Commission Regulation (EC) No 618/2000 of 22 March 2000 imposing a provisional countervailing duty on imports of stainless steel fasteners originating in Malaysia and the Philippines
Date: 2000-03-22
Institutions: European Commission
Subjects: Malaysia, Philippines, bolt and screw industry, customs duties, import, originating product

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COMMISSION REGULATION (EC) No 618/2000

of 22 March 2000

imposing a provisional countervailing duty on imports of stainless steel fasteners originating in
Malaysia and the Philippines

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community.

(4)

Having regard to Council Regulation (EC) No 2026/97 of 6
October 1997 on protection against subsidised imports from
countries not members of the European Community (1), and in
particular Article 12 thereof,

complaint regarding subsidised imports and material
injury being suffered by the Community industry.

The Commission officially advised the Community
producers, exporting producers, importers, raw material
suppliers, users known to be concerned and the repre-
sentatives of the exporting countries of the initiation of
the proceeding. The parties concerned had the oppor-
tunity to make their views known in writing and to
request a hearing.

After consulting, the Advisory Committee,

Whereas:

(1)

(2)

(3)

A. PROCEDURE

In June 1999 the Commission announced by a notice
(hereinafter referred to as ‘notice of initiation’) published
in the Official Journal of the European Communities (2) the
initiation of an anti-subsidy proceeding with regard to
imports into the Community of stainless steel fasteners
(hereinafter referred to as ‘SSF’) originating in Malaysia,
Singapore, Thailand and the Philippines and commenced
an investigation.

The proceeding was initiated as a result of a complaint
lodged by the European Industrial Fasteners Institute
(EIFI) on behalf of Community producers representing a
major proportion of Community production of SSF. The
complaint contained evidence of subsidisation of the
said product, and of material injury resulting therefrom,
which was considered sufficient to justify the initiation
of a proceeding.

Prior to the initiation of the proceeding and in accord-
ance with Article 10(9) of Regulation (EC) No 2026/97
(hereinafter referred to as the ‘basic Regulation’), the
Commission notified to the Governments of Malaysia,
Singapore, Thailand and the Philippines that
it had
received a properly documented complaint alleging that
subsidised imports of SSF originating in Malaysia, Singa-
pore, Thailand and the Philippines are causing material
injury to the Community industry. These Governments
were invited for consultations with the aim of clarifying
the situation as regards the contents of the complaint
and arriving at a mutually agreed solution. The Govern-
ments of Malaysia and the Philippines accepted the
offers of consultation which were held with the
Commission on 5 June 1999 with the Government of
Malaysia and on 7 June 1999 with the Government of
the Philippines. Due note was taken of the comments
made in regard to the allegations contained in the

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ C 181, 26.6.1999, p. 29.

(5)

(6)

The Commission sent questionnaires
to all parties
known to be concerned and received replies from the
Governments of Malaysia, Singapore, Thailand and the
Philippines, from the complaining Community produ-
cers, from seven raw material suppliers and from two
exporting producers in Malaysia. one in Singapore, four
in Thailand and two in the Philippines.

The Commission sought and verified all the information
it deemed necessary for the purpose of a preliminary
determination and carried Out
the
premises of the following companies and government
institutions:

investigations at

(a) Complaining Community producers

— Bulnava srl, Milano (Italy)

— Inox Viti snc di Cattinori Enrico & Bruno,

Grumello Del Monte (Italy)

— Tevi

(Trafilerie e Viterie Italiane srl), Ponte

Dell'Olio (Italy)

— Torbesa (Tornilleria del Besos, SA), Barcelona

(Spain)

— Ugivis SA, Belley (France)

(b) Government of Malaysia (GOM)

— Bank Negara Malaysia, Kuala Lumpur

— Customs and Excise Department, Kuala Lumpur

— Inland Revenue Board, Kuala Lumpur

— Local Customs Offices, Ipoh and Penang

— Malaysia External Trade Development Corpora-

tion, Kuala Lumpur

— Malaysian Industrial Development Authority,

Kuala Lumpur

— Ministry of

International Trade and Industry,

Kuala Lumpur

— Ministry of Taxation, Kuala Lumpur

(c) Exporting producers in Malaysia

— Tigges Stainless Steel Fasteners Sdn. Bhd., Ipoh

— Tong Heer Fasteners Co. Sdn. Bhd., Penang

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(d) Government of Singapore (GOS)
— Central Bank of Singapore
— Economic Development Board, Ministry of Trade

and Industry

— Ministry of Taxation
— Trade Development Board, Ministry of Trade and

(9)

Industry

(e) Exporting producer in Singapore

— Szu-I Fasteners, Ltd, Singapore

(f) Government of Thailand (GOT)

— Board of Investment, Bangkok
— Customs Department, Bangkok, Samutprakarn
— Department of Foreign Trade, Bangkok
— EAGAT and Provincial Electricity Authority,

Bangkok

— Excise Department, Bangkok
— Industrial Estate Authority of Thailand, Bangkok,

Samutprakarn

— Industrial Finance Corporation, Bangkok
— Revenue Department, Bangkok

(g) Exporting producers in Thailand

— A.B.P. Stainless Fastener Co., Ltd, Ayutthaya
— Chiao Pao Metal Co., Ltd (related company of

Dura Fasteners Co., Ltd), Samutprakarn
— Dura Fasteners Co., Ltd, Samutprakarn
— Taiyo Fastener

(Thailand) Co., Ltd (related
company of Dura Fasteners Co., Ltd), Samutpra-
karn

(h) Government of the Philippines (GOP)
— Bureau of Custom, Manila
— Bureau of Internal Revenue, Manila
— Bureau of Investment, Manila
— Department of Finance, Manila
— Philippine Economic Zone Authority, Manila,

Cavite

(k) Exporting producers in the Philippines

— Lu Chu Shin Yee Works (Philippines), Ltd, Cavite
— Pilshin Works Corporation, (related company of

Lu Chu Shin Yee Works Ltd), Cavite.

The investigation of subsidisation covered the period
from 1 April 1998 to 31 March 1999 (hereinafter
referred to as the ‘investigation period’ or ‘IP’). The
examination of injury covered the period from 1 January
1996 to 31 March 1999 (hereinafter referred to as the
‘period considered’).

For the purpose of this investigation, and in accordance
with established policy and practice in this area, in case
a company received a benefit under a given scheme
below 0,01 %, it is considered that such a company did
not benefit from such scheme. In the case of the Philip-
pines, which is a developing country included in the list
contained in Annex VII of the WTO Agreement on
Subsidies and Countervailing Measures, this threshold is
raised to 0,3 %, unless the subsidisation level of the
programmes below that threshold collectively exceeds
0,6 %.
the
exporting companies is expressed as a percentage of the
denominator applicable to the subsidy scheme in ques-

Furthermore,

received by

the benefit

(7)

(8)

tion, in accordance with Article 7 of the basic Regula-
tion.

Definitive anti-dumping measures are currently in force
concerning imports of SSF originating,
in
Malaysia and Thailand by means of Council Regulation
(EC) No 393/98 (3). An anti-absorption investigation
concerning these measures was initiated on 6 May
1999 (4).

inter alia,

B. PRODUCT UNDER CONSIDERATION AND LIKE

PRODUCT

1. Product under consideration

(10)

(11)

(12)

(13)

steel
The product under consideration is
fasteners,
i.e. bolts, nuts and screws of stainless steel
which are used to mechanically join two or more
elements. The products described above fall within CN
codes
7318 15 30,
7318 15 51, 7318 15 61, 7318 15 70 and 7318 16 30.

7318 14 10,

7318 12 10,

stainless

Screws are fastener products with an external threading
on the shank. They can either be used without any other
part and fixed into wood (wood screws) or metal sheets
(self-tapping screws) or be combined with a nut and
washers to form a bolt. Screws may have a variety of
head shapes (cup, socket, flat, hexagonal. etc.), shank
lengths and diameters. The shank may be totally or
partially threaded.

SSF are used by a variety of user industries and in a wide
range of
final applications where resistance to both
atmospheric and chemical corrosion is necessary and
where hygiene may also be essential, such as equipment
for processing and storing food products, plants in the
chemical industry, manufacture of medical equipment,
public lighting equipment, shipbuilding, etc.

There are many types of SSF, each one being defined by
its specific physical and technical characteristics and by
the grade of stainless steel
is made.
However, all the products under consideration which fall
under the general definition of fasteners have the same
basic physical characteristics and the same uses and are
distributed via the same distribution channels. No clear

from which it

(3) OJ L 50, 20.2.1998, p. 1.
(4) OJ C 125, 6.5.1999, p. 12.

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for the purpose of

dividing line exists between the many types of SSF. They
forming one single
are consequently considered as
category of product
the present
investigation. It was however decided that, for technical
investigation requirements, it would be appropriate to
divide the product under consideration into ‘types’ and
to gather and handle the data collected on the basis of
those types. To this end, five criteria were considered (5).
Each comination of these criteria, which is referred to as
‘product control number’ (hereafter ‘PCN’. corresponds
to a specific type of SSF.

In the course of the investigation,
it was alleged that
nuts (CN code 7318 16 30) should be excluded from the
scope of the investigation given that no production of
nuts existed in the Community.
It should be noted,
however. that the fact that a specific product type would
not or no longer be produced by the Community
industry is not in itself sufficient to determine whether it
should be excluded from the scope of the anti-subsidy
proceeding. The Commission found, in any event, that
although a sizeable proportion of
the Community
consumption of nuts was imported, in particular from
the countries concerned, the Community industry had
also some production of nuts.

The part of the Community industry which has main-
tained a capacity for production of nuts may increase its
production of nuts once a reasonable price level has
been re-established on the Community market. In these
circumstances
it was not considered justifiable to
remove nuts from the scope of the investigation.

2. Like product

The Commission found that SSF produced and sold on
the respective domestic markets in Malaysia, Singapore,
Thailand and the Philippines. and those exported to the
Community from the countries concerned as well as
those produced and sold by the Community industry in
the Community market have the same physical charac-
teristics and uses. It was therefore concluded that all are
like products within the meaning of Article 1(5) of the
basic Regulation.

(14)

(15)

(16)

C. SUBSIDIES

I. MALAYSIA

1. Introduction

1. double deduction of business expenses:

(a) promotion of exports

(b) export credit premiums

(c) approved training

2. double deduction of insurance premiums for expor-

ters

3. pioneer status

4. tax exemption on the value of increased exports

5. sales tax exemption on raw materials, machinery

and equipment

6. export credit refinancing

7.

industrial building allowance

8.

import duty exemption

9. drawback of excise duties and sales tax

10.

incentives for strategic projects

11. reinvestment allowance

12. capital allowance on capital expenditure in the

provision of plant and machinery

13.

infrastructure allowance

14.

incentives for the promotion of Malaysian brand
names.

2. Subsidy programmes that have been used by the

exporting producers

Double deduction of business expenses for the promo-
tion of exports

A . L e g a l b a s i s

(18)

the
This programme is regulated by Section 41 of
Promotion of Investment Act (Act 327) of 1986 and
Rule 4(2) of the Income Tax Rules of 1986, Chapter on
the Promotion of Exports.

B . E l i g i b i l i t y

(19)

The double deduction is available to Malaysian manufac-
turing or agricultural companies, in respect of expenses
the promotion of Malaysian products
incurred for
abroad. In order to obtain the benefit of the double
deduction of expenses, a company has to exhibit Malay-
sian made products in an international trade fair which
is recognised by the Malaysian authorities, and thereafter
submit an application.

(17) On the basis of

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

(5) These criteria are the following: (1) CN code; (2) type of raw mate-
rial used;
i.e. code number under which the
product is classified within the ‘DIN’ nomenclature; (4) diameter in
millimetres; (5) length in millimetres.

(3) DIN number,

C . A m o u n t

(20) Any eligible company which incurred eligible expenses
is allowed to deduct the double of the expenses from its
income tax. In case the company is loss-making, the
benefit may be carried over during the next four years.
There is no fixed rate of deduction or a minimum or
maximum amount.

(21)

(22)

(23)

(24)

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D . P r a c t i c a l

i m p l e m e n t a t i o n

B . E l i g i b i l i t y

(27)

In order to obtain the benefit, a company makes a claim
by completing an application form with the Ministry of
International Trade and Industry (MITI). The applicant
has to submit a cover letter. space rental invoice, photo-
copy of trade fair brochure and a latter from the Malay-
sian Trade Development Corporation. The letter of
approval from MITI is submitted with the company's
application to the inland revenue. The deduction from
income tax can be claimed in the year following the
fiscal year in which the trade fair took place.

agricultural

The double deduction is available for Malaysian manu-
facturing or
in respect of
premiums payable for insurance of cargo exported by
that person or company, provided that the insurer is a
company incorporated in Malaysia.

companies

C . A m o u n t

E . C o u n t e r v a i l a b i l i t y

The scheme constitutes a subsidy as the financial contri-
in the
bution by the Government of Malysia (GOM)
form of double deduction of expenses confers a benefit
upon exporting producers i.e. a reduced tax liability.

The scheme constitutes a countervailable subsidy in the
sense of Article 3(4)(a) of the basic Regulation. The
double deduction constitutes a subsidy which is contin-
gent upon export performance since the programme is
available only with regard to expenses incurred in
marketing products for export.

F . C a l c u l a t i o n o f

t h e b e n e f i t

the benefit of

The benefit to the exporting producers should be calcu-
lated on the basis of the effect of the double deduction
of costs on the taxes payable by exporting producers
the difference
during the investigation period (i.e.
between the amount of tax paid with the benefit of the
scheme and the amount that would have been paid
without
the scheme). The amount of
benefit should be allocated over the export turnover
during the investigation period. Since subsidies under
this scheme are equivalent to one-time grants, in order
to encompass the full benefit
the
amount has been adjusted by adding the average
commercial interest during the investigation period, i.e.
11,5 %. This average interest rate was calculated on the
basis of the monthly average lending rates by commer-
cial banks during the investigation period.

to the recipient,

(25) One company benefited from this scheme and obtained

a subsidy of 0,01 %.

Double deduction of insurance premiums for exporters

A . L e g a l b a s i s

(28) Any eligible company which incurred eligible expenses
is allowed to deduct the double of the amount of the
In case the
expenses incurred from its income tax.
company is loss making, the benefit may be carried over
during the next four years. There is no fixed rate of
deduction or a minimum or maximum amount.

D . P r a c t i c a l

i m p l e m e n t a t i o n

(29)

In order to obtain the benefit, a company makes a claim
in its income tax return in the year of assessment after
the expenditure has been incurred. Original receipts and
a detailed calculation of the double expenses are to be
attached to the income tax return.

(30)

(31)

(32)

E . C o u n t e r v a i l a b i l i t y

insurance premiums

The double deduction of
for
exporting producers constitutes a subsidy as there is a
financial contribution by the GOM in the form of
double deduction of expenses (i.e. a reduced tax liability)
which confers a benefit upon exporting producers.

The scheme constitutes a countervailable subsidy in the
sense of Article 3(4)(a) of the basic Regulation. The
double deduction constitute a subsidy which is contin-
gent upon export performance — and therefore deemed
to be specific — since the programme is only available
to exporting producers engaged in export transactions.

F . C a l c u l a t i o n o f

t h e b e n e f i t

The benefit to the exporting producers corresponds to
the effect of the double deduction of costs from the
income tax payable by exporting producers during the
investigation period (i.e.
the difference between the
amount of tax paid with the benefit of the scheme and
the amount that would have been paid without the
benefit of the scheme). The benefit should be allocated
over the export turnover during the investigation period.
Since subsidies under this scheme are equivalent to one-
time grants, in order to encompass the full benefit to the
recipient. the amount has been adjusted by adding the
average commercial
interest during the investigation
i.e. 11,5 %.
period,

(26)

This programme is regulated by Subsection 154 of the
Income Tax Act of 1967 and the Income Tax Rules of
1995.

(33) One company benefited from this scheme and obtained

a subsidy of 0,34 %.

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Pioneer status

A . L e g a l b a s i s

(34)

(35)

The pioneer status or investment tax allowance was
established by the Promotion of
Investments Act of
1986. The first schedule to the Promotions of Invest-
ment Order of 1994 contains the list of promoted activ-
ities and promoted products. The list of promoted activi-
ties was expanded in a second schedule in 1995. The
Promotion of
Investments Order of 1995 contains
special rules for promoted products for high technology
companies.

B . E l i g i b i l i t y

The investment tax allowance is available to all compa-
nies producing a ‘promoted’ product
(manufacturing
sector) or engaging in a ‘promoted’ activity (service
sector). Promoted products are products which are listed
in the schedule to the Promotion of Investments Act.
Pursuant to Section 4 of the Act, the Minister of Inter-
national Trade and Industry ‘shall from time to time
determine such activities or products as he may deem fit
to be promoted activities or promoted products’.
According to the Act,
in order to promote a certain
product, the Minister will take into consideration three
criteria:
(a) whether the production on a commercial
scale is suitable to the economic requirements or devel-
opment of Malaysia; (b) favourable prospects for further
development; and (c) the national and strategic require-
ments of Malaysia. In practice, the Action Committee on
Industries, a committee composed of representatives of
MITI and the Department of Treasury evaluates if the
proposed product will satisfy at least two of four criteria:
(a) value added; (b) local content; (c) industrial linkage;
and (d) technology measures by way of an increase in
the number of managerial and technical employees in
the company.

C . A m o u n t o f b e n e f i t

(36) Any company which was granted pioneer status enjoys a
tax exemption on 70 % of its statutory income. These
exemptions are granted for a five-year period. In prin-
ciple, no extension for the benefits are given except
where the Minister decides that the activity is of national
and strategic importance to Malaysia. Finally, companies
which produce promoted products for high technology
will obtain a 100 % tax exemption for a period of 10
years.

D . P r a c t i c a l

i m p l e m e n t a t i o n

(37)

In order to obtain the pioneer status, a company makes
an application to the Malaysian Industrial Development
Authority (MIDA), an agency under the Ministry of
International Trade and Industry. MIDA will verify
whether the future production falls within the list of

promoted products. If a company is granted the pioneer
status, it submits a claim to the Inland Revenue Board
together with the annual tax return containing the calcu-
lation of the claim for the tax incentive. The company
can claim the first tax exemption in the tax year follwing
the year of commencement of production.

E . C o u n t e r v a i l a b i l i t y

The tax exemptions under the Promotion of Investments
Act constitute countervailable subsidies in the sense of
Article 3(2)(a) of the basic Regulation. The GOM has
limited the access to the subsidy to enterprises which
make a promoted product. Since the GOM has made the
incentive available for
the production of a limited
number of products, it automatically limits the access to
these enterprises which produce the products as defined
in the Act. The product under consideration has been
listed as a promoted product.

Furthermore, the GOM has wide discretion in the desig-
nation of promoted products. The criteria i.e. the suit-
ability to the economic development of Malaysia,
favourable prospects for further development and the
national and strategic requirements of Malaysia, under
which products can be classified as a promoted product
are vague and cannot be considered as objective criteria
in the meaning of Article 3(2)(b) of the basic Regulation.
In this resped, it was established that there is no further
definition of these criteria.

Finally, the GOM has provided for differentiated rates of
tax exemption depending on the type of promoted
product. As a consequence, the GOM favours certain
enterprises over other enterprises because of the produc-
tion of a ‘more’ promoted product.

Therefore, the scheme constitutes a subsidy as the finan-
cial contribution by the GOM in the form of tax exemp-
tion confers a benefit. It is a subsidy which is specific to
certain enterprises in Malaysia pursuant to Article 3(2)(a)
of the basic Regulation.

F . C a l c u l a t i o n o f

t h e b e n e f i t

The benefit to the exporting producers should be calcu-
lated on the basis of the corporate income tax exemp-
tion and the resulting tax saving that was effectively
granted to the exporting producers during the invest-
igation period. The amount of benefit should be allo-
cated over the total turnover during the investigation
period. Since subsidies under this scheme are equivalent
to one-time grants,
in order to encompass the full
benefit to the recipient, the amount has been adjusted by
adding the average commercial
interest during the
i.e. 11,5 %.
investigation period,

(38)

(39)

(40)

(41)

(42)

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(43) Although the product under consideration was de-listed
as a promoted product in the last amendment to the
Promotion of Investments Act, one company producing
the product under consideration is still eligible to claim
the tax exemption for a period of
five years. One
company benefited from this scheme and obtained a
subsidy of 1,87 %.

Sales tax exemptions

(50)

A . L e g a l b a s i s

(44)

The legal basis of the scheme is found in Sections 4 and
11 of the Free Zones Act of 1990.

B . E l i g i b i l i t y

(45)

The sales tax exemption is available for companies
which are located in free zones. The exemption is given
to all imported machinery. equipment and raw materials
used directly in the manufacturing process for
the
production of finished goods destined for export. The
programme is under the responsibility of the Minister of
International Trade and Industry.

(46) Malaysia has a sales tax system with three different rates:
5 %, 10 % or 15 %. About 90 % of the goods are subject
to a sales tax of 10 %. A few basic products such as
books,
food and certain types of machinery are
exempted from sales tax.

C . A m o u n t o f b e n e f i t

(47) Any company meeting the criteria, enjoys a 100 %
exemption of sales tax on the value of the imported
goods inclusive of the import duty (if paid).

D . P r a c t i c a l

i m p l e m e n t a t i o n

(48)

In order to obtain the benefit of this programme, a
company makes an application to the State Director of
Customs (From D). The application should contain the
description of the goods, the country of origin and the
specific function in the manufacturing process. The State
Director will verify whether the imported good meets
the criteria of Sections 4 and 11 of the Free Zones Act
and if so, will approve the sales tax exemption.

WTO Agreement on Subsidies and Countervailing Meas-
ures (SCM Agreement), which refers to the exemption of
an exported product from duties or taxes borne by the
like product when destined for domestic consumption.
However, exporting companies located outside the free
zones do not benefit from a general sales tax exemption.
As a result, the sales tax exemption programme does not
appear to fulfil the criteria necessary to apply footnote 1.

This programme is contingent upon export performance
since it is limited to machinery, equipment and materials
used directly in the manufacturing process for
the
production of finished goods destined for export and, in
addition to, companies located in the free zones, are
required to export at least 80 % of their production. As a
result, the sales tax exemption constitutes a countervail-
able subsidy pursuant to Article 3(2)(a) and 3(4)(a) of the
basic Regulation.

F . C a l c u l a t i o n o f

t h e b e n e f i t

Raw materials

(51)

(52)

The majority of products in Malaysia have a sales tax
rate of 10 %, except for certain products such as books,
food and certain types of machinery. The normal
payable sales tax for stainless steel wires used in the
production of the product under consideration is 10 %.

The amount of subsidy is the difference between the
amount of sales tax actually paid on raw materials and
the amount of sales tax which would normally be
payable (at the standard sales tax rate of 10 %) without
the benefit of the exemption during the period of invest-
igation. This amount should be allocated over the total
export sales during the period of investigation. Since the
benefits from sales tax exemptions are obtained regularly
during the investigation period, they are equivalent to a
series of grants made between the first and the last day
of the investigation period. In these cases, it is normal
practice to assume that an average grant he received at
the mid-point of the investigation period. Hence, the
interest to be added is on the whole amount of non-paid
duties over a period of six months, by using the average
commercial

lending rate of 11,5 %.

(53)

Both companies benefited from this
obtained subsidies between 2,13 % and 6,71 %

scheme

and

E . C o u n t e r v a i l a b i l i t y

Machinery and equipment

(49)

The sales tax exemption appears to constitute a subsidy
pursuant to Article 2(1) of the basic Regulation since it
involves a revenue foregone for the GOM. It has been
advanced by the GOM that this programme falls within
the criteria of footnote 1 to Article 1(1)(a)(1)(ii) of the

(54)

The machinery used by the two companies does not
belong to the types of machinery generally exempted of
sales tax. The normal sales tax rate payable for machi-
nery is 10 %.

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(55)

The amount of subsidy is the difference between the
amount of sales tax actually paid on machinery and the
amount of sales tax which would normally be payable
(at the standard sales tax rate of 10 % on that machi-
nery) without the benefit of the exemption. The benefit
the
should be allocated over the normal
machinery which is 10 years
industry in
Malaysia. This amount should be allocated over total
export sales during the period of investigation. Since
subsidies under this scheme are equivalent to one-time
in order to encompass the full benefit to the
grants,
recipient, the amount has been adjusted by adding the
average commercial
interest during the investigation
i.e. 11,5 %.
period.

lifetime of

this

for

(56)

Both companies benefited from this
scheme
obtained subsidies between 0,03 % and 0,40 %.

and

Industrial Building Allowance

A . L e g a l b a s i s

(57)

The Industrial Building Allowance (IBA) is provided for
under Schedule 3 of the Income tax Act 1967.

B . E l i g i b i l i t y

(58) A company is eligible for IBA if the company incurred
qualifying building expenses provided that the applicant
was the ower of the building and the building was in use
for the purpose of the business. Pursuant to the Finance
Act of 1983, the IBA is also applicable for buildings
which are used as warehouses for the storage of goods
for export or for storage of imported goods which will
be processed and re-exported.

C . P r a c t i c a l

i m p l e m e n t a t i o n

(59) A company which has incurred eligible expenses can
claim the IBA directly in the annual tax return. The
amount of allowance claimed is verified by the Inland
Revenue Board at the time of the regular tax audits.

D . A m o u n t o f b e n e f i t

(60)

Pursuant to the Income Tax Act, the rates for IBA differ
between constructed and purchased buildings. For
constructed buildings, the rates are an initial allowance
and an annual allowance of 10 % and 2 % respectively of
the building expenditure. Purchased buildings are only
given annual allowances equivalent to a permitted frac-
tion of the purchase price.

Regulation. In addition, the standard IBA forms a part of
the standard depreciation practice for buildings used for
production. It is applicable for the entire manufacturing
and services
sector without differentiating between
industries. However, no assessment has been made of
the ‘special’ IBA for warehouses for storage of goods
since this IBA was not used by the exporting producers
of the product under consideration.

Import Duty Exemption

A . L e g a l b a s i s

(62)

Pursuant to Section 11 of the Free Zones Act 1994,
imported raw materials used directly in manufacturing
are exempted from import duties. The same provisions
allow importing machinery and equipement without the
payment of import duties.

B . E l i g i b i l i t y

(63)

In order to quality for the import duty exemption on
raw materials, machinery and equipment, a company
must be located in a free zone and manufacture an
approved product which is exported to a third market. It
is also important to mention that any company which is
located in a free zone has an obligation to export at least
80 % of its production.

C . P r a c t i c a l

i m p l e m e n t a t i o n

(64) As regards the imported raw materials, an application is
made to the State Director of Customs using Form D
which verifies whether the input can be directly used in
the finished product. After approval, the imports made
under this scheme are declared through Customs Form 8
to the customs authorities. The imports are registered
and examined if they are in compliance with the declara-
tion made in with the approval by the State Director of
Customs. The verification of the customs department
revealed that every entry of goods into the free industrial
zone is verified to establish whether it constitutes an
input which can be used in the production of a finished
product. The imported machinery and equipment are
automatically exempted.

D . C o u n t e r v a i l a b i l i t y

Raw materials

E . C o u n t e r v a i l a b i l i t y

(65)

(61)

The standard IBA does not constitute a subsidy. Since
the IBA complies with international accountancy stan-
dards on depreciation, it cannot be considered to consti-
tute a financial contribution in the form of revenue
foregone in the sense of Article 2(1)(a)(ii) of the basic

The import duty exemption appears to involve a subsidy
pursuant to Article 2(1) of the basic Regulation. The
GOM alleges that the import duty exemption does not
constitute a subsidy pursuant to footnote 1 to Article
1(1)(a)(1)(ii) of the WTO Agreement on Subsidies and
Countervailing Measures, which refers to the exemption
of an exported product from duties or taxes borne by

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the like product when destined for domestic consump-
tion. The GOM has not been able to prove that it has in
place and applies effectively a system or procedure to
confirm whether raw materials imported in the free
trade zone are consumed in the production of
the
exported products and in what amounts, as required by
Annex II of the basic Regulation. The system put in
place and administered by the GOM only ensures that a
duty is charged on sales from the free zones to the
domestic market, calculated on the basis of the duty rate
applicable to the finished product. This leaves open the
question of whether and to what extent the quantity of
raw materials imported in a given period corresponds to
the quantity incorporated in the exported finished prod-
ucts. Firstly, a duty charged on finished products does
not necessarily, as claimed by the GOM, equal or exceed
the duty paid on the corresponding amount of raw
materials incorporated therein. There is no evidence that
duty rates on finished products always exceed those on
raw materials and moreover the result of such equation
could not be predicted in case of a multi-product manu-
facturing process combining a plurality of
inputs.
Secondly, the system does not allow a proper verifica-
tion of
the correspondence between imported and
exported quantities within the period. It fails to verify
whether stocks are accumulated by the company during
the investigation period, and furthermore it does not
keep track of duty-free sales of goods within the export
processing zone (EPZ) or between EPZs.

The incentive is therefore a subsidy since it provides a
financial contribution by the GOM in the form of
import duties foregone that are otherwise due and it
confers a benefit on the recipient. As it is limited to
companies located in certain areas and furthermore
contingent upon export performance,
specific
within the meaning of Articles 3(2)(a) and 3(4)(a) of the
basic Regulation.

is

it

Machinery and equipment

The incentive constitutes a subsidy under Article 2(1) of
the basic Regulation, since it provides a financial contri-
bution by the GOM in the form of import duties fore-
gone that are otherwise due and it confers a benefit to
the recipient. The incentive does not involve and exemp-
tion concerning inputs that are consumed in the produc-
tion process. As it is limited to companies located in
certain areas and furthermore contingent upon export
performance, it is specific within the meaning of Article
3(2)(a) and 3(4)(a) of the basic Regulation.

(66)

(67)

F . C a l c u l a t i o n o f

t h e b e n e f i t

Raw materials

(68)

The amount of subsidy is the difference between the
amount of import duties actually paid on raw materials
and the amount of
import duties tax which would
normally be payable without the benefit of the exemp-
tion during the period of investigation. This amount

should be allocated over export sales. Since the benefits
from import duty exemptions are obtained regularly
during the investigation period, they are equivalent to a
series of grants made between the first and the last day
of the investigation period. In these cases, it is normal
practice to assume that an average grant be received at
the mid-point of the investigation period. Hence, the
interest to be added is on the whole amount of non-paid
duties over a period of six months, by using the average
commercial

lending rats of 11,5 %.

(69)

Both companies benefited from this
obtained subsidies between 1,47 % and 2,54 %

scheme

and

Machinery and equipment

(70)

The amount of subsidy is the difference between the
amount of import duties tax actually paid on machinery
and the amount of import duties which would normally
be payable without the benefit of the exemption. The
benefit should be allocated over the normal lifetime of
the machinery which is on average 10 years in Malaysia.
The amount pertaining to the investigation period
should be allocated over export sales. Since subsidies
under this scheme are equivalent to one-time grants, in
order to encompass the full benefit to the recipient, the
amount has been adjusted by adding the average
commercial interest during the investigation period, i.e.
11,5 %.

(71)

Both companies benefited from this
scheme
obtained subsidies between 0,03 % and 0,55 %.

and

Reinvestment allowance

A . L e g a l b a s i s

(72)

The reinvestment allowance is given under schedule 7a
of the Income Tax Act of 1967 (Act 53).

B . E l i g i b i l i t y

(73)

In order to qualify for the reinvestment allowance a
company needs to have been in operation for at least 12
months,
to have incurred capital expenditure on a
factory, plant or machinery used in Malaysia for the
purpose of a qualifying project and to have achieved a
level of productivity as prescribed by the Minister of
Finance (process efficiency standard). Subsection 8 of
Act 451 defines a qualifying project as a project by a
manufacturing company to expand its existing business
that is approved by the Minister of Trade and Industry
under the Industrial Coordination Act 1975. The rein-
vestment allowance is not available for companies
enjoying pioneer status or receiving an investment tax
credit.

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C . P r a c t i c a l

i m p l e m e n t a t i o n

3. Subsidy programmes not used by the exhorting

(74) An application is made to the State Director of Taxation
using a special application form in which the project is
described in detail. The company also has to indicate
whether an increase in productivity has occurred,
whether the company is located in a promoted area and
whether the process efficiency ratio for the product is
positive or negative. Finally, the application has to be
signed by the applicant and an eternal qualified auditor.
When the application for reinvestment allowance is
approved, the company can claim the benefit in its
annual tax return. The benefit of the reinvestment allow-
ance can be carried forward during five years.

D . A m o u n t o f b e n e f i t

The amount of benefit is normally 60 % of the eligible
incurred expenses for the qualifying project which can
be offset against up to 70 % of the statutory income. If
the company is located in a promoted area or has
achieved a prescribed level of productivity, 60 % of
eligible expenses can be offset against up to 100 % of
the statutory income.

producers

(77)

The complainant alleged that the exporting producers of
the product under consideration benefited from a
number of other subsidy programmes. The question-
naire response and the verification revealed that the
exporting producers did not use the below listed
programmes.

— double deduction of export credit premiums
— double deduction of expenses on approved training
— tax exemption on the value of increased exports
— export credit refinancing
— drawback of excise duties and sales tax
— incentives for strategic projects
— capital allowance on capital expenditure in the provi-

sion of plant and machinery

— infrastructure allowance
— incentives for the promotion of Malaysian brand

names.

(78)

Therefore, the Commission has not made and assess-
ment as regards these programmes.

E . C o u n t e r v a i l a b i l i t y

The reinvestment allowance for companies non located
in promoted areas does not constitute a countervailable
subsidy in the sense of Article 3 of the basic Regulation.
The GOM has not limited the access to the subsidy to
certain enterprises and applies objective criteria in the
granting of the subsidy. Since none of the exporting
producers is located in promoted areas, the countervail-
ability of this subsidy scheme for these areas has not
been assessed.

4. Amount of countervailable subsidy

(79)

It was established that the level of cooperation in this
proceeding has been very high. Cooperating exporting
producers covered virtually all exports from Malaysia to
the Community during the investigation period, as
shown by the comparison of import figures provided by
Eurostat with export figures supplied by the cooperating
exporting producers.

(80)

The country-wide weighted average margin for subsidi-
sation is above the applicable de minimis level.

(75)

(76)

Double deduc-
tions

Pioneer status

Sales tax exemp-
tions

Import duty
exemptions

0,01

0,34

1,87

0

7,11

2,16

2,57

2,02

(%)

Total

11,56

4,52

Tong Heer Fasteners

Tigges Stainless Steel
Fasteners

II. SINGAPORE

(81) On the basis of

the information contained in the
complaint and in the replies to the Commission's ques-
tionnaires, the the following programmes were investi-
gated:

— double deduction for overseas investment

— double deduction for research and development

— double tax deduction scheme

— pioneer status

— investment allowance

— expansion incentive

— development and expansion incentive

— approved royalties incentive

— approved foreign loan scheme

— preferential financing scheme.

(82) During the verification of the replies of the Government
of Singapore and the exporting producer, the Commis-
sion established that none of the alleged subsidies has
been used by the cooperating exporting producer. The
Commission also verified whether other producers of
the product under consideration exported the product
under consideration. The Commission found that one
other producer exported the product under considera-
tion to the European Union. However, evidence was
provided that this exporting producer did not benefit
from the alleged subsidies.

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Official Journal of the European Communities

L 75/27

(83)

it is considered appropriate not to
For these reasons,
make an assessment as regards the countervailability of
the alleged subsidies.

3(2)(a) of the basic Regulation. Additionally, this scheme
is contingent upon export performance and is thus
specific under the provisions of Article 3(4)(a) of the
basic Regulation.

III. THAILAND

1. Introduction

(84) On the basis of

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

the Commission

investigated

services

— schemes available under the Investment Promotion

Act:

— exemption or reduction on duties on imports of

machinery

— exemption from corporate income tax

— additional

incentives for enterprises in special

investment promotion zones

— exemption of import duties on raw and essential

materials,

— schemes

available under

the

Industrial

Estate

Authority Act (IEAA):

— import duty exemption

— exemption of payment of surcharge under the

law for promotion of investment

— value added tax exemption

— exemption of excise tax on machinery, equip-

ment and spare parts,

— reduced electricity rates,

— loans at preferential

interest rates.

(85)

It was established that, during the investigation period,
the cooperating exporting producers availed themselves
only of schemes under the IEAA.

3. Subsidy programmes not used by the exporting

producers

(88)

The Commission established that, during the invest-
igation period, the cooperating exporters did not avail
themselves of any other subsidy programmes alleged in
the complaints,

i.e.:

— schemes under the Investment Promotion Act

— schemes under the Industrial Estate Authority Act

others than import duty exemptions

— reduced electricity tariffs

— loans at preferential rates.

4. Amount of countervailable subsidies

(89)

The amount of countervailable subsidies in accordance
with the provisions of the basic Regulation, expressed ad
valorem, for the investigated exporting producers is as
follows.

Company

IEAA section 48
(%)

Dura Fasteners Co., Ltd/Taiyo Fasteners (Thai-
land) Co., Ltd/Chiao Pao Metal Co., Ltd

0,24

A.B.P. Stainless Fastener Co., Ltd

0

(90)

It was established that the level of cooperation in this
proceeding has been very high. Cooperating exporting
producers covered virtually all exports from Thailand to
the Community during the investigation period, as
shown by the comparison of import figures provided by
Eurostat with export figures supplied by the cooperating
exporting producers.

2. Subsidy

programmes

by
exporting producers

used

cooperating

(91)

(86)

(87)

It was found that one exporter benefited from import
duty exemptions on imported machinery (IEAA Section
48) which are granted only to companies located in an
EPZ. An EPZ is an area which, from a customs point of
view, is separate from the rest of Thailand. In order to
be granted permission under the IEAA to establish a
factory in an EPZ, a company has to fulfil, inter alia, an
export requirement.

This scheme was found to be a subsidy as defined under
Article 2 of the basic Regulation since it involves a
financial contribution by the Government in the form of
import duties forgone and a benefit is thereby conferred.
The use of the scheme is limited to companies located in
certain zones and is therefore specific under Article

The weighted average country wide margin for all the
exporting producers that cooperated in the investigation
is de minimis, i.e. under 2 %. Under these circumstances,
the subsidy margin for Thailand has to be considered
negligible.

IV. PHILIPPINES

1. Introduction

(92) On the basis of the information in the complaint and of
the replies to the questionnaires, the following schemes
were investigated, which allegedly involve the granting
of countervailable subsidies:

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24.3.2000

— schemes available under the Omnibus Investment

Code (OIC):

— income tax holiday

in the Philippines, estab-
economic zones (ecozones)
lishing for this purpose the Philippine Economic Zone
Authority (PEZA). On 17 May 1999 PEZA issued imple-
menting rules (PEZA Rules) relating to SEZA.

— additional deduction for

incremental

labour

expenses

— tax credit on domestic capital equipment

(96)

— tax credit for import duties and taxes on raw

materials

— import tax and duty exemption of raw materials

— import tax and duty exemption on machinery

— import duty exemption and supplies and spare

parts,

— schemes available under the Special Economic Zones

Act (SEZA):

— income tax holiday

(97)

— exemption from national and local taxes (gross

income tax or 5 % special rate)

— tax credit for training expenses

— additional deduction for

incremental

labour

expenses

— tax credit on domestic capital equipment

— tax credit for import substitution

— import tax and duty exemption of raw materials

— import tax and duty exemption on machinery

— import duty exemption on supplies and spare

parts

— exemption from wharfage dues and export tax,

duty,

impost and fee

— reduced rental and construction rates.

(93)

There are currently two SSF producers in the Philippines,
Lu Chu Shin Yee Works (Philippines) Ltd, incorporated
in 1988 (Lu Chu) and Pilshin Works Corporation, incor-
porated in 1997 (Pilshin). Both are subsidiaries of a
Taiwanese company, Lu Chu Shin Yee Works (Taiwan)
Ltd, a company that
to the anti-dumping
is subject
measures currently in force. They are related companies
and will therefore be regarded as one company (Lu
Chu/Pilshin) in the following analysis.

(94) During the verification visits it was established that,
cooperating
investigation period,
during
exporting producers only availed themselves of benefits
under the SEZA.

the

the

Ecozones are limited areas determined as such by the
Governement of the Philippines (GOP). They can be
publicly or privately owned and/or operated. There are
different types of ecozones, such as industrial estates,
free trade zones, export processing zones and tourist
recreational zones. As regards export processing zones,
they are delimited areas which are not considered as part
of the national custom territory. They are reserved for
export-oriented companies.

In order to benefit from PEZA incentives, companies
must obtain a registration with PEZA, which includes
authorisation to operate within one of the ecozones in
the country. There are several types of registration, e.g.
export enterprises (must export more than 50 % of their
foreign owership is above 40 %),
turnover. 70 % if
domestic market enterprises,
free trade enterprises,
pioneer enterprises and service enterprises. Registered
PEZA companies become automatically eligible for the
various incentives available under the SEZA. Export
enterprises located in EPZ have generally the right to
additional

incentives.

(98)

The exporting producer concerned is a PEZA registered
export enterprise located in the Cavite EPZ.
In the
investigation period,
the following
schemes.

it made use of

Gross income tax (5 % special rate) (Section 24 SEZA)

(99)

The gross income tax (GIT) consists of an option given
to companies to pay a special income tax corresponding
to 5 % of the gross income and be thus exempted from
payment of all national and local taxes. Lu Chu availed
itself of this incentive during the investigation period.

2. Subsidy programmes that have been used by the

exporting producers

A . E l i g i b i l i t y

General

(95)

SEZA (Republic Act No 7916 (1995)) provides for the
special
creation, operation and administration of

(100) The GIT is available to companies registered with PEZA,
except
to enterprises providing certain services (e.g.
custom services, freight forwarding, banking and insur-
ance) within ecozones.

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B . P r a c t i c a l

i m p l e m e n t a t i o n

(101) PEZA companies may elect to apply GIT on its annual
income tax return. The income tax form includes the
option for the company to determine the amount due
for the fiscal year by applying the special 5 % rate on
gross income instead of the usual rate (33 % according
to the last amendment to the Internal Revenue Code) on
the company's net income. According to Rule XX of
PEZA Rules, the gross income to be determined for
purposes of computing the GIT refers to net revenues
derived from the business within the ecozone net of a
list of allowable deductions corresponding to the costs
directly imputable to the production, including deprecia-
tion and financial charges associated with fixed assets.

(102) Applicant's tax return is firstly submitted to PEZA,
which verifies and states the company's entitlement to
the GIT, and subsequently to the Bureau of Internal
Revenue which carries out the ordinary tax review.

(103) By opting for the GIT, the company is automatically
exempted from ordinary income tax, which for years
1998 and 1999 was respectively 34 % and 33 % of net
income. Moreover, the GIT incentive implies exemption
from all local taxes. These taxes vary by jurisdiction and
include, inter alia, real property, business, local franchise,
professional, community taxes.

C . C o u n t e r v a i l a b i l i t y

(104) The GIT incentive constitutes a subsidy under Article 2
of the basic Regulation because it involves a financial
contribution by the GOP in the form of income taxes
and local taxes foregone that are otherwise due, and it
confers a benefit on the recipient. Since access to this
incentive is limited to companies that are authorised by
the GOP to locate and operate in certain areas
(ecozones),
is deemed to be specific within the
meaning of Article 3(2)(a) of the basic Regulation.

it

D . C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

(105) The benefit to Lu Chu/Pilshin has been calculated on the
basis of data referring to the tax year 1998, that is the
most recent period for which a tax return was available.

(106) The benefit to Lu Chu/Pilshin is the difference between
the amount of tax actually paid for the year 1998 and
the amount that would have been paid at the normal
rate of tax. The latter includes the national income tax at
the ordinary rate of 34 % and some local taxes normally
collected within the jurisdiction in which Lu Chu/Pilshin
is located: community tax, real property tax and muni-
cipal licence tax. Since this subsidy is equivalent to a
one-time grant, the benefit calculated in this way is

increased by the interest rate calculated over the invest-
igation period, at the average commercial lending rate of
the period.
i.e. 15.1 %. Allocated over the total sales
during the investigation period, the subsidy obtained by
Lu Chu/Pilshin amounts to 0,58 %.

Import duty exemption on machinery, raw materials,
supplies and spare parts (Sections 4(c) and 23 SEZA)

Introduciton

(107) Rule XV of PEZA Rules provides that machinery, raw
materials, supplies and spare parts brought into an EPZ
by an export enterprise to be employed in its manufac-
turing process
certain conditions, be
shall, under
exempted from import duties.

(108) As explained above. EPZ are not part of the customs
territory of the country. Traffic from and to the area is
restricted and subject to the control of PEZA and Bureau
of Customs.

Exemption on imports of machinery

A . E l i g i b i l i t y

(109) Export enterprises located in an EPZ may avail them-

selves of this incentive.

B . P r a c t i c a l

i m p l e m e n t a t i o n

(110)

In order to avail itself of the import duty exemption on
imported machinery, an EPZ located company must
submit an application for import permit to the PEZA.
Permission is granted by PEZA, upon checking that the
machinery is related to the production of the company.

C . C o u n t e r v a i l a b i l i t y

(111) The incentive constitutes a subsidy under Article 2(1) of
the basic Regulation, since it provides a financial contri-
bution by the GOP in the form of import duties fore-
gone that are otherwise due and it confers a benefit to
the recipient. The incentive does not involve an exemp-
tion concerning inputs that are consumed in the produc-
tion process. As it is limited to companies located in
certain areas and furthermore contingent upon export
performance, it is specific within the meaning of Article
3(2)(a) and 3(4)(a) of the basic Regulation.

D . C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

(112) The benefit to the exporting producer, i.e. Lu Chu, has
been calculated on the basis of unpaid customs duty due
this
on imports of

goods by

spreading

capital

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Official Journal of the European Communities

24.3.2000

amount across a period which reflects the normal depre-
ciation of such assets in the industry concerned. This
period has been established at 10 years, which is consid-
ered to reflect the normal service life of this type of
machinery in this industry in the Philippines. The
amount pertaining to the investigation period should be
allocated over export sales. Since subsidies under this
scheme are equivalent to one-time grants, in order to
encompass the full benefit to the recipient, the amount
has been adjusted by adding the average commercial
interest during the investigation period, i.e. 15,1 %. The
resulting amount has been allocated over total exports
during the investigation period, giving an amount of
subsidy of 0,05 %. Since this amount of subsidy is below
0,3 %, and the Philippines is all Annex VII country, it is
considered that no benefit was received by the exporting
producer in accordance with recital 8 above.

Exemption on imports of raw materials

A . E l i g i b i l i t y

(113) Export enterprises located in an EPZ may avail them-

selves of this incentive.

B . P r a c t i c a l

i m p l e m e n t a t i o n

(114) Companies locates in EPZ wishing to benefit from duty
exemption on imported raw materials must submit an
application to PEZA — including details concerning,
shipper,
import and goods imported — in order to
obtain the permit to tranship the cargo from the port of
entry into the EPZ. Officials of PEZA and the Bureau of
Custom cross-check the imported goods at the port of
entry and make sure that they are delivered into the EPZ.
PEZA keeps a company file in which it registers the
individual

imports.

(115) A comparable procedure is applied when companies
export their finished products. They must request an
export permission from the PEZA. PEZA officials check
the cargo prior to leaving the zone and make sure it is
delivered as such to the port of shipment, where it will
be cross-checked by the Bureau of Customs. The export
is registered in the company's file kept by PEZA. In case
a company wants to sell a part of its production domes-
tically,
it has to obtain authorisation by PEZA. Only
authorised local sales can leave the PEZA.

(116) According to the GOP, companies selling goods domes-
tically are required to pay the import duty on the corre-
sponding quantity of raw materials imported,
to be
calculated by PEZA and the Bureau of Customs on the
basis of a pre-defined formula of manufacturing.
However, the GOP did not provide any evidence on

whether and how this formula is actually established and
applied.

(117) The GOP also submitted that PEZA carries out, at
regular intervals, a verification of the companies raw
material stock in order to ensure that goods are re-
exported within the six months. In the negative, compa-
nies are required to pay the import duty on the raw
materials which have not been re-exported. However,
the GOP did not provide any evidence on whether and
how this verification is actually carried out.

C . C o u n t e r v a i l a b i l i t y

(118) The incentive appears to involve a subsidy as defined
under Article 2(1) of the basic Regulation. The GOP has
not been able to prove that it has in place and applies
effectively a system or procedure to confirm whether
raw materials imported in the EPZ are consumed in the
production of
the exported products and in what
amounts, as required by Annex II of the basic Regula-
tion. The GOP did not provide any evidence to support
its claim that a formula of manufacturing is applied to
establish the link between exports of finished products
and imports of raw materials. Moreover, the GOP did
not submit any evidence on whether and how it actually
carries out verifications of the company's stock.

(119) The incentive constitutes a subsidy since it provides a
financial contribution by the GOP in the form of import
duties foregone that are otherwise due and it confers a
benefit to the recipient. As it is limited to companies
located in certain areas and furthermore contingent
upon export performance,
is specific within the
meaning of Articles 3(2)(a) and 3(4)(a) of the basic Regu-
lation.

it

(120) Lu Chu has a relatively straight

forward production
process: the only raw material used is stainless steel wire
rod which is processed (cut and shred) into fasteners, i.e.
Lu Chu's only finished products. In the course of the
investigation, the GOP and the Commission conducted
and examination of the actual inputs involved in accord-
ance with Annex II to the basic Regulation. During the
investigation period, Lu Chu imported the totality of the
raw materials and exported the totality of the finished
products (i.e. it did not purchase or sell on the domestic
market). No significant difference was found between
import and export quantities during the investigation
period, nor did the company's stock at the end of the
period reach and anomalous level.

(121) The Commission considers

sufficient
evidence that, during the IP, raw materials imported by
Lu Chu in exemption from import duties have been
actually consumed in the production of the exported

there is

that

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L 75/31

products. Furthermore, given the commercial structure
and operation of this company, there are no indications
this situation will change in the coming years.
that
Consequently,
it is provisionally found that Lu Chu/
Pilshin did not obtain a subsidy under this programme.

Exemption on imports of spare parts and supplies

A . E l i g i b i l i t y

(122) Export enterprises located in an EPZ may avail them-

selves of this incentive.

B . P r a c t i c a l

i m p l e m e n t a t i o n

(123)

In order to benefit from the import duty exemption on
imported spare parts and supplies. companies located in
the EPZ must submit an application for import permit
to the PEZA. Permission is granted by PEZA, upon
checking that the goods are related to the production of
the company.

C . C o u n t e r v a i l a b i l i t y

(124) The incentive constitutes a subsidy under Article 2(1) of
the basic Regulation, since it provides a financial contri-
bution by the GOP in the form of import duties fore-
gone that are otherwise due and it confers a benefit to
the recipient. There is no evidence that the exemption
involved concerns inputs that are consumed in the
production process. As it is limited to companies located
in certain areas and furthermore contingent upon export
performance, it is specific within the meaning of Articles
3(2)(a) and 3(4)(a) of the basic Regulation.

D . C a l c u l a t i o n o f

t h e s u b s i d y a m o u n t

during the investigation period, they are equivalent to a
series of grants made between the first and the last day
of the investigation period. In these cases, it is normal
practice to assume that an average grant be received at
the mid-point of the investigation period. Hence, the
interest to be added is on the whole amount of non-paid
duties over a period of six months, by using the average
commercial
lending rate of 15,1 %. The resulting
amount has been allocated over total exports during the
investigation period, giving an amount of subsidy of
3,33 %.

3. Subsidy programmes not used by the exporting

producers

(126) The Commission established that, during the invest-
igation period, the cooperating exporters did not avail
themselves of any other subsidy programmes alleged in
the complaints,

i.e.:

— other incentives under the SEZA,

— reduced rental and construction rates,

— incentives under the OIC, the only exception being
the import tax and duty exemption on raw materials.
which was used by the company Pilshin. However,
since the amount of subsidy it received under this
scheme is below 0,3 %, and the Philippines is an
Annex VII country, it is considered that no benefit
was received, as explained in recital 8 above.

4. Amount of countervailable subsidies

(127) The amount of countervailable subsidies in accordance
with the provisions of the basic Regulation, expressed ad
valorem, for the investigated exporting producer Lu Chu/
Pilshin is 3,91 %.

(125) The benefit to the exporting producer has been calcu-
lated on the basis of unpaid customs duty due on the
total imports of supplies and spare parts. 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. Since the bene-
fits from import duty exemptions are obtained regularly

(128)

It was established that the level of cooperation in this
cooperating
proceeding has been very high. The
exporting producer covered virtually all exports from
the Philippines to the Community during the invest-
igation period, as shown by the comparison of import
figures provided by Eurostat with export figures supplied
by the cooperating exporting producer.

Company

Gross Income
Tax

Import duty
exemption

Lu Chu Shin Yee Works, Ltd/Pilshin Works Corporation

0,58

3,33

(%)

Total

3,91

D. COMMUNITY INDUSTRY

1. Community Producers

(129)

In the Community, SSF are manufactured by the
following companies:

— producers who lodged the complaint and cooperated

in the investigation:

— Bulnava srl, Milan, (Italy)

— Inox Viti

snc di Cattinori Enrico & Bruno,

Grumello Del Monte (Italy)

— Tevi

(Trafilerie e Viterie Italiane srl), Ponte

Dell'Olio (Italy)

— Torbesa (Tornillería del Besos. SA), Barcelona

(Spain)

— Ugivis SA, Belley (France),

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Official Journal of the European Communities

24.3.2000

— other producers who were not complainants but did

not oppose to the proceeding.

(130)

It was found that, during the IP, certain complaining
Community producers had purchased SSF from various
sources outside the Community, including the countries
concerned. However,
these purchases
represented a negligible share of total production (i.e.
less than 2 %). It was therefore considered that these
purchases were in accordance with standard commercial
practice of producers who had to supplement their own
range of products with small purchases of imported SSF.

the volume of

(131) Based on the above, the output of all these companies
the Community production within the

constitute
meaning of Article 9(1) of the basic Regulation.

2. Community industry

(132)

represented a major proportion of

It was examined whether the complainant Community
total
producers
the
Community production of SSF and arrived at
conclusion that
the total
Community production during the IP. It has therefore
been concluded that the complainants constitute the
Community industry within the meaning of Articles 9(1)
and 10(8) of the basic Regulation. They are here inafter
referred to as the ‘Community industry’.

they produced 70 % of

E. INJURY

1. Preliminary remarks

(133) The analysis of injury should be seen in the light of the
anti-dumping measures provisionally imposed on the
product under consideration through Commission Regu-
lation (EC) No 1732/97 (6) and confirmed by Regulation
(EC) No 393/98 (7). The latter imposed a definitive anti-
dumping duty on imports of SSF originating in the
People's Republic of China, India, the Republic of Korea,
Malaysia, Taiwan and Thailand.

(134) Furthermore, since the investigation has concluded that
the exporting producers in Singapore did not benefit
from the alleged subsidies and given that the subsidy
margin for Thailand has been found to be negligible, the
injury analysis has been limited to imports of SSF origin-
ating in Malaysia and the Philippines.

2. Community consumption

(135) Community consumption was based on the question-
naire replies
the Community
industry), Eurostat information (volume of imports) and
the complaint (non-complaining Community producers
volume of sales).

(volume of

sales of

(6) OJ L 243, 5.9.1997, p. 17.
(7) See footnote 3.

(136) On the above basis, the apparent Community consump-
tion increased from 79 388 tonnes in 1996 to 80 080
tonnes in 1997, it decreased to 60 977 tonnes in 1998
and to 58 680 tonnes in the IP, which represents all
overall decrease of 26 %. Consumpiton increased slightly
(by 1 %) from 1996 to 1997, but it registered a sharp
decline in 1998 (24 % over the previous year) and an
additional decrease of 4 % in the IP.

(137)

(138)

It should be noted that the development of apparent
consumption is largely influenced by the behaviour of
the stockholders on the Community market given that
they act as intermediaries between all producers of SSF,
both Community producers and exporting producers.
The apparent consumption figures therefore reflect the
purchases made by the stockholders during the period
considered and not necessarily those made by users.

In the previous anti-dumping proceeding it was found
that consumption had massively increased between
1994 and 1995 due to the purchases made by stock-
holders (from 59 900 to 86 500 tonnes). In this context,
the abrupt decrease between 1997 and 1998 (from
80 080 to 60 977 tonnes, followed by an additional
decrease in the IP to 58,680) coincides with the imposi-
tion of the anti-dumping measures mentioned above and
brought
imports to that of 1994. This
development indicated that imports before the imposi-
tion of the above mentioned an anti-dumping measures
were well above the purchases made by users.

the level of

3. Cumulation

(139)

It was examined whether imports of SSF originating in
Malaysia and the Philippines should be assessed cumula-
tively in accordance with Article 8(4) of the basic Regu-
lation.

(140)

In this respect it was found that the amount of counter-
vailable subsidies was more than de minimis as defined in
Article 14(5) of the basic Regulation and the volume of
imports from each of these countries was not negligible.

(141) As mentioned above,

it was also found that SSF
imported from both countries concerned as well as SSF
produced and sold by the Community industry were
alike in all respects. It should be noted that imports of
SSF from both countries are produced to the same
quality standards as Community products, usually a DIN
standard or an ISO standard, they are interchangeable
and were marketed in the Community during the same
period through comparable sales channels and under
similar commercial conditions. The imported SSF were
considered therefore to compete with each other and
with the SSF produced in the Community.

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L 75/33

(142)

In the light of the above, it was considered that all the
criteria set out in Article 8(4) of the basic Regulation
were met by imports originating in Malaysia and the
Philippines, i.e. the countervailable subsidies from each
of
the
these countries were more than de minimis,
volume of imports was not negligible, and a cumulative
assessment of the effects of the imports was appropriate
in light of
the conditions of competition between
imported products and the conditions of competition
between the imported products and the like Community
products. The imports from Malaysia and the Philippines
were therefore examined cumulatively.

costs (including handling, financing and transport costs)
and repackaging costs in accordance with Article 28 of
the basic Regulation. The
for post-
importation costs and repackaging costs were based on
facts available, i.e. information received from importers
during the previous anti-dumping investigation.

adjustments

(148) Based on the above methodology, undercutting margins,
expressed as a percentage of the Community industry's
weighted average price, have been found for both coun-
tries. ranging from 10 % to 20 %, in the case of Malaysia
and reaching 31 % in the case of the Philippines.

4. Volume and market share of subsidised imports

6. Situation of the Community industry

(143) The volume of

the
SSF originating

subsidised imports
in the

into the
Community of
countries
concerned increased by 16 % during the period consid-
ered. They increased from 6 280 tonnes in 1996 to
7 433 tonnes in 1997, 7 917 tonnes in 1998 and fell to
7 293 tonnes in the IP.

(144) The market share held by these countries increased from
7,9 % in 1996 to 9,3 % in 1997 and 13 % in 1998,
reaching 12,4 % in the IP, which represents an increase
of 4,5 percentage points over the period considered,
with a particular increase since 1997.

5. Prices of the subsidised imports

Price evolution

(145) The prices of imports from the countries concerned, per
kg, as reported by Eurostat decreased from EUR 2,91 in
1996 to EUR 2,7 in 1997 and EUR 2,73 in 1998,
further decreasing to EUR 2,58 in the IP. It should be
noted that the prices of the imports from the countries
concerned have been consistently and significantly lower
than the Community industry's prices during the period
considered.

Price undercutting

(146) As regards price undercutting, the SSF imported from
the countries concerned and those produced and sold by
the Community industry on the Community market
were categorised by PCN (i.e. type of SSF). For each type
of SSF. a comparison was made between the exporting
producers' and the Community industry's average selling
prices net of all rebates and taxes, calculated on the basis
of sales to the first unrelated customer duly adjusted,
when appropriate, to take into account the differences in
distribution channels. The difference was then expressed
as a percentage of the Community industry's prices.

(147)

In order to arrive at a comparable level of trade with the
sales of the Community industry, the import prices from
the countries concerned were adjusted to take into
account customs duty payable (including the anti-
dumping duty in the case of Malaysia), post-importation

Volume of sales and market share

(149) The Community industry's sales on the Community
market increased by 31 % over the period considered,
going from 14 131 tonnes in 1996 to 18 758 tonnes in
1997, to 19 216 tonnes in 1998 and decreasing to
18 520 tonnes in the IP.

(150) The market share held by the Community industry
increased over the period considered, rising from 17,8 %
in 1996 to 23,4 % in 1997, 31,5 % in 1998 and to
31,6 % in the IP. The overall increase in market share
can be attributable to an increase of
sales while
consumption declined following the imposition of anti-
dumping duties. Major exporters to the Community
other than the countries subject to anti-dumping duties
also increased their market shares for the same reason.

Prices

(151) The weighted average selling price of SSF sold by the
Community industry on the Community market showed
an overall 17 % decrease during the period considered.
Prices decreased from EUR 3,65/kg in 1996 to
EUR 3,22/kg in 1997, EUR 3,23/kg in 1998 and
EUR 3,02/kg in the IP.

(152)

It should be noted that, according to the information
provided by the co-operating raw material suppliers, the
price of the raw materials concerned decreased by 5,6 %
between 1998 and the IP, while the Community indus-
try's prices of SSF incorporating this raw material fell by
6,3 %. As the cost of raw material purchases represented
56,7 % of the Community industry's full cost in the IP, it
has been found that the Community industry's prices of
SSF have decreased well above the decline in the costs of
raw materials. This situation can thus he characterised as
one of price depression.

Profitability

(153) The Community industry's return on sales went from
0,1 % in 1996 to 2,3 % in 1997, to 1,8 % in 1998 and
to a loss of – 0,8 % in the IP.

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Official Journal of the European Communities

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(154)

If this downward trend were to persist, the selling prices
of the producers in the Community industry would soon
be close to their marginal costs, as in a highly competi-
tive and transparent market it is not possible to maintain
profits, even at the expense of market share, by unilater-
ally charging higher prices. The weighted average loss of
– 0.8 % in the IP represents the worst result since 1996.

Production, capacity and capacity utilisation

(155) The production of the Community industry increased by
21 % over the period considered, going from 15 620
tonnes in 1996 to 18 857 tonnes in 1997 and 20 272
tonnes in 1998 falling to 18 857 tonnes in the IP.

(156) Capacity of the Community industry increased by 22 %
in the period considered. It should be noted, however,
that a large part of this increase took place in 1997, at a
time when the Community industry expected an
increase in sales due to the imposition of anti-dumping
duties in the above mentioned proceeding. Between
1998 and the IP capacity remained stable.

(157) Capacity utilisation increased from 60 % to 62 %
between 1996 and 1997. It further increased to 63 % in
1998, but it fell to 59 % in the IP.

Stocks

(158) The Community industry's stocks increased 30 % over
the period considered, rising from 3 331 tonnes in 1996
to 4 435 tonnes at the end of the IP.

and 1998 (by 8 %) and it fell by 5 % between 1998 and
the IP.

7. Conclusion on injury

(162)

It is concluded that the Community industry suffered
significant price pressure from the subsidised imports
originating in the countries concerned over the period
considered, which were found to considerably undercut
the Community industry's prices in the IP and which
significantly increased in terms of import volume. As a
consequence, the Community industry was unable to
increase or even maintain the level of its selling prices
despite the restored, effective competition from the
countries subject to anti-dumping duties.

(163)

In this context, the Community industry's financial situa-
tion deteriorated, reaching a weighted average loss of
– 0,8 % in the IP, and could not be redressed due inter
alia to the ability of the countries concerned to depress
prices.

the situation of

(164) Following the imposition of provisional anti-dumping
measures in 1997,
the Community
industry improved between 1997 and 1998 in terms of
production and sales. However, between 1998 and the
IP the situation of the Community industry deteriorated
in terms of production (a 7 % decrease in the volume
produced), sales (a 3,6 % decrease in the volume sold),
and profitability (from 1,8 % to – 0,8 %). In view of the
the
above,
Community industry has suffered material injury within
the meaning of Article 8(2) of the basic Regulation.

it has been provisionally concluded that

Investments

F. CAUSATION OF INJURY

(159)

fluctuated over

Investments increased overall by 32 %, going from
EUR 1,6 million in 1996 to EUR 2,1 million in the IP.
the period considered
Investment
(EUR 8,8 million in 1997 and EUR 4,09 million in
1998). A reasonable level of investment in machinery is
needed in the SSF industry in order to maintain compet-
itiveness as well as to comply with environmental
requirements.

(165)

suffered by

the Community

In order to reach its conclusion on the cause of the
injury
the
Commission examined the impact of all know factors
and their consequences on the situation in that industry.
Such analysis ensures that any injury caused by factors
other than subsidised imports is not attributed to the
subsidised imports.

industry,

Employment

1. Effects of the subsidised imports

(160) Employment increased from 386 persons in 1996 to
453 in the IP, i.e. 17 % over the period considered. The
increase in employment took place mostly in 1997 (438
employees against 386 in the previous year) and coin-
cided with changes in the structure of some companies
during 1997 as well as with an increase in capacity.

Productivity

(161) Productivity of the Community industry, measured in
tonnes per employee, improved 10 % over the period
considered. It improved substantially between 1996 and
1997 (by 8 %), it continued to improve between 1997

(166) There is a clear coincidence between the significant price
undercutting found during the IP and the deterioration
of the prices of the Community industry and its profit-
ability in the same period. The significant price pressure
from the subsidised imports between 1998 and the IP
coincided with a severe decrease in the prices of the
Community industry, leading to losses of – 0,8 % during
the IP.

(167) Following the imposition of the anti-dumping measures
mentioned above, the Community industry was able to
increase its production, sales and to improve profit-
ability. However, the increase of imports from the coun-
tries concerned between 1997 and 1998 and the sharp

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L 75/35

decrease in the sales prices, in particular between 1998
and the IP, coincided with a deterioration of the situa-
tion of the Community industry, namely with regard to
its profitability. The Community industry was unable to
benefit either from its spare capacity or the re-establish-
ment of effective competition following the imposition
of anti-dumping measures. The pressure from subsidised
imports did not allow the Community industry to
improve its profitability.

(168)

It has therefore been concluded that the increase in
imports reaching a significant level of the Community
market during the IP, the depressed prices and the dete-
riorating situation of the Community industry, in partic-
ular in terms of financial losses, can be attributed to the
persistent low prices of the imports from the countries
concerned.

2. Effect of other factors

(169) The Commission examined whether the injury suffered
by the Community industry could have been caused by
factors other than the subsidised imports. In particular,
of
the Commission
consumption, the evolution and impact of imports from
third countries, and the effect of changes in the cost of
raw materials.

development

examined

the

Consumption

(170)

(171)

It was considered whether the development of consump-
tion was a material cause in the deterioration of the
situation of the Community industry, namely as regards
its profitability.

It should be noted that while consumption strongly
the
decreased between 1996 and the IP (by 26 %),
volume of sales of the Community industry during the
same period increased by 31 % and its share of the
Community market increased over the same period by
13,8 percentage points. Despite this increase in sales, the
Community industry's prices have seriously decreased
between 1996 and the IP with the consequent deteriora-
tion of its profitability.

(172)

In view of the above, it is unlikely that the contraction
in demand has contributed to the deterioration of the
situation of the Community industry.

Imports from other third countries

(173) As regards imports from other third countries, it was
found that these imports lost a significant share of the
Community market, which declined from 64,8 % in
1996 to 42,3 % in the IP.

Singapore

based on Eurostat were higher than the selling prices of
the Community industry over the period considered. In
view of the above, it does not appear that imports from
Singapore have materially contributed to the injury
suffered by the Community industry.

Thailand

(175) As mentioned above, the investigation has shown that
the subsidy margin for Thailand is negligible. Imports
from Thailand have kept an increased presence in the
Community market at prices below those charged by the
Community industry. It should be noted that the anti-
dumping measures concerning imports of SSF from
Thailand are based on the dumping margins found in
the previous anti-dumping proceeding.

(176)

It is therefore considered that imports from Thailand
might have also contributed to the injury suffered by the
Community industry.

Other third countries

(177)

(178)

It was found that the total market share held by other
third countries decreased during the period considered
by 29 percentage points mainly due to the decrease in
imports from the countries subject
to anti-dumping
duties.

It was therefore considered that these imports did not
contribute to the injury suffered by the Community
industry to all extent that could break the causal link
between the subsidised imports and the injury suffered
by the Community industry.

Raw materials

(179)

It was examined whether the injury suffered by the
Community industry could be attributed to an increase
in the costs of raw materials.

(180)

found that

It was
the raw material
the price of
commonly used in the production of SSF, i.e. stainless
steel wire rod, charged by the raw material suppliers
responding to the questionnaires decreased during the
period considered. This trend was accompanied by a fall
in the price of nickel, the main input of stainless steel
wire rod. It should be noted that the cooperating raw
material suppliers represented a major proportion of the
total purchases of stainless steel wire rod made by the
Community industry.

(181)

In view of the above, it is considered that the price of
the raw material did not contribute to the injury suffered
by the Community industry.

(174) As mentioned above, the investigation has shown that
exporting producers in Singapore did not benefit from
the alleged subsidies. Although imports
from this
country have registered a significant increase during the
period considered ( 167 %), the prices of those imports

3. Conclusion on causation

(182)

In the light of the above, it is concluded that the imports
from the two countries concerned taken in isolation
have caused material injury to the Community industry.

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G. COMMUNITY INTEREST

1. General considerations

(183) On the basis of the information submitted it has been
provisionally examined, whether despite the subsidy and
injury findings, compelling reasons exist which would
lead to the conclusion that it is not in the Community
interest to impose measures in the present case.

(184)

In order to assess the impact of possible measures,
Community interest questionnaires were sent to all inter-
ested parties in the upstream and downstream industries
known to the Commission at the time of the initiation
of the proceeding. Information on Community interest
was also requested from the Community industry. Only
seven raw-material
suppliers, one non-complainant
Community producer and the Community industry
responded to the questionnaires.

2. The supplier industry

Situation of the raw material suppliers

(185) The raw material used in the production of SSF is stain-
less steel wire rod. This raw material is produced by the
major stainless steel makers in Europe who supply the
entirety of
consumed by the
Community industry.

raw materials

the

(186) There are a number of different grades of stainless steel
wire rod that can be used in this type of production,
Nevertheless, the two most commonly used grades, by
both the Community industry and the producers in the
countries concerned, are austenitic steel type A2 (AISI
304 grade) and A4 (AISI 316). These grades of steel are
mainly used on account of their heat and corrosion
resistance and their superior strength.

(187) On the basis of the information supplied by the cooper-
ating raw material suppliers,
it was found that they
employed 14 520 people in the IP, of which approxi-
mately 625 were specifically concerned by the produc-
tion of the raw material concerned. Their total turnover
in the IP was EUR 3,3 billion of which EUR 135
million related to the raw materials concerned. Their
total turnover decreased by 20 % between 1996 and the
IP. Sales
the raw material
concerned decreased by 2,6 % in the same period from
EUR 103,2 million in 1996 to EUR 100,6 million in
the IP.

in the Community of

(188) As regards the profitability on the sales of the raw
materials concerned in the Community, a weighted
average loss of – 6,9 % was found in the IP.

Effect of imposition/non-imposition of measures

(189) Although the companies producing the raw materials
concerned do supply other non-Community markets
and may, theoretically, be able to redirect their sales to
these markets, any major decline in the sales on the
Community market, which represents 77,5 % of their

total sales in volume of the raw material concerned, is
likely to have a substantial effect on them. It should also
be noted that some of these non-Community markets
are highly protected.

(190) Taking into account that the total Community produc-
tion of the raw materials concerned represents more
than a negligible proportion of the total turnover and
employment of the companies concerned, and the fact
that the total turnover of these companies decreased
during the period considered, it can be considered that
in the event of the imposition of measures they could
benefit from a higher sales volumes and an improve-
ment on their negative profitability level registered in the
IP.

(191) On the other hand, should measures not be imposed,
the downward trend in the companies' turnover would
be more difficult to reverse, as sales of the raw material
concerned are likely to decline. In addition to this, the
loss of further employment would be inevitable if the
Community industry reduces its purchases of the raw
material concerned.

3. The Community industry

Nature and structure of the Community industry

(192) The Community industry is composed of small and
medium-sized companies located in France, Spain and
Italy. Production is capital
intensive and highly auto-
mated. It should be noted that SSF are finished products
which do not undergo any further transformation, and
are mainly consumed by end-user industries that incor-
porate SSF into various applications.

(193) The range of SSF is highly standardised and both the
Community industry and the exporting producers in the
countries concerned produce SSF to agreed norms (DIN
or ISO standards). Given this high degree of standardisa-
tion and the bargaining power of the major stockholders
in the Community, which act both as importers of SSF
produced in third countries and wholesalers of SSF
produced in the Community, prices of SSF, and in
particular the most common SSF types, are extremely
sensitive to dumped or subsidised imports.

Effects of the imposition/non-imposition of measures
on the Community industry

(194) Given that the injury found has taken the form of a
severe price depression caused by the price undercutting,
which resulted in a deterioration of the profitability of
the Community industry, it is expected that, following
the imposition of countervailing duties, the volume of
SSF sold by the Community industry will increase and,
more importantly, the prices of SSF on the Community
market will also rise. This increase in prices would
enable the Community industry to reach an acceptable
level of profitability, allowing the companies to continue
trading and make the necessary investments.

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(195) Should measures not be imposed, it is likely that the
negative trend of the Community industry will continue,
leading in the long term to the closure of at least some
companies. The Community industry is particularly
marked by a low capacity utilisation and a negative
In this context, a future loss of
financial situation.
employment is probable.

(196)

it

In conclusion, and taking into account that the analysis
of the Community industry showed that it is structurally
viable,
is expected that measures would give the
industry the opportunity to recover from the injury
suffered. It is expected that prices and its volumes sold
the
in
Community industry to regain profitability. Therefor, it
is considered to be in the interest of the Community
industry to impose measures.

the Community will

allowing

increase,

4. Importers and traders

(197) The distribution of SSF in the Community is character-
ised by a significant number of importers/traders who
hold large stocks of the product under consideration. In
essence,
the importers/traders act between producers
(Community and third-country) and users and their
behaviour on the market strongly influences the prices
of SSF. It was found that the Community industry still
relies on the well-established distribution network of
importers/traders for a large percentage of its sales.

(198) No response to the Community interest questionnaire
was received from any importer/trader concerned. The
Commission has therefore based its analyses on facts
available as well as on substantiated arguments made by
certain importers/traders concerned.

(199) The previous anti-dumping investigation found that
importers/traders could control the levels of supply and
thus prices through both their access to dumped imports
before the imposition of duties and their bargaining
power over third countries and the Community industry.
This has been confirmed in the current investigation as
the information provided by a major importer/trader
showed that its overall level of stocks decreased in 1996,
increased in 1997 (the provisional anti-dumping duty
was imposed on 4 September 1997) and declined in
1998 (the definitive anti-dumping duty was imposed on
16 February 1998).

(200) An importer has claimed that the imposition of counter-
vailing duties will have as an effect the closure of the
Community market to the traditional suppliers from the
Far East. It was also claimed that since the Community
industry is incapable of meeting all
the Community
demand of SSF, importers/trade who act as stockists will
suffer substantial economic damages.

(201) As regards the closure of the Community market to
imports,
the exporting
it should be mentioned that
countries already subject to anti-dumping duties have
generally continued to supply the Community market
after the imposition of those measures. Furthermore, a
number of alternative sources of supply exist not subject
to measures which represented around 19 % of
the
Community consumption during the IP (excluding
Malaysia and the Philippines).

(202) The Commission also examined the impact of any coun-
tervailing measure on the economic situation of impor-
ters/traders in the light of the measures already imposed
in the previous anti-dumping proceeding.
In this
context, it is worth noting that no importer/trader has
completed the questionnaire in the present proceeding,
which could indicate that the anti-dumping measures
imposed in 1998 did not have a significant impact on
them.

(203)

In any event, the impact of any countervailing duty on
the situation of importers/traders should also be seen in
the light of the fact that these parties trade in a multi-
tude of products. Indeed, the Commission found in the
previous anti-dumping investigation that
the product
under consideration represented an average around 30 %
of the importers/traders' total turnover.

(204) Should countervailing measures be imposed, it is consid-
ered that prices of SSF on the Community market will
increase. Although the prices of the subsidised imports
will in all likelihood increase to the full extent of the
duty, prices of
the Community products may not
increase to the same extent. This increase in prices is
likely to have a negative impact on importers and
traders who may see their margins reduced. However, it
should be noted that the importers, who also act to a
large extent as traders, may choose to increase their
purchases from the Community industry and obtain
discounts for larger volumes. Indeed, the investigation
has shown that, subsequently to the imposition of anti-
the
dumping measures in the previous proceeding,
Community industry increased its sales of SSF to impor-
ters/traders.

(205)

In the light of the above, it is considered that if measures
are imposed, it is unlikely that the situation of impor-
ters/traders will significantly be affected.

5. Users

Nature and structure of user industries

(206) Firstly,

it should be mentioned that no user of

the
product under consideration has cooperated in the
present proceeding. Furthermore, no information has
been provided by users showing that the analysis carried
out
in the previous anti-dumping investigation on
imports of SSF was inaccurate as regrads the impact of
those measures on users.

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Official Journal of the European Communities

24.3.2000

(207) Secondly,

information gathered in the course of

the
investigation shows that SSF are to a large extent sold to
users
importers/traders
acting as stockists.

through the intermediate of

(208) Thirdly, SSF are used in a wide variety of applications:
foodstuffs, catering, pharmaceutical, medical equipment,
household appliances (white goods), automobile, mari-
time and shipbuilding, building and construction, envir-
onment, energy, chemical and petrochemical, and trans-
port. In view of the type of user industry involved, it is
not incorrect to conclude that the SSF represent a very
small percentage of
the final products.
the costs of
Therefore any countervailing measure imposed on SSF
imported from the countries concerned is not likely to
substantially increase the cost of the final product for
the user.

Effect of imposition/non-imposition of measures

(209) Given the lack of cooperation from users in the present
proceeding, the supply channels and the type of users
concerned, the impact of any countervailing duty on
users is likely to be very marginal as the prices of SSF
stand for a marginal proportion of the cost of produc-
tion of the final product.

(210) Furthermore,

should

countervailing measures

be
imposed,
it is unlikely that supply constraints would
occur, given the existence of alternative sources of
supply not
the
covered by measures.
Community industry.

including

6. Conclusion on Community interest

(211) The investigation has shown that

the imposition of
measures can be expected to allow the Community
industry to increase prices and volumes and therefore to
restore profitability, with consequent beneficial effects
on the competitive conditions on the Community
market. The imposition of countervailing duties is also
expected to benefit raw material suppliers.

(212) Whilst any negative effects are likely to ensue for the
importers/traders from the likely price increase,
the
extent of these may be reduced by decreasing margins or
by increasing the prices charged to the user industry.
The user industry, in turn, is unlikely to suffer serious
consequences from such an increase given the low inci-
dence of SSF on their final products.

H. PROVISIONAL MEASURES

(214) On the basis of the conclusions on subsidisation, injury,
causal
link and Community interest, the Commission
considered it necessary to adopt provisional counter-
vailing measures.

1. Injury elimination level

(215) For the purpose of determining the level of these meas-
the subsidy
the Commission took account of
ures,
margins found and of the amount of duty necessary to
eliminate the injury sustained by the Community
industry.

(216) To that effect,

the Commission considered that

the
removal of such injury requires that the industry should
be in a position where the prices of the imports of the
product
countries
originating
concerned should be increased to a non-injurious level.

concerned

the

in

(217) For the purposes of calculating the necessary price
increase. i.e. the injury margin, the Commission consid-
ered that the prices of subsidised imports had to be
compared with the actual sales prices of the Community
industry plus a reasonable level of profit which the
industry might be expected to obtain in the absence of
injurious subsidisation from the countries concerned.

(218) On this basis, the weighted average export prices for
those products used in the determination of price under-
cutting were compared, on a cif Community frontier
level, adjusted to take account of customs duty paid and
allowance in respect of post-importation costs and
repackaging costs, with the actual weighted average
selling prices charged by the Community industry,
to reach a reasonable
increased, where appropriate,
pre-tax profit margin on turnover,
in this case estab-
lished at 5 %. This profit margin is an appropriate
minimum which the Community lndustry could be
expected to obtain in the absence of injurious subsidisa-
tion. This profit margin is the same as that used in the
previous anti-dumping investigation concerning imports
of the same product originating in the People's Republic
of China, India, the Republic of Korea, Malaysia, Taiwan
and Thailand.

(219) Based on the above methodology, substantial

injury
elimination levels have been found for both countries.

2. Provisional measures

(213)

In the light of the above. the Commission considers that
no compelling reasons exist for not imposing measures
in the present case. Consequently, the imposition of
countervailable duties would not be against the interest
of the Community.

(220)

In view of the wide diversity of product types, an ad
valorem duty appears
to be the most appropriate
measure. In accordance with Article 12(1) of the basic
Regulation the duty rate should correspond to the
amount of subsidy, unless the injury margin is lower.

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Official Journal of the European Communities

L 75/39

(221) As regards Malaysia, for both exporting producers anti-dumping duties are currently in force, at the
rates of 7,0 % and 5,7 % respectively. The level of the duty imposed within this proceeding shall
therefore take into account the totality of the domestic subsidy plus the excess of export subsidy
amount over the existing anti-dumping duty. As summarised in the table below, one Malaysian
exporting producer should be subject to a provisional countervailing duty (in addition to the existing
anti-dumping duties) of 4,5 %. As for the second exporting producer, the countervailing duty should
be nil, since the existing anti-dumping duty exceeds the export subsidy amount.

(222) Given that the companies cooperating in the proceeding covered virtually all imports from this
country, the residual duty should be set equal to the highest level found for co-operating companies.
Thus, the residual countervailing duty should be set at 4,5 %, in addition to the existing residual
anti-dumping duty of 7,0 %.

Company

Total subsidy

Export subsidy

Existing AD duty

Proposed CVD

(%)

Tong Heer Fasteners

11,56

9,69

Tigges Stainless Steel Fasteners

4,52

4,52

Others

7,0

5,7

7,0

4,5

0

4,5

(223) The following rates of duty should therefore apply for the Malaysian cooperating producers:

Tong Heer Fasteners:

Tigges Stainless Steel Fasteners:

4,5 %

0 %.

(224) As regards the Philippines, the following rates of duty should apply for the cooperating producer:

Lu Chu Shin Yee Worla, Ltd/Pilshin Works Corporation:

3,9 %.

(225)

In order to avoid granting a bonus for non-cooperation, it was considered appropriate to establish
the duty rate for the non-cooperating companies as the highest rate established for any cooperating
i.e. 4,5 % for Malaysia and 3,9 % for the Philippines.
exporting producer,

(226) The individual company countervailing duty rates specified in this Regulation were established on
the basis of the provisional findings of the present investigation. Therefore, they reflect the situation
found during that investigation with respect to these companies. These duty rates (as opposed to the
country-wide duty applicable to ‘all other companies’ ) are thus exclusively applicable to 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 operative part of this Regulation with its name and address, including entities
related to those specifically mentioned, cannot benefit from these rates and shall be subject to the
duty rate applicable to ‘all other companies’.

(227) 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 he addressed to the Commission (8) forthwith with all relevant 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 Regulation
accordingly by updating the list of companies benefiting from individual duty rates.

(8) European Commission
Trade Directorate
General Directorate E
DM 24 — 5/77
Rue de la Loi/Wetstraat 200
B-1019 Brussels.

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I. FINAL PROVISION

(228)

In the interest of sound administration, a period should be fixed within which the interested parties
which made themselves known within the time limit specified in the notice of initiation may make
their views known in writing and request a hearing. Furthermore, it should be stated that the findings
concerning the imposition of duties made for the purposes of this Regulation are provisional and
may have to be reconsidered for the purposes of any definitive duty,

ADOPTED THIS REGULATION:

Article 1

A provisional countervailing duty is hereby imposed on imports of stainless steel fasteners and parts
falling within CN codes 7318 12 10, 7318 14 10, 7318 15 30, 7318 15 51, 7318 15 61,

1.
thereof
7318 15 70 and 7318 16 30 and originating in Malaysia and the Philippines.

The rate of the duty applicable to the net free-at-Community-frontier price, before duty, shall be as

2.
follows:

Malaysian producers

Rate of duty
(%)

TARIC additional
code

Tong Heer Fasteners

Tigges Stainless Steel Fasteners

All other companies

4,5

0

4,5

A104

A105

A999

Philippines producers

Rate of duty
(%)

TARIC additional
code

Lu Chu Shin Yee Works, Ltd/Pilshin
Works Corporation

All other companies

3,9

3,9

A106

A999

3.

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

The release for free circulation in the Community of the products referred to in paragraph 1 shall be

4.
subject to a security, equivalent to the amount of the provisional duty.

Article 2

Interested parties which made themselves known within the time limit specified in the notice of initiation
of this investigation may make known their views in writing and apply to be heard orally by the
Commission within a period of time fixed pursuant to Article 30 of Regulation (EC) No 2026/97.

Pursuant to Article 31(4) of Regulation (EC) No 2026/97, the parties concerned may comment on the
application of this Regulation within one month of the date of its entry into force.

Article 3

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

Article 1 of this Regulation shall apply for a period of four mouths.

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

Done at Brussels, 22 March 2000.

For the Commission

Pascal LAMY

Member of the Commission