaining to the Community
economic
industry with the same economic indicator worldwide
level
in the context of anti-subsidy
proceedings.

is not relevant

g) Investments and employment

(199) The investigation showed that investments were made
mainly in the replacement of machinery and equipment.
During the investigation period, the level of investment
was
Investments were
increased by 32 % as compared to 1995, consistent with
the high demand in 1997.

to the 1995 level.

similar

(200) As regards employment, the Community industry manu-
factures various products on the same site and with the
same machinery, notably hot-rolled coils. The invest-
igation showed that during the period examined
employment
the product
concerned decreased by 4 %.

the production of

for

h) Summary of

the Community
industry between 1995 and the investigation period

the situation of

(201)

(202)

Interested parties suggested that a determination of
injury during the investigation period could not be
carried out on the basis of a comparison of the situation
of
the Community industry established in the years
1995 and 1997. They found that, in particular, price
and profitability levels in 1995, production, capacity
utilisation, sales volume and market share levels in 1997
were not representative of what their levels should be
under conditions of fair competition. They thus argued
that on the basis of the other findings over the entire
period examined, it could not reasonably be concluded
injury.
that the Community industry suffered material

In this respect it should be noted that,
in the above
claim, interested parties have not stated in which respect
some economic indicators established in 1995 and 1997
could not be considered representative. They merely
stated that prices and profits in 1995 and production,
capacity utilisation, sales volume and market share were
not representative.
the above claim
In other words,
suggests that a significant part of the data established
during the investigation carried out by the Commission
should be disregarded in the present proceeding without
any evidence or explanations indicating that the condi-
tions of normal competition were not met in 1995 and
1997. Given that during its investigation the Commis-

sion found no evidence to corroborate the allegation
that normal competition was not taking place on the
Community market during the years 1995 and 1997, it
is considered that there are no grounds to disregard such
information.

(203) The Commission thus examined the developments of
the economic situation of
the Community industry
within the period examined, and its overall economic
situation between 1995 and the investigation period, on
a yearly basis.

(204) The investigation showed that between 1997 and the
investigation period, with a slight increase in apparent
consumption,
the Community industry increased its
sales prices by 9 % but was not able to maintain its sales
volume, which decreased by 12 %. Accordingly,
the
Community industry lost 6,6 percentage points or 14 %
of market share. Furthermore, the Community industry
production decreased by 9 %, leading also to a reduced
capacity utilisation. Despite these negative developments
profitability increased from 6,3 % to 12,9 %.

(205) The investigation also showed that between 1997 and
the investigation period imports from the countries
concerned increased significantly in terms of volume
leading to substantial increase of
(+ 797 000 tonnes),
their market share (+ 4 percentage points). Although
the countries concerned increased their sales prices by
over 10 % they were nevertheless found to be undercut-
ting the prices of the Community industry by around
6 % on average during the investigation period.

4. Analysis of

the situation of

the Community

industry during the investigation period

a) Preliminary remarks

(206) The Community industry claimed that prices and thus
profits remained at a high level in the first half of the
investigation period because apparent consumption and
therefore demand was exceptionally high, even though it
was not matched by a commensurate actual consump-
tion. This led, in the first half of the investigation period,
to an overstocking which was largely fed by the imports
concerned, and, in the second half of the investigation
period, to a significant de-stocking.

for which there

(207) Furthermore, the Community industry indicated that a
more refined analysis of sales by product types and sales
channels
is head-on competition
between the Community industry and imports would be
necessary in the present case to show the full extent of
the injury suffered. This entails a differentiated analysis
of sales of black as opposed to pickled coils, and sales
channels where longer-term contracts are concluded as
opposed to other sales.

L 31/64

EN

Official Journal of the European Communities

5. 2. 2000

(208) Finally, the Community industry claimed that a more
detailed analysis of the four quarters of the investigation
period was necessary given the existence of a time lag
between orders placed by purchasers and deliveries
made to them. It was claimed that such time lags effec-
the imports
tively delayed the negative impact of
concerned. The Community industry claimed that it was
therefore necessary to further investigate the develop-
ment of orders received during the investigation period.

(209) All operators on the steel market agreed that business is
mainly carried out on a quarterly basis. Production is
organised on the basis of quarterly plans and prices.
Both orders and deliveries are negotiated accordingly.
the suggestion made by some exporting
Therefore,
producers that
the investigation
the partitioning of
period, in particular into quarters, did not constitute an
objective evaluation of the possible injury suffered by
the Community industry was not founded. The above
claims of the Community industry have therefore been
investigated and analysed as set out below.

b) Cyclical nature of the steel industry

(211) According to the complainant, there are seasonal fluctu-
ations on the steel market in that the first two quarters
of each calendar year are normally better than the last
two quarters. Such seasonal fluctuations could mainly be
observed in sales activity. Sales would normally be
affected in the third quarter of the year due to the
holiday period in the user industries, but they should
pick up again in the fourth quarter. Given that some of
the above allegations made by the Community industry
required a quarterly analysis it was important to ensure
that any development observed did not merely reflect
normal quarterly fluctuations. This analysis was particu-
larly relevant as the complainant alleged that the trends
observed within the investigation period were far
beyond the normal cycles.

(210)

In order to have an overview of the cyclical nature of the
activity of the Community industry and to cross-check
the quarterly developments of its economic situation,
the Commission also collected quarterly data for the
period 1996 up to the second quarter of 1999.

(212) For the evaluation of the cyclical nature of the hot-rolled
coil business, the Commission found that the trends in
production and sales for the Community industry from
1996 up to the investigation period were as follows:

Production
— 1996
— 1997
— IP (1998)

Sales volume
— 1996
— 1997
— IP (1998)

Sales value
— 1996
— 1997
— IP (1998)

1st
quarter

2nd
quarter

3rd
quarter

4th
quarter

(%)

93
97
100

87
97
100

100
95
100

97
100
94

90
100
87

96
100
88

95
97
77

91
97
68

89
99
63

100
97
70

100
97
61

94
98
51

(213) With regard to production, it was found that the third
quarter did not necessarily show the lowest level of
activity. In 1996 and 1997, the greatest difference found
was 7 % between the first and the fourth quarter of
1996 and the trend in production was linear in those
years. During the investigation period however the levels
of production in the third and in the fourth quarter were
far lower when compared to the first quarter, indicating
that the fluctuations observed in that period were far
beyond the normal seasonal fluctuations.

(215) The above quarterly analysis covering the years 1996
and 1997 as well as the investigation period, shows that
the trends observed during this latter period are far
beyond the normal fluctuations linked to the cyclical
nature of the hot-rolled coil business.

c) Apparent consumption and overstocking

(214) Concerning sales volume, the downturn observed in the
third and fourth quarters was even more pronounced
during the investigation period. Sales activity in the
second half of the investigation period was exceptionally
low and far beyond the normal seasonal fluctuations.

(216) As indicated in recital 155, the development of apparent
consumption on a yearly basis was quite stable,
in
particular between 1997 and the investigation period. It
should be underlined that apparent consumption, by
i.e. actual
definition, does not

reflect actual use,

5. 2. 2000

EN

Official Journal of the European Communities

L 31/65

consumption of the product concerned by its users. The
difference between apparent consumption and actual
consumption is basically the quantity of stocks kept at
various levels of the distribution chain, i.e. in the present
case by importers, traders, dealers, SSCs and users.

held stocks which in the middle of the investigation
period were more than double those held at the begin-
ning of this period, while there was no indication of a
significant difference in the underlying activity between
the beginning and the end of the investigation period by
this user.

in

apparent

consumption

(217) The examination of this particular issue showed that
apparent consumption was significantly higher in the
first two quarters of the investigation period than in the
last two quarters. In addition, the comparatively steady
development
found
throughout 1997 did not occur during the investigation
period. This difference in trends was particularly obvious
when comparing the end of 1997 and the beginning of
the investigation period, as there was a considerable
increase in apparent consumption between these two
time periods. This
suggests an increase in stocks,
whereas the reverse was true if the fourth quarter of
1997 is compared with the fourth quarter of the invest-
igation period, indicating a significant decrease in stocks
in the last two quarters of the investigation period.

(218) As it has been alleged that these stocks played a particu-
larly important role in the development of the market
during the investigation period, it was considered neces-
sary to establish the quarterly apparent consumption not
only for the investigation period but also for 1997.

(219) To confirm these findings,

the relevant development
should also have been established for actual consump-
tion. However, its determination was hampered by the
fact that cooperation of the various relevant interested
parties in the distribution chain and at user level was not
complete. Nevertheless,
the Commission was able to
establish the stocks held at trader's level on the basis of
Eurostat information gathered in the framework of the
ECSC Treaty.

(220)

In line with the above findings on apparent consump-
tion, this information showed that there was a consider-
able build-up of stock at trader level between the end of
1997 and the beginning of the investigation period. An
increase of 29 % between the fourth quarter 1997 and
first quarter of the investigation period and a further
increase of 11 % between the first quarter of the invest-
igation period and the second quarter of the invest-
igation period were observed.

(221) This information also confirmed a considerable decrease
in stocks towards the end of the investigation period
(– 22 %). The use of
clear when
comparing the level of stocks at the end of both the first
the investigation period. A
and second semesters of
comparison of the quarterly development of stocks in
1997 with the quarterly development during the invest-
igation period also confirms the above findings.

stocks became

(223) The investigation thus confirmed the Community indus-
try's claim that considerable overstocking occurred at
the beginning of the investigation period. In the first two
quarters of the investigation period apparent consump-
tion was significantly higher than actual consumption,
while for the third and fourth quarters of the invest-
igation period the difference was reversed.

(224)

In absolute terms, it was found that apparent consump-
tion during the first half of the investigation period
exceeded apparent consumption in the first half of 1997
by around 1,5 million tonnes.

largely

(225) Some interested parties claimed that the Community
industry
to the overstocking
contributed
observed during the first half of the investigation period.
In this respect it should be noted that, as shown below,
the Community industry's sales started to decline right
from the beginning of the investigation period. This
suggests that the Community industry did not play an
important role in feeding the overstocking observed.

d) Production and capacity utilisation

(226) On a quarterly basis, production decreased by 23 % in
the third quarter and by 30 % in the fourth quarter of
the investigation period as compared to the first quarter
of the investigation period.

(227)

In line with the decrease in production, the rate of
capacity utilisation also decreased by 12 % in the third
quarter of the investigation period and by 17 % in the
fourth quarter as compared to the first quarter of the
investigation period.

(228) Similarly,

it was found that production and capacity
utilisation were declining when compared with the rele-
vant quarterly activity in 1997. In the third and fourth
quarters of the investigation period as compared to the
third and fourth quarter of 1997, production decreased
by 20 % and 11 % respectively, capacity utilisation by
12 % and 18 %.

e) Sales volume, sales prices and profitability

i ) S a l e s v o l u m e

(222) This trend of overstocking in the first two quarters of
the investigation period was confirmed in a submission
received by an exporting producer under investigation
and by the information from a major user of
the
product concerned on the Community market. This user

(229) The Community industry sales volume decreased by
32 % in the third quarter of the investigation period and
by 39 % in the fourth quarter as compared to the first
quarter.

L 31/66

EN

Official Journal of the European Communities

5. 2. 2000

(230) Furthermore, as already mentioned in the year-to-year
analysis, the Community industry claimed that a more
refined and differentiated analysis of its various types of
sales and sales channels should be made, as this would
show that the sales competing directly with the imports
concerned are more affected than other sales. In addition
to the differentiation between sales of black coils and
pickled coils, that industry claimed that a proportion of
its sales were the result of long-term delivery and sales
contracts, concluded, for example, with the automobile
industry. These contracts typically cover a period of up
to one year, during which delivery quantities and prices
are fixed. The exporting producers concerned do basi-
cally not supply the customers under such contracts.

(231)

In order to carry out a detailed analysis the above
mentioned types of sales were grouped and are referred
to as ‘long-term’ sales as compared to ‘other’ sales. Simi-
larly, the development of sales, sales prices and profit-
ability of black and pickled coils during the investigation
period were also analysed.

(232) The sales volume of long-term sales was much more
stable throughout
the investigation
the quarters of
period than the rest of the sales activity. Indeed, the
decrease in long-term sales was 20 % in the third quarter
and 22 % in the fourth quarter as compared to the first
quarter of the investigation period. The decrease in other
sales was much more pronounced namely 35 % and
43 % in the third and the fourth quarter respectively, as
compared to the first quarter of the investigation period.

(233) The same was true when analysing the sales volume of
black compared to pickled coils. During the invest-
igation period the volume of pickled coils sold devel-
oped in a smoother way than that of black coils. The
decrease in the sales volume of black coil was as high as
39 % in the third quarter and 44 % in the fourth quarter
as compared to the first quarter of the investigation
period whereas the decrease in pickled coils was limited
to 21 % and 29 % respectively.

i i ) S a l e s p r i c e s o f

t h e C o m m u n i t y i n d u s t r y

(234) During the first two quarters of the investigation period
sales prices of hot-rolled coils were by and large stable,
namely at a level of ECU 306 and ECU 308 per tonne
respectively. Subsequently they fell down to ECU 286
per tonne during the third quarter and to ECU 254 per
the investigation
tonne during the fourth quarter of
period. Overall this represents a decrease of 17 % during
the investigation period.

(235) The analysis of prices differentiated by types of sales
showed that prices for long-term sales largely remained
stable in the first three quarters of the investigation
period, only decreasing from ECU 320 per tonne to
ECU 312 per tonne, namely a decrease of 2 %. The
decrease was limited to 10 % when comparing the first

and the fourth quarter of the investigation period. By
contrast, prices for other sales had already decreased by
10 % between the first and the third quarter of the
investigation period and by 21 % between the first and
the fourth quarter of the investigation period.

(236) The comparison between the development of prices of
black coils and pickled coils showed that prices of the
former decreased much more than those of the latter.
The result of these differing trends was that prices across
categories differed significantly more at the end of the
investigation period than at the beginning. Indeed, prices
for pickled coils, only decreasing from ECU 328 per
tonne to ECU 316 per tonne, namely a decrease of 4 %.
The decrease was limited to 12 % when comparing the
first and the fourth quarter of the investigation period.
By contrast, prices for black coils had already decreased
by 10 % between the first and the third quarter and by
22 % between the first and the fourth quarter of the
investigation period.

i i i ) P r o f i t a b i l i t y

(237) On a quarterly basis, it emerged that profitability was
very good during the first half of
the investigation
period. Given the precipitation of price decreases
throughout
profitability
continued to decrease, namely from 16,8 % during the
first quarter of the investigation period to – 2,6 % in the
fourth quarter.

subsequent

quarters,

the

(238) The differentiation in sales showed significant decreases
in profitability from the very start of the investigation
period for the sales of black coils and sales other than
the long-term sales.

(239) The investigation showed that profitability for the long
term sales was very good in the first half of the invest-
igation period (around 21 %) and remained positive
throughout the investigation period, namely 8 % in the
fourth quarter of
the investigation period. Similarly
other sales were also profitable at around 16 % in the
first half of the investigation period. In line with the
development of demand for hot-rolled coils,
it subse-
quently collapsed in the third and the fourth quarter of
the investigation period to become negative (– 7 %) in
the fourth quarter of the investigation period.

(240) The same observations were made on profitability differ-
entiated for black coils and pickled coils where profit-
ability for both types was good in the first half of the
investigation period. Subsequently, profitability for
pickled coils remained positive throughout the invest-
igation period (4,5 % in the fourth quarter) whereas
profitability in black coils sales significantly decreased in
the third quarter of the investigation period and reached
a level of
losses as high as – 16,5 % in the fourth
quarter of the investigation period.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/67

(241)

In conclusion, overall sales, prices and profitability all
fell during the investigation period. This trend was
significantly less pronounced for sales made in market
segments where fewer subsidised imports were present.
In terms of prices and resulting profitability, the situa-
the Community industry remained relatively
tion of
stable during the time in which apparent consumption
boomed. The investigation has also shown that
the
Community industry did not increase its sales volume in
line with the increase in the apparent consumption. By
contrast, price levels and profitability remained at a high
level at a time of strong and increasing demand.

(242) The investigation also showed that the purchase prices
of major cost items in the cost of production decreased
during the investigation period. Notably, the price of
iron ore decreased by up to 12 % and scrap by up to
40 % and the price of oil dropped to the level of 1970.
Accordingly, the cost of raw material decreased limiting
the level of the losses incurred, particularly during the
investigation period.

(246) The investigation has shown that production planning
for an effective capacity utilisation resulted in a time lag
between the order and the sale. This time lag was indeed
found to be at least one quarter. In other words sales in
the first quarter of the investigation period are the result
of orders negotiated and concluded in the fourth quarter
of 1997.

(247) Given the existence of this time lag, the quarterly trend
established in the orders received by the Community
industry showed a significant decrease during the invest-
igation period. In line with the claim by the Community
industry, this negative trend is pronounced right from
the first quarter of the investigation period compared to
the trend determined for sales volume and production.
The volume of orders received in the second quarter of
the investigation period were 17 % lower than those
received in the first quarter. Furthermore, it emerged that
a relatively high level of orders was received in the
fourth quarter of 1997, corresponding to deliveries/sales
effected in the first quarter of the investigation period.

(243)

In order to complete the above analysis on sales volume,
sales prices and profitability,
it was found that these
economic indicators were also declining when compared
with the relevant quarterly activity in 1997. In the third
and fourth quarter of
the investigation period as
compared to the third and fourth quarter of 1997, sales
volume decreased by 24 % and 27 % respectively, sales
prices were 6 % and 19 % lower. As regards profitability,
it was found that it was 15 percentage points lower in
the fourth quarter of the IP as compared to the fourth
quarter of 1997.

(244) As shown in the chapter below, in assessing the devel-
opments in sales volume, sales prices and profitability it
is important to note that there is a time lag between
price negotiation with customers and invoicing and
delivery by the Community industry. Thus, when
considering in particular the developments in other sales
the prices applied during the first quarter of the invest-
igation period were in fact negotiated during the fourth
quarter of 1997 and so on.

f) Time lag between the situation of the Community

industry and the market developments

industry

(248) These findings are thus consistent with the claim by the
Community
positive
that
economic situation during the first half of the invest-
igation period merely reflects a healthy level of orders
received during the last quarter of 1997 and the first
quarter of
the investigation period, namely when
demand was still high.

relatively

the

g) Conclusion on the situation of the Community

industry in the investigation period

(249) The quarterly analysis indicated that the economic situa-
the Community industry deteriorated signifi-
tion of
cantly during the investigation period, in particular in
the second half. This deterioration went far beyond the
seasonal fluctuations observed during the previous years
on a quarterly basis.

(250)

In particular, it was found that in the third quarter of the
investigation period as compared to the average activity
of the period, all the injury indicators followed a nega-
tive trend: production decreased by 10 %, capacity utili-
sation by 6 %, sales volume by 14 %, sales prices by
2,4 % and profitability decreased by 2,1 percentage
points.

(245) As already mentioned in the year to year analysis above,
in assessing its
the Community industry alleged that,
price and profitability development, the existence of a
time lag between the sales of the goods and price nego-
tiation with customers related to such sales should be
considered. In practice, it was claimed, the negotiations
preceded the sales by at least one quarter.

(251) Furthermore,

the developments observed during the
fourth quarter of the investigation period indicated that
the situation of the Community industry only deteri-
orated further: as compared to the average activity of the
investigation period production decreased by 18 %,
capacity utilisation by 10 %, sales volume by 22 %,
prices by 13 % profitability became negative (– 2,6 % on
net turnover), a decrease of 15,5 percentage points.

L 31/68

EN

Official Journal of the European Communities

5. 2. 2000

5. Developments after the investigation period

(252) As mentioned above, the overstocking which occurred
during the first half of the investigation led to a rela-
tively positive market situation reflected in the good
level of prices on the Community market during this
time period. Accordingly profitability of the Community
industry was still good. However, in view of the fact that
this situation was not supported by an underlying posi-
tive development in the user markets but was likely to
lead to negative developments after a certain time lag it
was considered necessary also to confirm this scenario
by analysing developments after the end of the invest-
igation period.

(253) As pointed out by some exporting producers it was
found that a certain degree of recovery occurred in the
volume produced and sold by the Community industry
at the beginning of 1999. However, it should be noted
that the level of production and sales were significantly
lower than those at the beginning of the investigation
period and those of 1997. In this respect, the invest-
igation showed that
the
Community industry continued to deteriorate after the
investigation period, in particular in terms of a decrease
in sales price and profitability during the two first quar-
ters of 1999.

the economic situation of

(254) This confirmed the negative effect of the massive over-
stocking which occurred at the beginning of the invest-
igation period and the de-stocking which began during
the investigation period and
the third quarter of
continued, despite
imports,
in actual
a decrease
throughout the first half of 1999. Apart from the effect
of overstocking, the delay with which the negative devel-
opment of the Community industry occurred was also
due to the time lag under which the Community
industry operates with its customers. This is apparent
not only from the development of the injury indicators
such as production, sales, prices and profitability, but
also from the development of the orders received by the
Community industry.

(255) Some parties have claimed that the imposition of coun-
tervailing measures
in the present proceeding was
unnecessary as the imports concerned ceased after the
investigation period.

(256) The investigation showed that, based on generally avail-
able or unverified information, imports, in particular for
some of
the countries concerned by the present
proceeding, have fallen since the beginning of the invest-
igation period. However, this is not an unusual phenom-
enon in anti-subsidy and anti-dumping investigations as
in particular importers, take into
market participants,
account
investigations require prudent
assessment of the market insofar as they can lead to the
imposition of countervailing and anti-dumping meas-
ures. The reaction of market participants can be more or
less pronounced. In any event, taking into account the

the fact

that

decrease in imports, which may be limited in time, to
justify the non-imposition of measures would allow the
exporting producers concerned to adopt a stop-and-go
policy for their exports. It is considered that this would
have highly disruptive effect on the Community market
for any product and therefore can not in the present
circumstances serve as a justification for not imposing
countervailing measures.

(257) Finally,

it has been claimed that the phenomenon of
high imports concentrated in the investigation period
was only short-lived. In the meantime market prices in
the Community have reached levels which ensure a
the
quick recovery of
Community industry.

the economic situation of

(258)

It should be noted that detailed analysis demonstrates
that Community industry prices continued to deteriorate
and reached very low levels during the first two quarters
of 1999. This price decrease triggered considerable
financial losses, which the Community industry incurred
during a considerable period of time.

6. Conclusion on injury

industry

In addition,

(259) On the one hand, the year-to-year analysis of the situa-
tion of the Community industry in the period from
1995 to the investigation period showed a number of
negative developments.
the quarterly
analysis indicated that the economic situation of the
Community
deteriorated
significantly
the investigation period. Contrary to the
throughout
suggestion made by some exporting producers and
taking into account the special characteristics of the
Community market in terms of oversupply and time lag
between orders and deliveries these developments are
the
representative of
Community industry during the whole investigation
period.

situation of

economic

the

(260) The investigation has also shown that these negative
developments continued and even worsened after the
end of the investigation period, a development which is
particularly relevant in view of the functioning and the
situation of the Community market. It has been ascer-
far beyond the
tained that
seasonal fluctuations observed in previous years on a
quarterly basis.

this deterioration went

(261) To summarise, it was found that, during the third and
fourth quarters of the investigation period, all the injury
indicators followed a negative trend compared to the
average activity of the investigation period: production
decreased by 10 % and 18 % respectively, capacity utili-
sation by 6 % and 10 %, sales volume by 14 % and
22 %, sales prices were negotiated 2,4 % and 13 % below
the average price of the investigation period and profit-
ability decreased by 2,1 and 15,5 percentage points
respectively.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/69

(262) Similarly it was found that these economic indicators
were also declining when compared with the relevant
quarterly activity in 1997.
In the third and fourth
quarter of the investigation period as compared to the
third and fourth quarter of 1997: production decreased
by 20 % and 11 % respectively, capacity utilisation by
12 % and 18 %, sales prices were 6 % and 19 % and
profitability was positive both in 1997 and during the
investigation period but it was 15 percentage points
lower in the fourth quarter of the IP as compared to the
fourth quarter of 1997. All these trends were confirmed
during the two quarters after the investigation period.

(263) The investigation then revealed that the above trends
would have been even more negative without specific
sales such as those under long term contracts or those of
pickled coils, which are less affected by the imports
concerned. The orders received by the Community
industry for delivery in the fourth quarter of the invest-
igation period were 31 % lower than those received for
delivery in the first quarter of the investigation period.

(264) On the other hand, the year-to-year analysis has shown
that average profit rates increased from 1997 to the
investigation period, reaching a level of 12,9 %. Profits
and sales prices remained stable during the first quarters
of the investigation period.

(268)

(265) Regarding these findings, which could at

first sight
appear to be contrary to a finding of injury, the invest-
igation has shown that they were in line with a high
level of apparent consumption during the first semester
of the investigation period which, the investigation has
confirmed, was not matched by actual consumption. As
a consequence, the prices and profits of the Community
industry (whose sales did not develop in line with the
overstocking) remained stable but were bound to deteri-
orate thereafter in view of the fact that the significant
apparent consumption was not met by a commensurate
actual consumption. Indeed, during the second part of
the investigation period, apparent consumption tumbled
as the massive stocks were used, which in turn provoked
a significant price and profit decrease.

(266) The subsequent analysis of the economic situation of the
Community industry in the first two quarters of 1999
confirmed that these negative trends were not confined
to the investigation period and were the direct results of
the developments during the investigation period. While
production and sales volume
improved somewhat
compared to the second half of the investigation period,
sales prices and profitability continued to decrease. It
should be noted that the Basic Decision as confirmed by
the jurisprudence of the Court permits the information
pertaining to the time period after the end of the invest-
igation period to be taken into account, in particular in

order to establish whether trends observed during the
investigation period continue.

(267) Based on the developments in the situation of

the
Community industry during the period from 1995 to
the investigation period and during the investigation
period in particular, the Commission has concluded that
the Community industry has suffered injury during the
investigation period. Contrary to the suggestion that the
economic
largely
showing
outweighed by other indicators showing lack of injury,
the
all
above detailed investigation showed that
economic indicators developed negatively, in particular
profits and sales prices with a time lag of a few months.
The magnitude of the injury suffered enables it to be
classified as material in accordance with the provisions
of Article 8(6) of the Basic Decision.

indicators

injury

are

F. CAUSATION

1. Introduction

the market

In the present analysis it should be borne in mind that
the product concerned is a very price sensitive product.
In addition,
for this product, as shown
above, has a number of particular characteristics: the
relationship between the Community industry and
certain users is long-term; production set-up and plan-
ning entails a certain time lag between order and
delivery; and the Community industry operates more in
certain market segments than the exporting producers
concerned. Nevertheless, these characteristics do not call
into question the fact that the products produced and
sold by the Community industry and those imported by
the countries concerned are like products. It only indi-
cates that certain sales channels and certain types of
product are more prone to competition from the
imports concerned than others.

(269)

suffered by

In order to reach its conclusions on the cause of the
industry,
injury
the
the Community
Commission examined the impact of
the subsidised
imports from the countries concerned. At the same time,
the impact of other known factors and their possible
consequences on the situation of that industry were also
analysed. Such analysis ensured that any injury caused
by other factors than subsidised imports would be iden-
tified and not attributed to these imports.

(270) The other factors examined were: the development of
consumption, the oversupply of the Community market,
imported into the
the impact of hot-rolled coils
Community from other third countries, the behaviour of
other Community producers not included in the defini-
tion of
the export perfor-
mances of the Community industry and the world-wide
situation of the steel business.

the Community industry,

L 31/70

EN

Official Journal of the European Communities

5. 2. 2000

2. Impact of subsidised imports

(277)

a) Impact of the volume of subsidised imports and

stockpiling

(271) The investigation showed that the imports concerned
increased considerably, in particular between 1997 and
the investigation period. While in 1995, only 8 000
tonnes of hot-rolled coils entered the Community
market from the countries concerned, in 1997, this rose
to 47 000 tonnes.

(272) The investigation also showed that the major increase in
imports occurred During the period between 1997 to
the investigation period (+ 797 000 tonnes) and partic-
ularly during the first two quarters of the investigation
period. During that period over 550 000 tonnes were
delivered onto the Community market. This represents
more than 10 times the import volume of the second
semester 1997. Between 1997 and the investigation
period,
countries
concerned increased by 4 percentage points.

share held by the

the market

(273) During the period from 1995 to the investigation period
while Community consumption increased by 9 %, the
Community industry's sales volume increased by only
1 % and it thus lost 3,7 percentage points of its market
share.

(274) As far as the period of the import surge (1997 to the
investigation period) is concerned, it coincided with the
deterioration of
the Community industry's situation.
Production decreased by 9 % and sales volume by 12 %.
The loss in market share amounted to 6,6 percentage
points and orders by 17 %.

(275)

indicates that

In addition, the development of import volumes, taken
together with the development of apparent consumption
the subsidised imports
shown earlier,
concerned mainly fed the increase in stocks, and thus
the increase in apparent consumption in the first two
quarters of the investigation period, whereas the sales of
the Community industry decreased from the very begin-
ning of the investigation period.

(276) The investigation revealed that contrary to the exporting
producers in question the Community industry is not
very present in the traders' sales channel. As regards
certain large operators, it showed that these ordered few
or no hot-rolled coils from the Community industry
during the third and the fourth quarter of the invest-
igation period. This resulted in a significant drop in sales
in third quarter of the investigation period (– 28 %) and
in the fourth quarter (– 12 %). This in turn had a signifi-
cant negative influence on prices and profitability of the
Community industry during the last two quarters of the
investigation period.

Indeed,

In order to fully assess this development it should be
borne in mind that the development of the situation of
the Community industry was particularly negative,
pronounced and immediate in sales channels and for
product
types in which the exporting producers are
these producers are not very
mainly active.
active in sales channels where long-term sales contracts
are concluded The Community industry has fared rela-
tively better in these sales channels than in others, where
competition from imports is more pronounced. It has
also been shown above that the Community industry's
sales of black coils, which account for around 90 % of
the imports concerned, have been developing very nega-
tively throughout the investigation period.

b) Impact of the import price level and functioning of

the steel market

(278) The investigation showed that

countries

from the

the situation of

the
Community industry remained stable in terms of prices
and therefore overall profitability during the first two
quarters of the investigation period, although import
prices
concerned continuously
decreased during the whole investigation period. In this
respect the investigation has shown that the develop-
ment of prices and profits of the Community industry
were due, on the one hand, to the general structure and
functioning of
the time lag
between orders made by and deliveries to clients and, on
the other hand, by the development of stocks and thus
apparent consumption during the investigation period.

in terms of

the market

(279) Concerning the general functioning of the market, it has
been found that, given the time lag between orders and
the
deliveries (at
the situation of
Community industry during the first quarter of
the
investigation period, basically reflected the situation of
orders placed during the fourth quarter of 1997, when
imports started to surge.

least one quarter),

(280)

In terms of the development of apparent consumption,
it has been found that the situation of the Community
market in general and of the Community industry in
particular during the first quarter of the investigation
period corresponded to a time period of spectacular
growth in stocks — and thus apparent consumption.
This allowed prices and profits to remain high despite
the increase in imports which occurred at the same time.
The subsidised imports thus had the biggest impact on
the economic situation of
the Community industry
when it became clear that the growth in stocks and thus
in apparent consumption was not matched by a growth
in actual consumption. Indeed, given the considerable
in demand for hot-rolled coils at the end of the
fall
investigation
prices
decreased by 17 % and profitability became negative.

period, Community

industry

5. 2. 2000

EN

Official Journal of the European Communities

L 31/71

(281) The community industry claimed that during the entire
investigation period the exporting producers adopted a
policy of systematic price decrease and were continually
undercutting the Community industry's prices. This
precipitated and hastened the fall in sales prices on the
Community market during that period.

(286) Consequently, it is concluded that the presence of low-
priced subsidised imports played an important role in
the deteriorating situation of the Community industry
and thus to the material injury suffered by that industry
during the investigation period.

(282) The investigation showed that the exporting producers
significantly reduced their price during the
indeed,
investigation period while the Community industry
attempted to maintain its price level until June 1998. In
July 1998, the Community industry reduced its sales
prices. Their sales prices, which were over 300 ECU/
tonne in January 1998, fell to around 250 ECU/tonne in
December 1998.

(283) This dramatic decrease in prices is explained by the fact
that the exporting producers continued to undercut the
Community industry's prices throughout
the invest-
igation period. It is to be noted that the level of the
undercutting was lower at the beginning of the invest-
igation period and became increasingly more significant
throughout the investigation period. The Community
industry had to reduce its prices in order to continue
participating in the market,
from the
in particular
middle of the investigation period onwards.

(284)

In this respect it is to be noted that steel is a major
commodity product and the indicative base price of
hot-rolled coils is published daily in specialised newspa-
pers and is well know by all operators present on the
market. The products produced and sold by the
Community industry and those imported by the coun-
tries concerned are highly sensitive to price movements
which are quickly transmitted through the market.

The above thus suggests that overall the findings of the
investigation show that the imports concerned caused
the negative development in the economic situation of
the Community industry.

c) Conclusion on the impact of subsidised imports

(285)

It is considered that the volumes of subsidised imports,
which accumulated in the Community market within a
very short period, depressed prices and led to a reduced
market share of the Community industry. These import
volumes allowed traders and certain large Community-
based users to accumulate stocks with negative repercus-
sions on price negotiation with the Community industry
as early as in the second quarter of the investigation
period and to extend the period over which such
imports depressed prices. Moreover, given the general
transparency of the market, users and purchasers in the
Community market became quickly aware of the low
price policy applied by the exporting producers. This
precipitated and hastened the fall of sales price on a
market with negative results on market share and profit-
ability of the Community industry.

3. Impact of other factors

a) Development of consumption

(287) During the period examined apparent consumption on
the Community market increased continuously by 9 %.
During the period between 1997 and the investigation
period apparent consumption increased by 0,4 %.

(288) Consequently, given the continuous positive develop-
ment in consumption volume since 1996, it is consid-
ered that it cannot be linked to the injurious situation
suffered by the Community industry during the invest-
igation period.

b) Oversupply of the Community market

(289) The allegation of an oversupply of

argued that

the Community
market at the beginning of the investigation period was
also investigated.
the
Some parties
Community industry was continuously increasing its
deliveries on the market and was thus the main contri-
buting factor
they
argued that the high rate of capacity utilisation of the
Community producers resulting from high deliveries
should exclude any injury to be attributed to imports
from the countries concerned.

in the oversupply. Accordingly,

(290) The detailed analysis of the development in apparent
consumption in 1997 as compared to the investigation
period showed that during the first two quarters of the
investigation period apparent consumption was 1,4
million tonnes higher than in the corresponding quarters
of 1997. This comparison should be seen in the light of
the fact that 551 000 tonnes of subsidised hot-rolled
coils were imported from the countries concerned in the
first two quarters of the investigation period whereas the
corresponding volume imported in the same period in
1997 was about 4 000 tonnes. This represents an
increase of over 0,5 million tonnes during the first half
of the investigation period.

(291) Furthermore,

it

is

traders

thus participating to the oversupply of

significantly
recalled that
increased their stocks in the first half of the investigation
period,
the
Community market. The investigation revealed that the
Community industry is not very active in the traders
sales channel whereas the exporting producers sold
significant quantities via
the
Community industry did not feed the stocks piled by
traders during the investigation period.

traders. Accordingly,

L 31/72

EN

Official Journal of the European Communities

5. 2. 2000

(292)

the investigation has shown that

the
In conclusion,
increase in subsidised imports was considerable during
the investigation period while it was found that the
Community industry lost sales and experienced a drop
in production resulting in a fall in market share. Accord-
the increase in low-priced subsidised imports
ingly,
largely contributed to the oversupply.

(300) Accordingly, the suggestion by some exporting produ-
cers that the imports of hot-rolled coils from other third
countries not subject to any proceeding are the cause of
the injury suffered by the Community industry cannot
be taken into consideration.

d) Other producers in the Community

c) Imports of hot-rolled coils from other third coun-

tries

(293)

(294)

In addition to the countries concerned by the present
countries,
anti-subsidy proceeding other
namely Bulgaria, Iran and the Federal Republic of Yugo-
slavia were concerned by an anti-dumping proceeding.

exporting

In addition, other countries exported hot-rolled coils to
the Community market. During the investigation period
the main exporters were Russia, Slovakia, Romania,
Hungary, South Korea and Indonesia.

(295) Some exporting producers argued that they have been
unduly discriminated against in comparison to some
other
third countries mentioned above which were
excluded from the scope of the investigation.

(296)

it

In this respect
that no complaint
is pointed out
against the above third countries was lodged and that
therefore no prima facie evidence of subsidisation and
injury justifying the initiation of an investigation was
received. As furthermore,
the investigation has not
brought to light any evidence of injurious subsidisation
practices by such third country exports the allegation of
discrimination is not founded.

(297) During the period examined, other third countries not
subject to any proceeding's share of total imports of the
product concerned onto the Community market while
remaining significant showed a decreasing trend. The
import volume decreased from 3 million tonnes in 1995
to 2,4 million tonnes in the investigation period, namely
a decrease by 20 % in terms of volume. The share of
these imports represented 99 % of total import volume
in 1995 but only 74 % during the investigation period.
Accordingly, throughout the period examined, the share
of the Community market held by the other third coun-
tries decreased by 20 %.

(298)

Import prices from these third countries followed the
general downward tendency in the Community market
and decreased by 9 %.

(299) Based on the above facts and considerations it was
imports from other third countries not
found that
subject
to any proceeding remained significant and
enjoyed a continued presence in the Community market
during the period examined. However, it also emerged
that while the situation of the Community industry only
deteriorated in particular from 1997 to the investigation
period, namely when the subsidised imports surged
massively,
the increase in imports from other third
countries was very limited.

(301) During the investigation period, the producers in the
the
total

included in the definition of

represented

35 % of

Community not
Community
Community production.

industry

(302) Based on the information available, during the period
examined, the economic situation of the other producers
of hot-rolled coils in the Community was similar to that
of the Community industry. During the investigation
period their sales volume increased by 5 %, namely an
increase below the increase in consumption. Accord-
ingly, their share of the market in terms of volume
decreased by 4 %. Furthermore,
these producers also
suffered from price depression as the decrease in sale
value by 6 % indicates and their sales prices were in line
with those of the Community industry.

(303) Consequently, the impact of the other producers in the
Community on the deteriorating economic situation of
the Community industry was limited.

e) Export activity of the Community industry

(304) Certain exporting producers claimed that the situation of
the
the Community industry deteriorated because of
decrease in its export activity during the period exam-
ined.

(305) The investigation showed that the sales volume destined
for exports to third countries decreased by 536 000
tonnes between 1995 and the investigation period and
by 299 000 tonnes between 1997 and the investigation
period. This represents a decrease of 4,8 % and 2,9 %
the Community
the total
respectively of
sales of
industry. On this basis,
the Commission does not
exclude that such a decrease in the export sales affected
the overall economic situation of
the Community
industry. However, it is recalled that the present invest-
igation exclusively covered the economic situation of the
Community industry as regards the Community free
market. Accordingly, prices and revenues from export
sales were excluded from the injury analysis.

f) Community industry's preference to supply captive

market

(306) A number of users of the product concerned on the
Community market stated that the Community industry
had attempted to increase the integration of its activities
over the period examined. At the end of 1997, the
Community industry had allegedly given priority to

5. 2. 2000

EN

Official Journal of the European Communities

L 31/73

supplying related parties in the captive market before
supplying independent parties on the free market with
the result that the users were forced to obtain their
supplies from outside the Community. Therefore, injury
could not be caused by the development of imports.

(307) The Commission found that between 1997 and the
investigation period the evolution of sales volume to
both related and unrelated customers showed decreasing
trends. The fact that the supply to the captive market
followed a similar
that production
capacity was available. This decline in sales volume indi-
cated that
the
product concerned, which could have led to a decrease
in the sales volume to unrelated parties.

there was no shortage of supply of

trend indicates

g) World wide situation in the steel business

(308) Some exporting producers claimed that the situation of
the Community industry, in particular in the second part
of the investigation period, was largely due to the deteri-
oration of the worldwide situation of the steel business.

(309) Based on the information available it emerged that a
worldwide downturn occurred during the investigation
period. Sales prices decreased in the USA, Japan and
South Korea. However, it was found that sales prices in
these countries were 15 %, 24 % and 7 % respectively,
higher than those in the Community at the end of the
investigation period.

(310) Consequently the worldwide situation of

the steel
industry and in particular the situation in South East
Asia, cannot explain the deterioration of the economic
situation of the Community industry during the period
examined.

4. Conclusion on causation

(311) The above analysis indicates that

factors other than
subsidised imports from the countries concerned may
have contributed to the difficult state of the Community
industry during the investigation period. However, the
the sudden increase in
investigation has shown that
imports, the price depression and price undercutting
practised by the exporting producers had significantly
negative
the
Community industry. Therefore, it is concluded that the
taken in isolation, had caused
subsidised imports,
material

injury to the Community industry.

consequences

situation of

on the

G. COMMUNITY INTEREST

1. Preliminary remarks

(312) The purpose of countervailing measures is to remedy
unfair trading practices having an injurious effect on the
Community industry and re-establish a situation of effec-
tive competition on the Community market. In addition
to subsidisation, injury and the cause of this injury, the

Commission examined whether any compelling reasons
existed which could lead to the conclusion that it is not
in the Community interest to impose measures. For this
purpose, and in accordance with Article 31(1) of the
Basic Decision, the impact of possible measures on all
parties involved in this proceeding and the consequences
of taking or not taking measures, were considered on
the basis of the evidence available.

2. Interest of the Community industry

(313)

In case of injurious subsidisation caused by low-priced
subsidised imports, the interest of a Community industry
is that conditions of effective competition are restored.

(314) The investigation has

shown that

the Community
market of hot-rolled coils was characterised by the pres-
ence of products originating in the countries concerned
which were sold at prices undercutting those of the
Community industry. The resulting injurious situation
could be contained as long as the volume imported was
limited. However,
subsidised
imports, which suddenly flooded on the Community
market in a very short time during the investigation
period, caused a price depression, which had a signifi-
cant impact on the financial situation of the Community
industry. This situation leaves the Community industry
in a seriously weakened position and this industry has
an interest in it being corrected.

the high volume of

(315) During the period examined, the Community industry,
as well as other producers located in the Community,
undertook important rationalisation and restructuring
projects that are still going on at present. The realisation
of these projects is important in view of the globalisa-
tion of the steel market. This activity of the Community
industry at a worldwide level demonstrates its adapt-
ability,

its competitiveness and viability.

(316) With measures in force, employment, which increased
during the period examined, could be maintained and
possibly increased, depending on the evolution of
consumption. The results of
the investigation have
shown that
the Community industry lost significant
sales volume and saw its prices decrease, in particular
the investigation period. The
towards
proposed countervailing duties, which amount
to
around 6 % for cooperating exporting producers on a
weighted average level, should allow the Community
industry to recover from its injurious situation by either
increasing its own prices and/or sales quantities.

the end of

L 31/74

EN

Official Journal of the European Communities

5. 2. 2000

(317)

In view of the inadequate profitability in 1996 and 1997
and the material injury suffered during the investigation
period, it is highly probable that the financial situation
of the Community industry will deteriorate further in
the absence of any measures to correct the negative
effects of subsidised imports. This may ultimately lead to
cuts in production or closures of certain facilities and
therefore threaten employment in the Community.

3. Interest of users and related activities in the

Community

(318)

In order to evaluate the impact on users of taking or not
taking measures, the Commission sent questionnaires to
the known users on the Community market. An on-the-
spot investigation took place at the premises of a major
user in order to verify the information submitted. The
following conclusions are based on the responses
received from users.

(319) Users were found to have themselves imported 40 % of
imports of hot-rolled coils from the countries
the

employ 4 000 people

in

total
concerned. They
Community.

they already held a share of 75 % of

(320) Users claimed that in the event of the imposition of
measures, they would no longer have a choice in their
they would
sources of supply and they feared that
become entirely dependent on the goodwill of
the
Community producers. In particular it was claimed that
these producers had to supply a large captive market
and that
the
Community free market. They recalled that these produ-
cers' sales on the captive market as well as a large share
of their sales on the free market was destined for related
companies, whose downstream products were in direct
competition with their own products. The users in ques-
the Community industry
tion also indicated that
supplied independent users only after the requirements
of their related companies had been fully satisfied. They
also claimed that the related user companies already
bought the product concerned below the market price.
the
Under
opinion that the imposition of countervailing measures
would give the Community industry a decisive and
unjustified competitive advantage in the downstream
the
markets which would not be in the interest of
Community.

these circumstances,

the users were of

(321) Finally, these users claimed that the imposition of coun-
tervailing duties was likely to cause shortage of supply
for
in the
Community market at the end of 1997. This situation
would clearly be an infringement to the ECSC Treaty.

independent buyers, as was

the case

(322)

It is to be noted that the purpose of the imposition of
countervailing measures is not to prevent users from
importing hot-rolled coils from the countries concerned,
rather to ensure that these imports are made at non-
injurious prices. Even with the imposition of counter-

vailing measures, these products will always be present
in the Community market and will ensure that
the
choice of supply is maintained for users companies.

(323) The Commission estimated that a weighted average
countervailing duty of 6 % on hot-rolled coils imported
from the countries concerned may prompt at maximum
an increase of around 1,2 % in the overall cost of the
user companies' raw materials. This extra cost would
cause an estimated increase in the full cost of production
of about 0,8 %, given the mix of various sources of
purchases and the average value added in the down-
stream products.

(324) This estimated extra cost of production incurred by the
user companies, either charged or not to the subsequent
purchasers, is not such as to endanger the profitability of
the user industries. Moreover, this cost should be seen in
the light of expected positive developments in the hot-
rolled coils markets when governed by effective trade
conditions.

(325) Concerning the level of sales price in the free market, it
is recalled that no significant differences were found
between the prices applied by the Community industry
to related and unrelated customers. Moreover, the claim
purporting that the Community industry did not supply
or had set up priorities for its supplies of hot-rolled coils
depending on the relationship with the purchaser during
the period examined cannot be taken into consideration
as no evidence in this respect has been made available.
More to the contrary, it has been found that certain sales
contracts concluded with the Community industry were
cancelled.

(326) Based on the foregoing, it is considered that any nega-
tive effects on users from taking measures against subsi-
dised imports from the countries concerned cannot
outweigh the positive effects from which all the other
operators active on the Community market will benefit.

4. Consequences on competition in the Community

market

(327) Some parties claimed that countervailing measures
would reduce competition on the Community market,
encouraging the creation of big steel groups. They
argued that in the recent past major steel companies,
such as British Steel and Sollac, had increased in size by
merging with or by purchasing other steel companies.
These groups are also in competition in the downstream
products with independent users, mostly small and
medium-sized enterprises. The consequences of such a
concentration may be the disappearance of many inde-
pendent users resulting in the reduction of employment
in the Community.

5. 2. 2000

EN

Official Journal of the European Communities

L 31/75

(328) Concerning the alleged restriction in competition, it is
recalled that there are a number of alternative sources of
supply such as Russia, Indonesia, Hungary, Romania,
South Korea, Slovakia, Brazil, etc. exporting hot-rolled
coils to the Community. There are also several hundred
selling the product
SSCs,
concerned mainly to small and medium-sized users.
Finally, there are several Community steel producers, in
addition to the Community industry, located in Finland,
France, Austria and Greece.

stockholders and dealers

present case will re-establish effective competitive condi-
tions for all operators in the Community. Furthermore,
having examined the various interests involved in the
present proceeding, no compelling reasons were found
to exist against the imposition of definitive counter-
vailing measures. The imposition of definitive counter-
vailing measures is therefore not against the Community
interest.

(329) Furthermore, given that

the level of

the measures
proposed is not such, from an economic point of view,
to foreclose the Community market to the countries
concerned there appears to be no risk of restricting
competition in the Community market.

5. Shortage of supply on the Community market

(330) Certain exporting

producers

from the

countries
concerned and users in the Community claimed that the
imposition of countervailing measures would cause a
shortage of supply, in particular for independent user
industries. This claim was based on the fact that the
Community industry alone is not able to supply the
whole Community free market in particular given its
current high capacity utilisation levels.

(331) Other interested parties claimed that the Community
industry does not have the capacity to supply its own
related companies in the free market and, is therefore
not in the position to compensate for any decrease in
imports caused by the imposition of countervailing
measures.

(332)

(333)

In this respect it should be noted that as the producers
in the Community cannot supply the whole of the free
market,
imports from third countries will always be
needed and the Community market will always been
open to such imports, provided they are made in respect
of the provisions of the Basic Decision.

In any event, the Community industry, other producers
in the Community and exporting producers in other
third countries will be able to continue to supply the
Community market. The exporting producers in the
countries concerned will also be able to continue to
supply the Community market given that the measures
proposed are not such as to close the market to them.

(334) Based on the above facts and considerations, the claim
that
the imposition of countervailing measures will
entail a shortage of supply is not considered to be
founded.

H. DEFINITIVE MEASURES

(336) Having established that the subsidised imports origin-
ating in India and Taiwan have caused material injury to
the Community industry and that there are no compel-
ling reasons not to take action, definitive countervailing
measures should be adopted.

1. Injury elimination level

(337) For establishing the level of duty, account has been
taken of the subsidy margins found and of the amount
of the duty necessary to eliminate the injury caused by
subsidised imports to the Community industry. The
necessary price increase was determined on the basis of
a comparison of the weighted average import price, as
established for the undercutting calculations, with the
non-injurious price of the different types of hot-rolled
coils
industry on the
sold by
Community market.

the Community

(338)

It was considered that the amount of duty necessary to
remove the effects of
injurious subsidisation should
allow the Community industry to cover its costs of
production and obtain a reasonable profit on sales. In
this respect,
it was considered that the profit margin
before tax of 12,9 % on turnover claimed by the
Community industry was an appropriate basis, regard
being given to the need for long-term investments and
for a rate of return, which the Community industry
could reasonably expect
injurious
subsidisation.

in the absence of

(339) Accordingly and given the profit rate realised by the
Community industry during the investigation period,
injury elimination levels were determined on a type-by-
type basis as the difference between the actual net sales
price of the Community industry and the actual net sales
price of the comparable imported models. The difference
was then expressed as a percentage of the cif import
price at the Community frontier customs duty unpaid.

6. Conclusion on the Community interest

2. Level of definitive duties

(335) The Commission considers that the imposition of coun-
tervailing duties is necessary to prevent further imports
of low-priced subsidised imports and avoid the situation
of the Community industry to deteriorate further. More-
over, the imposition of countervailing measures in the

(340)

In the light of the foregoing,
it is considered that a
definitive countervailing duty should be imposed at the
level of the subsidy margin found, but should not be
higher than the injury margin set out above in accord-
ance with Article 15(1) of the Basic Decision.

L 31/76

EN

Official Journal of the European Communities

5. 2. 2000

(341) The rates of countervailing duty applicable to the free-at-Community-frontier price, before duty, shall be:

Country/company

Injury margin

Total subsidy Margin

(%)

Proposed countervailing
duty

India
Essar
SAIL
TISCO

Taiwan
CSC
Yieh Loong

23,8
6,4
23,8
6,4

29,3
8,9
3,9

13,1
4,9
12,3
8,7

4,4
4,4
0,3

13,1
4,9
12,3
6,4

4,4
4,4
0,0

the present

investigation. Therefore,

(342) The individual company countervailing duty rates speci-
fied in this Decision were established on the basis of the
findings of
they
reflect the situation found during that investigation with
respect to the above companies. These duty rates (as
opposed to the country-wide duty applicable to ‘all other
companies’) are thus exclusively applicable to imports of
products originating in the country concerned and
produced by the companies and thus by the specific
legal entities mentioned. Imported products produced by
any other company not specifically mentioned in the
this Decision with its name and
operative part of
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 compa-
nies’.

(343) Any claim requesting the application of these individual
company countervailing 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 rele-
vant information, in particular any modification in the
company's activities linked to production, domestic and
export sales associated with e.g. that name change or
that change in the production and sales entities. The
Commission,
if appropriate, will, after consultation of
the Advisory Committee, amend the Decision accord-
ingly by updating the list of companies benefiting from
individual duty rates.

exceeds the injury threshold, it is not necessary to make
such a calculation.

3. Undertakings

(346) Exporting producers in India have offered a price under-
taking in accordance with Article 13(1)(b) of the Basic
Decision.

(347) The Commission considers that the undertakings offered
by the exporting producers in India can be accepted. The
acceptance of the price undertaking should be condi-
tional on the presentation to the Member States'
customs services of a valid undertaking invoice clearly
identifying the producer and containing the information
listed in the Annex. Where no such invoice is presented,
the appropriate rate of countervailing duty will be
payable.

(348)

It should be noted that in the event of a breach or
withdrawal of
the undertaking a countervailing duty
may be imposed, pursuant to Article (9) and (10) of the
Basic Decision.

I. TERMINATION OF THE PROCEEDING

(349)

In view of the findings on the level of imports origin-
ating in South Africa, the proceeding with respect to this
country should be terminated,

(344)

In the case of India, in order to avoid granting a bonus
it was considered appropriate to
for non-cooperation,
establish the duty rate for the non-co-operating compa-
nies as the sum of the highest level established per
individual
the cooperating
companies,

subsidy programme for
i.e. 13,1 %.

HAS ADOPTED THIS DECISION:

Article 1

(345) The limited cooperation of Taiwanese exporters may
also have warranted the establishment of a higher
residual duty. However, since the residual dumping
margin in the parallel anti-dumping case against Taiwan

(1) European Commission, Trade Directorate-General C DM 24 — 8/

38, Rue de la Loi/Wetstraat 200, B-1049 Brussels.

1.
A definitive countervailing duty is hereby imposed on
imports of certain flat rolled products of iron or non-alloy
steel, of a width of 600 mm or more, not clad, plated or
coated, in coils, not further worked than hot-rolled originating
in India or Taiwan falling within CN codes 7208 10 00,
7208 36 00,
7208 25 00,
7208 37 10,
7208 38 90,
7208 39 10, 7208 39 90.

7208 27 00,
7208 38 10,

7208 26 00,
7208 37 90,

5. 2. 2000

EN

Official Journal of the European Communities

L 31/77

The rates of duty for products manufactured by the companies listed in the table below applicable to

2.
the free-at-Community-frontier price, before duty, shall be:

Country

Company

Rate of AS duty (%)

TARIC additional
code

India

All companies

Taiwan

China Steel Corp., 1 Chung Kang Road, Hsiao Kang, Kaoh-
siung 81233
Yieh Loong Enterprise Co., Ltd, 317 Yu Liao Road, Chiao
Tou Hsiang, Kaohsiung Hsien
All other companies

13,1

4,4

0,0

4,4

A999

A071

A072

A999

Notwithstanding paragraph 1, the definitive countervailing duty shall not apply to imports released

3.
for free circulation in accordance with the provisions of Article 2.

4.

Unless otherwise specified, the provisions in force concerning customs duties shall apply.

1.

The undertakings offered in connection with this anti-subsidy proceeding by:

Article 2

Company

Country

TARIC additional code

Essar Steel Ltd, 27th KM, Surat Hazira Road, Hazira 394270,
Dist: Surat, State: Gujarat

Steel Authority of India Limited, Ispat Bhavan, Integrated Office
Complex, Lodhi Road, New Dehli — 110 0031

Tata Iron & Steel Company Limited, 43 Chrowringhee Road,
Calcuta — 700 071

India

India

India

A073

A074

A075

are hereby accepted.

2.
Imports pursuant to these undertakings, when released for free circulation, shall be exempted from
the countervailing duty set in Article 1(2) when they are manufactured and directly exported and invoiced
to an importing company in the Community by a company listed in the table of paragraph 1 and declared
under the appropriate TARIC additional code.

The exemption shall be conditional upon presentation to the relevant Member State's customs services of a
valid undertaking invoice issued by the exporting company containing the essential elements listed in the
Annex.

Article 3

Pursuant to Article 24(6) of Decision (EC) No 1889/98/ECSC, Member States' reports to the Commission
shall indicate for each release for free circulation, the year and month of import, the Combined Nomencla-
ture, TARIC and TARIC additional codes, the type of measure, the country of origin, the quantity, the value,
the countervailing duty, the Member State of import and, where appropriate, the serial number of the
production certificate.

L 31/78

EN

Official Journal of the European Communities

5. 2. 2000

The anti-subsidy proceeding concerning imports of certain flat-rolled products of iron or non-alloy steel, of
a width of 600 mm or more, not clad, plated or coated, in coils, not further worked than hot-rolled
originating in South Africa is hereby terminated.

Article 4

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

Article 5

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

Done at Brussels, 4 February 2000.

For the Commission

Pascal LAMY

Member of the Commission

Elements to be indicated in the undertaking invoice referred to in Article 2(2)

ANNEX

1. The product reporting code number (PRC) (as established in the undertaking offered by the exporting producer in

question),

including type and CN code.

2. The exact description of the goods,

including:

— invoice number,
— invoice date,
— the ‘company product code’ (CPC),
— the TARIC additional code under which the goods on the invoice may be customs-cleared at Community borders

(as specified in the Decision),
— quantity (to be given in kilos),
— minimum price applicable.

3. The description of the terms of the sale,

including:

— price per kilo,
— the applicable payment terms,
— the applicable delivery terms,
— total discounts and rebates.

4. Name of the importer to which the invoice is issued directly by the company.

5. The name of the official of the company that has issued the undertaking invoice and the following signed declaration:

6.

‘I, the undersigned, certify that the sale for direct export to the European Community of the goods covered by this
invoice is being made within the scope and under the terms of the undertaking offered by … (name of the company),
and accepted by the European Commission through Decision No 284/2000/ECSC. I declare that the information
provided in this invoice is complete and correct.’