Proposal for a Council Regulation imposing a definitive countervailing duty on imports of synthetic fibres of polyester originating in Australia, Indonesia and Taiwan and collecting definitively the provisional duty imposed
Date: 2000-04-26
Institutions: European Commission
Subjects: Australia, Indonesia, countervailing charge, export subsidy, textile fibre

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 26.04.2000
COM(2000) 250 final

Proposal for a

COUNCIL REGULATION

imposing a definitive countervailing duty on imports of synthetic fibres of polyester
originating in Australia, Indonesia and Taiwan and collecting definitively the
provisional duty imposed

(presented by the Commission)

EXPLANATORY MEMORANDUM

In April 1999, the Commission opened an anti-subsidy investigation in respect of imports of
polyester staple fibres originating in Australia, Indonesia, Taiwan, Thailand and the Republic
of Korea.

On 21 January 2000, having established that injurious subsidisation existed, the Commission,
by Regulation (EC) No 123/2000, imposed a provisional duty on imports of the above
mentioned product from Australia and Taiwan. The Commission continued its investigation
regarding Indonesia, given in particular the high degree of non-cooperation. The proceeding
regarding Thailand and the Republic of Korea was terminated. All interested parties were
given the opportunity to make their point of view known in writing and to request a hearing.

Following the publication of the provisional duty regulation, the governments of Australia
and Taiwan made comments on the countervailability of the various schemes as well as on the
calculation of the amount of subsidies received. However, these comments did not justify any
the
fundamental modification of
investigation confirmed that
the
cooperating companies were below the applicable de minimis level. However, for the two
non-cooperating exporting producers, which accounted for over 30% of the imports from this
country, countervailing duties have been proposed based on the facts available.

the provisional
Indonesia,
the amounts of countervailable subsidies found for

In the case of

findings.

The governments of Australia and Taiwan and a users' association in the Community
contested the injury findings. In their opinion the improvement in the Community industry's
profitability was not compatible with a finding of material injury. In addition, they claimed
that the Community industry's is not able to cover the total Community demand and that the
proposed measures will have a significant negative impact on the competitiveness of the users
industry. The investigation showed that profitability of the Community industry improved
because the price of the raw material and other costs decreased more than the sales price of
the product concerned. Notwithstanding this, profitability would have been higher in the
absence of subsidised imports. In addition, although there are alternative sources of supply of
PSF, the proposed measures are not such as to close the Community market to Australia,
Indonesia and Taiwan. Consequently, the proposed measures cannot cause shortages of
supply on the Community market. Finally, it should also be recalled that the impact of the
proposed measures on the users industry will be very limited.

Consequently, since all the provisional findings were confirmed it is hereby proposed that the
Council adopt the attached proposal for Regulation.

2

2000/zzz (CNS)

Proposal for a

COUNCIL REGULATION

imposing a definitive countervailing duty on imports of synthetic fibres of polyester
originating in Australia, Indonesia and Taiwan and collecting definitively the
provisional duty imposed

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection
against subsidised imports from countries not members of the European Community1, and in
particular Article 15 thereof,

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

Whereas:

A.

1.

(1)

PROCEDURE

PROVISIONAL MEASURES AND TERMINATION

By Commission Regulation (EC) No 123/20002 (hereinafter referred to as "the
provisional duty Regulation") provisional countervailing duties were imposed on
imports into the Community of polyester staple fibres (hereafter "PSF") falling within
CN code 5503 20 00 and originating in Australia and Taiwan and the proceeding
covering the same product originating in the Republic of Korea and Thailand was
terminated.

In the absence of conclusive evidence of subsidisation no provisional countervailing
measures were imposed on imports of PSF originating in Indonesia. Nevertheless it
was decided to continue the investigation into the imports from that country
concerning notably the treatment of non-cooperating companies and the establishment
of the countrywide margin of subsidisation.

(2)

As a result of a parallel anti-dumping investigation, provisional anti-dumping duties
were imposed under Commission Regulation (EC) No 124/20003 on imports into the
Community of PSF originating in Australia, Indonesia and Thailand.

1

2

3

OJ L 288, 21.10.1997, p.1
OJ L 16, 21.1.2000, p.3
OJ L 16, 21.1.2000, p.30

3

2.

(3)

(4)

(5)

(6)

B.

(7)

(8)

C.

(9)

I.

1.

(10)

SUBSEQUENT PROCEDURE

Subsequent
to the imposition of provisional countervailing duty, several parties
submitted comments in writing. In accordance with the provisions of Article 11(5) of
Regulation 2026/97 (hereinafter referred to as the "basic Regulation"), all interested
parties who requested a hearing were granted such a hearing.

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

All parties were informed of the essential facts and considerations on the basis of
which it is intended to recommend the imposition of definitive countervailing duties
on imports of PSF originating in Australia, Taiwan and Indonesia.

They were also granted a period within which they could make representations
subsequent to this disclosure.

The oral and written comments submitted by the interested parties were considered
and, where deemed appropriate, taken into account for the definitive findings.

PRODUCT CONCERNED AND LIKE PRODUCT

The product concerned is synthetic staple fibers of polyesters, not carded, combed or
otherwise processed for spinning, which is currently classifiable under CN code 5503
20 00. It is commonly referred to as polyester staple fibers (PSF).

As no comments were received following disclosure of provisional findings regarding
the definition of the product concerned and the like product, the conclusions of recitals
10 to 12 of the provisional duty Regulation are hereby confirmed.

SUBSIDIES

The findings made in the provisional duty Regulation concerning the countervailable
subsidies obtained by the exporting producers are hereby definitively confirmed,
unless it is expressly found otherwise in this Regulation.

AUSTRALIA

INTRODUCTION

Following the publication of the provisional duty Regulation, the Government of
Australia (hereinafter referred to as "GOA") submitted on 17 January 2000 in writing
its comments on the disclosure document containing the details underlying the
essential facts and considerations on the basis of which provisional measures have
been imposed. Comments from the sole co-operating exporter have been received on
14 January 2000. The GOA requested and was granted a hearing before the
Commission services on 4 February 2000.

4

2.

2.1

(11)

(12)

(13)

ISSUES CONCERNING SUBSIDISATION

General submissions

The GOA claimed that the disclosure documents did not set out "the details underlying
the essential facts and considerations on which provisional measures have been
imposed" as set forth in Article 30 of the basic Regulation. Since the GOA did not
receive the calculation methodology or the method of imposition of provisional
measures, the disclosure documentation was deficient. In particular, the methodology
in relation to non-recurring grants for capital expenditure/fixed assets was not
provided.

In response to this claim, it is considered that the disclosure document sent to the GOA
despite the fact that no request for such provisional disclosure had been received from
the GOA, contained a detailed analysis concerning subsidisation, injury, causation and
Community interest. Therefore, the said disclosure document in fact set out the details
underlying the essential facts and considerations on which provisional measures have
been imposed. An explanation of the methodology used for the calculation of the
subsidy amount was provided in the disclosure document concerning all subsidy
programmes for which benefits have been countervailed, for non-recurring grants the
explanation was repeated in the provisional duty Regulation in recitals (30) to (32).

It is not considered to be required by Article 30 basic Regulation to provide to a
government the actual company-specific calculations for the amount of subsidy, in
particular in the light of Article 29 of the basic Regulation and the rules on treatment
of confidential information contained therein. Such information was provided to the
co-operating exporter in the provisional disclosure document. In addition, pursuant to
Article 2 of the provisional duty Regulation, the parties concerned were able to make
known their views in writing on the contents of that Regulation, including the level of
the countervailing duties.

2.2

Individual Schemes

2.2.1

Export Market Development Grants (EMDG) Scheme

(14)

(15)

The GOA argued that the "grants entry test" performed under the EMDG Scheme,
which is described in recitals 14 to 17 of the provisional duty Regulation, does not tie
the grant to anticipated export earnings since the intent of the test is to ensure that the
enterprise must have a prospect of success by ensuring that the applicant undertakes
adequate financial and management planning.

It was established that under this test, the applicant must show that he has planned
export earnings which are not on their face unachievable. Since this was not disputed
by the GOA, it was thus established that unless it is anticipated that earnings will
accrue from exports, grants under the EMDG Scheme will not be made. Hence, the
subsidy is considered to be contingent in fact upon export performance since the facts
verified in the investigation demonstrated that the granting of the subsidy is in fact tied
to anticipated export earnings in the meaning of Article 3(4)(a) of the basic
Regulation, irrespective of the "intent" of the test.

(16)

Furthermore, it should be noted that the GOA and the exporting producer refused to
provide copies of the documents pertaining to the actual grant received by the

5

company, citing "business in confidence" requirements. Therefore, it could not be
verified whether the company in fact provided figures on planned export earnings to
the granting authorities. Both the company and the GOA have been made aware
during the verification visit that this refusal might lead to the final findings to be made
on the basis of the facts available in accordance with Article 28 of the basic
Regulation. Therefore, since it was not disputed that the "grant entry test" requires the
provision of information on planned export earnings, it is considered that the grant was
given on the basis of such anticipated earnings accruing from exports.

The GOA claimed that the EMDG scheme is not contingent upon export performance
since the grant is calculated as a reimbursement of a percentage of promotional
expenditure which is not tied to the sale of the product. Additionally, the scheme is not
specific since it is not limited to exporters and eligibility is automatic based on
objective criteria.

Since the eligibility for grants under the scheme is in fact tied to anticipated export
earning, the subsidy is considered contingent in fact upon export performance in the
meaning of Article 3(4)(a) of the basic Regulation,
irrespective of the actual
calculation of the amount of the subsidy. Such export subsidies shall be deemed to be
specific in accordance with Article 3(4) of the basic Regulation as a matter of law.

The GOA argues that the EMDG Scheme does not favour domestic over imported
goods since the legislation allows the promotion of goods made in Australia or
overseas.

In response to this argument, reference is made to Section 24 of Part 4 of the EMDG
Act 1997 which states that "goods made in Australia are eligible goods if they meet
the 50% Australian content rule" and "goods made outside Australia are eligible goods
if they meet the 75% Australian content rule". According to subsections 3 and 4 of this
Section,
these Australian content rules can be deviated from depending on the
determination by the Australian Trade Commission (Austrade) of whether or not "the
Australian input in those goods is […] sufficient to ensure that Australia will derive a
significant net benefit from their export." This clearly shows that, regardless of
whether goods are made in Australia or outside, they must meet the Australian content
requirement, thus making the subsidy contingent upon the use of domestic over
imported goods as set forth in 3(4)(b) of the basic Regulation. In addition, a
determination by Austrade on whether the Australian input is sufficient to ensure that
significant net benefits from their exports will be derived, would make this scheme in
fact tied to anticipated export earnings in the meaning of Article 3(4)(a) of the basic
Regulation.

The GOA and the exporting producer claimed that no further payments have been
received because the company is not eligible anymore for further grants. Furthermore,
the exporting producer argued that since the grant received in the investigation period
related to expenses incurred before the beginning of the investigation period, it should
not be countervailed.

It is considered that even though the company did not receive any recurring subsidies
after the grant in question due to the fact that it did not meet the eligibility criteria after
that date by exceeding the income threshold, the company was not permanently
ineligible for the grant. Whether or not the company's income will reach a level which
is below the respective level set under the EMDG Scheme, is determined by purely

(17)

(18)

(19)

(20)

(21)

(22)

6

commercial developments. This does not justify a deviation from the general principle
that the amount of countervailable subsidies shall be calculated in terms of the benefit
conferred on the recipient which is found to exist during the investigation period as
prescribed in Article 5 of the basic Regulation.

(23) As a general rule,

the appropriation of a subsidy to the investigation period is
determined by the point in time when the benefit is received by the company. In this
case, since the grant was paid out to the company during the investigation period, the
benefit has been conferred on the company by that date.

(24)

(25)

Therefore, the claims made by the GOA and the exporting producer concerning the
EMDG Scheme are rejected and the provisional findings are confirmed.

The co-operating exporting producer benefited from this scheme during the
investigation period and obtained subsidies of 0.03%.

2.2.2

Import Credit Scheme (ICS)

(26)

(27)

The GOA and the exporting producer claim that PSF is not an eligible product under
the scheme, which is described in recitals 33 to 35 of the provisional duty Regulation,
and no payments or benefits were received by the company in relation to PSF.
Benefits under the ICS related to other products and were expensed on these products.
There was no evidence of cross-subsidisation between the different products. The
Commission concluded erroneously that the funds obtained from the sale of the import
credits benefited all export products as the use of cash was not linked to a particular
product. It was also incorrect to conclude that PSF exports have benefited from the
sale of the import credits as most of the PSF is sold on the export market. This is not
substantiated by the facts, in particular in the light of the company's substantial
domestic sales.

It is considered that the issue of cross-subsidisation does not arise in this case. The
benefits under the ICS are not limited to a particular product. The company receives
credits which it can convert into cash with no strings attached. There is no requirement
that the cash must be used to benefit only the export, sale or production of the product
for which the credit amount was calculated. Therefore, since the benefits of the
subsidy are not linked to a particular product not subject to the investigation, they are
considered to benefit all export sales, including export sales of PSF. Additionally, the
statement that the import credits were "expensed on these [other] products" is not
supported by evidence. In fact, it was verified that all import credits obtained during
the investigation period were converted into cash by the company. It should also be
noted that the European Commission never concluded that since most of the PSF is
exported, PSF exports benefited from the subsidy. The question whether or not most
of the PSF is sold on the export market is not relevant for the issue of whether all
exports, including exports of PSF, benefited from the payments under the ICS.

(28)

The GOA also argued that since the ICS will be terminated on 30 June 2000, the
continuation of the subsidy in the calculation of the countervailing duty is not justified
in the light of Article 19(4) of the WTO Agreement on Subsidies and Countervailing
Measures.

(29) Article 5 of the basic Regulation states that the amount of countervailable subsidies is
calculated in terms of the benefit conferred on the recipient which is found to exist

7

during the investigation period for subsidisation. Since the benefits under the ICS were
obtained in the investigation period, they were taken account in the calculation of the
amount of countervailable subsidies. Information on possible changes relating to
subsidy programmes which might occur after the investigation period are normally not
taken into account for investigating subsidisation in accordance with Article 11 of the
basic Regulation. In this context, it should be noted that Article 19 of the basic
to request an interim review in which the
Regulation provides for
Commission may consider,
inter alia, whether the circumstances with regard to
subsidisation have changed significantly. The GOA's claim is therefore rejected.

the right

Calculation of the amount of the subsidy

(30)

(31)

The GOA argued, that the amount of the subsidy was not properly calculated since it is
incorrect that only exports are "cross-subsidised". Therefore, the correct denominator
should be total sales and not export sales.

In response to this argument, reference is made to the reasons for the rejection of a
for non-recurring grants for capital
similar claim concerning the denominator
expenditure/fixed assets as set out below for
International
Competitiveness Programme (IICP) and the Investment Attraction Programme (IAP).
Since, as shown above, the subsidy is an export subsidy, it is considered to benefit
export sales. Thus, the subsidy must be calculated by allocating the amount over
export sales.

the Incentives for

(32)

The co-operating exporting producer benefited from this scheme during the
investigation period and obtained subsidies of 3.48%.

2.2.3

(33)

Investment Attraction Programme (IAP) and Incentives
Competitiveness Programme (IICP)

for

International

The GOA argued that there was no failure to cooperate during the investigation. Even
though the grant contracts pertaining to the IICP and IAP, which are described in
recitals 24 to 27 and 38 to 41, respectively, of the provisional duty Regulation, could
not be provided, the information contained therein and an explanation on the intent,
parameters and operation of the programmes was provided to the Commission
services. Additionally, Article 28(3) of the basic Regulation provides that information
shall not be disregarded provided that, inter alia, the party has acted to the best of its
ability, which was the case here. Finally, the reasons for rejection of such evidence or
information was not disclosed and given in published findings as required by Article
28 of the basic Regulation.

the refusal

(34) During the verification visit the GOA and the co-operating exporter have been made
aware several times of the provision contained in Article 28 (1) of the basic Regulation
that
to provide access to the grant contract and related supporting
documents may lead to findings being made on the basis of the facts available
concerning subsidies granted under the IICP and IAP. The actual conditions of the
grants in question were never disclosed in full to the Commission services by the GOA
and the co-operating exporting producer, not even orally. In this respect, it should be
noted that information given by the GOA and the exporting producer on the intent,
parameters and operation of the two programmes and the conditions and amount of the
grants in question was not disregarded to the extent
this information was
verifiable in accordance with Article 28(3) of the basic Regulation. The reasons for

that

8

(35)

(36)

(37)

rejecting the unverifiable statement made by the GOA that neither the grants under the
IICP nor under the IAP were contingent upon export performance are clearly set forth
in the provisional disclosure document and in recitals (28), (29), (40) and (42) of the
provisional duty Regulation.

The GOA argued furthermore that information provided by the Victorian Government
in relation to the grant payment under the IAP has been disregarded, and that the
statements by the European Commission that the Victorian Government grant payment
is contingent on export and that exports are one of the objectives of the Economic
Development Act 1981, are not correct and not supported by the facts.

Findings concerning conditions of the actual grant under the IAP had to be made on
the basis of the facts available as explained above. These facts included Section
3(1)(c) of the Economic Development Act 1981 which states that the functions of the
Ministry for Economic Development shall be to facilitate, encourage, promote and
carry out, inter alia, "the development of export capacity of industry throughout the
state", and the Report of the Victorian Auditor's Offices cited by the complainant
which contains a reference to expected export growth of the co-operating exporting
producer.

The pertinent provision for the grant in question, i.e. Section 13(3) of the Economic
Development Act 1981 setting forth the objectives of the IAP does not specifically
mention the development in export capacity, but rather more general conditions such
as "the balanced economic development of the State". However, the Victorian Industry
Statement "Doing Business in Victoria" made by the Minister for Industry and
Employment of 1 September 1993 outlined the IAP by stating, inter alia, that "projects
identified for assistance must offer significant net economic benefits to Victoria,
particularly in terms of exports" and "investments should be in trade-exposed, key
industry sectors, with priority being accorded to export or
import competing
companies".

(38)

Therefore, it is considered, that the arguments made by the GOA concerning the IAP
and the IICP should be rejected and it is confirmed that these subsidies are contingent
upon export performance in the meaning of Article 3(4)(a) of the basic Regulation.

Calculation of the amount of the subsidy

(39)

(40)

The GOA argued that concerning grants made under the IICP and the IAP the
denominator for allocation of the subsidy amount should be total sales and not only
export sales since the grants were linked to the acquisition of fixed assets and therefore
benefited the entire operation.

It is normal practice that subsidies which are contingent upon export performance, are
allocated over export sales regardless of whether they are granted for the purchase of
fixed assets or not. It
is a reasonable assumption that benefits under subsidy
programmes which are intended to benefit exports, are also linked to such exports and
that they should therefore be calculated on the basis of export sales. This approach is
also in line with the Community's Guidelines for the calculation of the amount of
subsidy in countervailing duty investigations.

(41)

The co-operating exporting producer benefited from the IICP and the IAP during the
investigation period and obtained subsidies of 1.92% and 0.64%, respectively.

9

3.

(42)

(43)

II.

1.

(44)

(45)

2.

(46)

AMOUNT OF COUNTERVAILABLE SUBSIDIES

The amount of countervailable export subsidies in accordance with the provisions of
the basic regulation, expressed ad valorem, for the investigated exporter is as follows.

EMDGS

IICP

ICS

IAP

TOTAL

Leading Synthetics

0.03%

1.92%

3.48%

0.64%

6.07%

Since the investigated exporting producer accounted for virtually all of the imports of
the product concerned into the Community originating in Australia, the weighted
average country-wide subsidy margin is above the applicable de minimis margin for
subsidisation of 1%.

INDONESIA

INTRODUCTION

Following the detailed disclosure of findings and the publication of the provisional
duty Regulation, no submissions or comments were received within the applicable
time limits.

In accordance with established practice and policy concerning countries falling under
Annex VII of the WTO Subsidies Agreement, it is considered that no benefit
is
conferred by subsidies below 0.3 %. This rule only applies to cooperating exporting
producers who receive individual treatment.

SAMPLING

In order to enable the Commission services to select a sample, pursuant to Article 27
of the basic Regulation, exporting producers were requested to make themselves
known within 15 days of the initiation of the proceeding and to provide basic
information on their export and domestic sales, their precise activities with regard to
the production of the product concerned and the names and activities of all their
related companies in the PSF sector. The Indonesian authorities and the Indonesian
association of exporting producers were also informed in this regard by the
Commission.

(a) Pre-selection of cooperating companies

(47)

Seven companies in Indonesia came forward and provided the requested information
within the time limit. These companies were initially considered as cooperating and
were taken into account in the selection of the sample.

The companies, which made themselves known within the time limit represented
virtually the totality of imports of the product originating in Indonesia into the
Community.

(48)

The cooperating companies which were not finally retained in the sample, were
informed that any countervailing duty on their exports would be calculated in
accordance with the provisions of Article 15(3) of the basic Regulation.

10

(49) Companies, if any, which did not make themselves known within the time limit, were

considered as non cooperating companies.

(b) Selection of the sample

(50)

three Indonesian companies were chosen to constitute the sample in
Initially,
consultation with the Indonesian association of exporting producers. The Indonesian
association of exporting producers proposed the replacement of two initially chosen
companies by two others which, however, could not be considered more representative
than those initially chosen. All parties concerned were informed accordingly.

(51) Questionnaires were sent for completion to all three initially selected companies for
the sampling. Subsequently, one of these companies provided an incomplete response,
which was moreover in contradiction to the basic information it had previously
provided for the sampling exercise. A second company did not provide a complete and
meaningful response and failed to inform the Commission services properly about its
relationship with another Indonesian company. It should be noted that both companies
had received several requests specifying precisely the nature of the information needed
and were granted extended deadlines to submit this information. In consequence, these
two companies were informed in detail of the reasons why they were no longer
considered to be cooperating with the investigation and that
the result of the
investigation may be less favourable to them than if they had cooperated.

the basic Regulation. For

(52) Given the degree of non-cooperation by companies initially selected in the sample, the
Commission services decided to select a new sample in accordance with Article 27(4)
of
Indonesian cooperating
companies, which had provided complete and meaningful questionnaire responses,
with a view to being granted individual examination, were added to the sample. The
Indonesian association of exporting producers, the companies concerned and the
Indonesian authorities were informed accordingly and raised no objection.

this purpose,

two other

(53)

The three companies which finally constituted the sample and which fully cooperated
with the investigation were attributed their own subsidy margin and individual duty
rate.

3.

SUBSIDY PROGRAMMES USED BY COOPERATING EXPORTERS

BKPM Schemes

(54)

The Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM)
is a Government Agency serving directly under the President of the Republic of
Indonesia. The function of the BKPM is to assist
in formulating
Government policies with respect to investment, and is responsible for the planning
and promotion of investment, as well as the processing of investment approvals and
licenses and the supervision of the investment implementation. The BKPM plays a
central role in co-ordinating investment activities with other Government agencies.
The BKPM is equally involved in regional development as well as the compilation and
management of the Negative List of Investment (Daftar Negative Investasi – DNI),
which contains the sectors that are closed for investments as well as those that are
regulated.

the President

11

(55)

The BKPM approves both foreign (Penanaman Modal Asing – PMA) and domestic
(PMDN) investments. Companies that are approved by BKPM as PMA or PMDN
companies will be granted exemption or relief from import duty and levies on the
importation of capital goods, namely machinery, equipment, spare parts and auxiliary
equipment, as well as on the importation of raw materials for the purpose of two years
full production.

(56)

Foreign investment (PMA) is governed primarily by the Foreign Capital Investment
Law No 1 of 1967, as amended by Law No 11 of 1970.

(57) Domestic investment (PMDN) is governed by Law No 6/1968 on Domestic Capital

Investment as amended by Law No 12/1971.

(58)

(59)

In addition, PMA companies as well as other companies are subject to sectoral policies
applied by the corresponding Government authorities such as those stipulated in Law
No 5/1984 on Industry, Law No 5/1967 on Forestry, and Law No 12/1992 on
Agriculture.

The legal basis for the import duty exemption or relief instruments themselves is
contained in a number of Minister of Finance Decrees (No 297/KMK.01/1997,
No 545/KMK.01/1997, No 546/KMK.01/1997 and No 252/KMK.04/1998).

(a) Eligibility

(60)

(61)

(62)

Investment projects that are approved by BKPM, PMA as well as PMDN projects,
including existing PMA and PMDN companies expanding their projects to produce
similar products by more than 30% of installed capacity or diversifying their products,
will be granted these facilities.

The criteria for eligibility are set by BKPM and appear to be updated frequently.
These criteria include certain restrictions for foreign investment, most notably an
obligation to enter into a joint venture with an Indonesian company when investing in
certain sectors.

Investments in the sectors indicated in the Negative List of Investment are as such not
eligible and include certain chemical industries such as the cyclamate and saccharine
industries. Investments in twelve other sectors are only eligible if they fulfil certain
additional criteria. These sectors are enumerated in the ‘Technical Manual –
Implementation of Capital Investment 1998’ published by BKPM and contain, inter
alia, the iodised consumer salt, ethyl alcohol and the fertiliser industry.

(63) With regard to the way the programme is administered,

the
companies are subject to the sectoral/industrial policies applied by the corresponding
Ministries.

it was stated that

(b) Practical Implementation

(64)

In a first step, applications are submitted to BKPM where they will be evaluated in
terms of their suitability to various aspects such as sectoral policies, technology,
market and finance. In case of approval, BKPM then also assists the companies in
obtaining other necessary permits, such as building, land title and working permits.

12

(65)

The import duty facilities themselves are obtained at a later stage. For this purpose, a
so-called masterlist denominating capital goods and raw materials to be imported must
be submitted through PT. SUCOFINDO, a technical
inspection agency, which
evaluates the list and then forwards it to BKPM after approval. The BKPM will then
issue an approval letter and an import license.

(c) Conclusion on Countervailability

(66)

(67)

The BKPM schemes constitute a subsidy as the financial contribution by the GOI in
the form of unpaid duties confers a direct benefit upon the recipient.

The schemes do not qualify as drawback schemes in accordance with the provisions of
Annexes I to III of the basic Regulation, since capital goods are not consumed in the
production process, and there is no obligation to export the finished product containing
the raw materials.

(68)

The BKPM schemes are not contingent in law upon export performance or the use of
domestic goods over imported goods.

(69) While these schemes appear to be available for a wide range of investments, they
explicitly limit access to the subsidy to certain enterprises which are not operating in
certain sectors. Additionally, the number and quality of the restrictions applicable to
certain sectors, most notably those restricting eligibility to either certain types of
enterprises, or to geographical area, or completely exclude certain sectors, are not in
line with the conditions of Article 3(2)(b) of the basic Regulation, which stipulates that
the granting authority must establish objective criteria which are neutral, do not favour
certain enterprises over others, and which are economic in nature and horizontal in
application. Hence, these programmes are considered to be specific in the meaning of
Article 3(2)(a) of the basic Regulation since they explicitly limit access to the subsidy
to certain enterprises.

(70)

Even if there were no specificity in law under Article 3(2)(a) of the basic Regulation,
the scheme would be de facto specific under Article 3(2)(c) of the basic Regulation,
since it has not been shown that eligibility is automatic, but rather based on a case-by-
case decision in which a certain number of government authorities is involved which
follow sectoral/industrial policies applied by the corresponding Ministries. No
information was provided on the actual use of the subsidy programme and the manner
in which discretion was exercised by the granting authorities. Hence, it is concluded
in the alternative, also considered specific under
that
Article 3(2)(c) of the basic Regulation and therefore countervailable.

the BKPM schemes are,

(d) Calculation of the subsidy amount

(71)

The determination of the obtained benefit was based on the amount of duties unpaid
during the investigation period as far as raw materials and spare parts are concerned,
and over the period from 1.1.1988 up to the end of the period of investigation for
capital goods, for which the normal depreciation period in that industry of 17 years has
been applied. Since the schemes are not contingent upon export performance, total
benefits have been allocated to total turnover. The obtained amount was then adjusted
rate for bank loans during the period of
by the average commercial
investigation, which was determined to be 24,61%.

interest

13

(72)

Two exporting producers availed themselves of these schemes, but obtained no benefit
under these schemes in accordance with the above-explained policy.

BAPEKSTA Schemes

(73)

(74)

Import Duty, Exemption and Drawback
The Centre for Administration of
(BAPEKSTA) can grant, upon application, the exemption or restitution of import duty
as well as the non-imposition of value added tax (PPN) and sales tax on luxury goods
(PPnBM) on the import of goods for further processing for export.

The exemption scheme covers duty on imports that will take place in the future,
whereas the restitution scheme applies to imported inputs that have already been used
in an exported product.

(75)

The legal basis is the Decree of Minister of Finance No 615/KMK.01/1997 of
1 December 1997.

(a) Eligibility

(76)

(77)

The BAPEKSTA schemes are available to exporting producers in Indonesia upon
application to BAPEKSTA.

In order to obtain the exemption facilities, a company is required to re-export 100% of
the imported materials in the form of finished goods, within a period of twelve months
starting at the date of import, unless the production period is longer than twelve
months. In this case, an exception can be granted. A company must also submit a
security in the form of a bank guarantee covering the amount of duty exemption and
PPN and PPnBM normally payable.

(78)

In order to obtain the restitution facilities, a company must already have exported the
finished goods. The import must have taken place no longer than 12 months before the
shipment of the exported goods.

(79)

For both facilities, exports may also take place to bonded zones within Indonesia.

(b) Practical Implementation

(80)

For the exemption facility, companies must submit a form containing the expected
export performance in the future, the projected need for imported goods, and an
estimate of duty and taxes normally payable. Afterwards, they are under obligation to
submit a report on export to BAPEKSTA every six months.

(81) BAPEKSTA may later proceed with a verification by auditing the reports of the

company concerned.

(82)

For the restitution facility, a company must submit a form providing a linkage between
the goods of imported origin, on which duty and taxes have been paid, and the goods
exported, accompanied by import and export documents.

(83) BAPEKSTA is entitled to verify these documents by carrying out controls at the

premises of the company concerned.

14

(c) Conclusion on Countervailability

(84)

The GOI claimed that the BAPEKSTA schemes are normal duty drawback schemes in
line with international obligations. Companies that were found to misuse these
schemes and obtain excess exemption or restitution amounts would face penalties. It
was also claimed that computer systems were in place to match import and export
transactions and to confirm which inputs are consumed in the production of the
exported products and in what amounts.

(85) However, the GOI was not able to produce sufficient evidence for the existence of an

effective verification system.

(86) Annex II(II)(5) and Annex III(II)(3) of the basic Regulation provide that, where it is
determined that the Government of the exporting country does not have such a system
in place, a further examination by the exporting country based on actual inputs
involved, or actual transactions, respectively, will normally need to be carried out in
the context of determining whether an excess payment occurred. The GOI did not
carry out such an examination. The Commission did not, therefore, examine whether
there was in fact an excess drawback of import charges on inputs consumed in the
production of the exported product.

(87)

The BAPEKSTA schemes constitute a subsidy as the financial contribution by the
GOI in the form of duty exemption or restitution confers a direct benefit upon the
recipient. It is a subsidy contingent in law upon export performance (it is an export
subsidy according to the provisions of item (I) of Annex I to the basic Regulation) and
is therefore deemed to be specific under Article 3(4)(a) of the basic Regulation.

(d) Calculation of the subsidy amount

(88)

(89)

4.

(90)

The benefit to the exporters has been calculated on the basis of the amount of customs
duty exemption granted during the investigation period, allocated over total export
turnover during the investigation period. This amount was then adjusted by adding
half of 24,61%, the average interest rate for commercial bank loans during the period
of investigation.

PT Indorama Synthetics TbK availed itself of these schemes, and obtained a benefit of
1,4%.

SUBSIDY PROGRAMMES NOT USED BY COOPERATING EXPORTING PRODUCERS

It was found that the cooperating exporting producers did not benefit from any
countervailable subsidies under the following programmes:

–

–

Income Tax Facility based on Government Regulation No 45 of 8 July 1996
and Presidential Decree No 7 of 14 January 1999.

Bonded Zones under Government Regulation No 33/1996 of 4 June 1996 and
Decisions of
Indonesia
(No 291/KMK.05/1997, No 547/KMK.01/1997, and No 292/KMK.01/1998).

the Minister of Finance of

the Republic of

15

5.

AMOUNT OF COUNTERVAILABLE SUBSIDIES

(91)

The Commission limited its examination by applying sampling in accordance with
Article 27 of the basic Regulation. It was decided, under Article 27(4) of the basic
Regulation, that there was a degree of non-cooperation by two companies selected in
the sample which was likely to materially affect the outcome of the investigation, and
thus a new sample had to be selected. The amount of countervailable subsidies for
cooperating exporting producers included in the sample is established as follows.

BKPM Schemes BAPEKSTA

TOTAL

Schemes

PT. Indorama Synthetics TbK

PT. Panasia Indosyntec TbK

PT. Susila Indah Synthetic Fiber Industries

0.0%

0.0%

0.0%

1.41%

1.41%

0.0%

0.0%

0.0%

0.0%

(92)

In accordance with Article 15(3) of the basic Regulation, any countervailing duty
applied to imports from exporters or producers which have made themselves known in
accordance with Article 27 but were not included in the examination shall not exceed
the weighted average amount of countervailable subsidies established for the parties in
the sample. Thus, the amount of countervailable subsidies for cooperating exporting
producers not included in the sample is established as follows.

BKPM Schemes BAPEKSTA

TOTAL

PT. GT Petrochem Industries TbK

PT. Teijin Indonesia Fiber Corporation

0.0%

0.0%

Schemes

0.45%

0.45%

0.45%

0.45%

(93)

(94)

The amount of countervailable subsidies in accordance with the provisions of the basic
Regulation, expressed ad valorem, for the cooperating exporting producers varies from
0 % to 1,0 % and are therefore below the de minimis threshold of subsidisation for
Indonesia, i.e. under 3%.

The two companies which were excluded from the sample, namely PT. Global
Fiberindo and PT. Polysindo Eka Perkasa, represented a substantial share (i.e. over
30%) of imports of the product concerned into the Community. Therefore, definitive
findings as regards these two companies and any other company that did not cooperate
in the present proceeding are made on the basis of the facts available in accordance
with Article 28 of the basic Regulation.

(95) On such a basis, the investigation has evidenced the existence of countervailable
subsidies which are available to the non-cooperating exporting producers. It
is
considered that the absence of cooperation is the result of the use and benefit by those
producers of the countervailable subsidies at a level above the de minimis level for
Indonesia. In accordance with the provisions of Article 28 of the basic Regulation and
based on the information found in the complaint and the findings of the investigation,
and in order
the amount of
to avoid granting a bonus for non-cooperation,
countervailable subsidies for these two companies is established as follows.

16

BKPM Schemes

(Domestic
Subsidy)

BAPEKSTA
Schemes

(Export
Subsidy)

5 %

5 %

5%

5 %

5 %

5%

TOTAL

10 %

10 %

10%

PT. Global Fiberindo

PT. Polysindo Eka Perkassa

Any other company

(96)

The weighted average country-wide subsidy margin for all exporting producers
investigated (including the two non-cooperating companies), which represent virtually
the totality of exports of the product concerned to the Community originating in
Indonesia is above the applicable de minimis margin for this country of 3%.

III.

TAIWAN

1.

(97)

2.

2.1

(98)

INTRODUCTION

Following publication of the provisional duty Regulation, the Government of Taiwan
(hereinafter referred to as "GOT") submitted in letter dated 17 and 19 January 2000 its
views on the disclosure document containing the details underlying the essential facts
and considerations on the basis of which provisional measures have been imposed.
Numerous written submissions were received from the exporting producers, all of
whom requested and were granted a hearing on 15 February 2000.

GENERAL SUBMISSIONS

Specificity of the schemes concerned

submitted some general comments concerning the
The exporting producers
interpretation of
the concept of specificity. The determination of whether an
investigated subsidy is specific has been done in accordance with the provisions of the
basic Regulation, notably Article 3 therein. The comments from the exporting
producers have been taken into account when determining whether or not each
investigated scheme involves specific subsidies, pursuant to Article 3 of the basic
Regulation, which are countervailable. Thus, the manner in which the determination of
specificity has been made for individual schemes is explained, under the section
relating to each scheme where relevant, and in supplement to the findings contained in
the provisional Regulation.

2.2

Calculation of prevailing commercial interest rate

(99)

(100)

It had been provisionally decided to apply a general interest rate of 9.03% for the
purpose of this investigation. This rate was determined on the basis of the information
obtained during the investigation which was considered appropriate for this purpose.
GOT and the exporting producers challenged the reliability of this rate.

In view of this claim, the generally applicable interest rate has been recalculated by the
Commission services. The relevant benchmark interest rate is set at 8.52% and has
been obtained by taking the monthly commercial interest rates charged during the
investigation period by 37 domestic banks in Taiwan. These interest rates are publicly

17

available and are part of the monthly financial statistics published by the Economic
Research Department of the Central Bank of the Republic of China.

(101)

It was also claimed that the interest rate used for the provisional findings should have
been the one which is used for comparable loans and that anyway, the interest rate
applied by the Commission is not commensurate with the interest rate which the
companies are capable of obtaining on the market and that commercial loans were in
fact made to the companies during the investigation period. A comparable loan should
be a loan of a similar amount, purpose and with a similar repayment period. No such
comparable loan was identified for the exporting producers concerned. Therefore, the
methodology of the calculation of the benchmark interest rate as explained above is
confirmed.

2.3

Application of the interest rate in the calculation of the amount of the subsidy

(102) The exporting producers claimed that the Commission is wrong in adding interest, at
the average commercial interest rate in Taiwan during the investigation period, to the
programmes which are found to be subsidies.

(103) The legal bases for the addition of interest to the face value of the subsidy are
Articles 5, 6 and 7 of the basic Regulation, which contain provisions on the calculation
of the amount of subsidy, as developed by the Commission's Guidelines for the
calculation of the amount of subsidy in countervailing duty investigations.

(104) Pursuant to Article 5 of the basic Regulation, the calculation of the benefit shall reflect
the amount of subsidy found to exist during the investigation period and not simply the
face value of the amount at the time it is transferred to the recipient or foregone by the
government. Such an approach is specifically provided for in the Commission's
Guidelines for the calculation of the amount of subsidy in countervailing duty
investigations, where it is stated that the face value of the amount of subsidy has to be
transformed into the value prevailing during the investigation period through the
application of the normal commercial interest rate.

(105)

It was also argued that this methodology cannot be applied to the alleged subsidisation
amounts on tax credits since the tax credits, which the companies have claimed, are
only utilised in the annual tax return which is made by 31 March of the following year.
The exporting producers claim therefore that no benefit is conferred on them until this
date.

(106)

In response to this argument, it is considered that since the benefit consists of a
reduction of direct tax which is payable every year, the benefit
itself will recur
annually as well. Therefore, the benefit should also include the interest element of not
having to borrow an amount equal to such tax savings on the open market.

2.4

Assessment of the subsidies in relation to the product concerned

(107) The GOT and the exporting companies submitted that the Commission should have
linked the alleged subsidy schemes to the product concerned in order to calculate any
subsidisation rate by attributing benefits which can be specifically linked to product
lines to the extent that they are directly linked to the product concerned.

(108) The Commission's Guidelines explicitly mention that if the benefit of a subsidy is
limited to a particular product, the denominator for allocation of subsidy amount

18

should reflect only sales (or export sales) of that product. If this is not the case, the
denominator should be the recipient's total sales (or export sales).

(109) The Commission, in its calculations, has followed this approach, as was correctly
stated by the exporting producers, for the import duty exemption on raw materials. In
this particular case, benefits were only identified for
the fibre division and
consequently the corresponding sales denominator was used. For all other described
schemes, it was found that the benefits were not limited to a particular product and
therefore the total sales were used as denominator.

3.

3.1

INDIVIDUAL SCHEMES

Tax credit for the purchase of automation and pollution control equipment

(110) The GOT and the exporting producers claimed that this scheme, which is described in
recitals 49 to 58 of the provisional duty Regulation was wrongly assessed by the
Commission in terms of the specificity of the subsidy. In particular, it was claimed that
the alleged subsidy of tax credits for automation and pollution control equipment is
not contingent upon the use of domestic over imported goods and cannot therefore be
regarded as specific within the terms of Article 3(4)(b) of the basic Regulation.

(111) Although the programme provides for a tax credit for imported as well as for
domestically produced equipment, the subsidy is doubled for the purchase of domestic
equipment. These two tax credit rates are considered separate programmes concerning
domestically purchased equipment and imported equipment respectively. In the
absence of the 20% tax credit for domestically produced equipment, a company would
have received no tax credit. The 10% credit rate cannot be considered the standard rate
of tax, because it is only available for imported equipment. Since the 20% credit rate is
only available for domestically produced equipment but not for imported equipment, it
is contingent upon the use of domestic over imported goods. This tax credit
is
therefore a specific import substitution subsidy in the meaning of Article 3(4)(b) of the
basic Regulation.

(112) By the same token, the 10% credit rate is only available for imported machinery and is
therefore limited to enterprises which purchase such imported machinery. Such a
limitation is not considered to be neutral in the meaning of Article 3(2)(b) of the basic
Regulation since it favours certain enterprises over others. Additionally, the criteria
are not economic in nature or horizontal in application. Hence, the subsidy is specific
in the meaning of Article 3(2)(a) of the basic Regulation.

Calculation of the subsidy amount

(113) As regards the calculation of the amount of countervailable subsidies, the exporting
producers argued that 15% of the 20% tax credit for the purchase of domestically
produced goods cannot be countervailable, because such a tax credit would be
obtained irrespective of the origin of the goods. This claim is not considered justified.
The amount of countervailable subsidies consists of the full amount of tax credits,
since the tax credit of 20% for domestically purchased equipment cannot be
considered as a deviation from a standard tax credit rate of 10%. As explained above,
the two tax credit rates are considered separate programmes concerning domestically
purchased equipment and imported equipment respectively. In the absence of the 20%
tax credit for domestically produced equipment, a company would not have received a

19

tax credit. The 10% credit rate only applies to imported machinery; it is not a general
credit rate. Therefore, the Commission concluded that the amount of the subsidy is the
total revenue foregone by the GOT.

(114) The benefit to the exporting producers has been calculated as explained in recital 57 of
the provisional duty Regulation, correcting however the average commercial interest
rate which was added to the amount of taxes unpaid during the investigation period as
explained above.

(115) The GOT claimed furthermore, that since the subsidy is linked to the purchase of fixed
assets, it should be calculated by spreading the subsidy over the normal depreciation
period of the assets in the industry concerned.

(116)

It is considered that benefits in the form of savings of direct taxes are generally not
considered to be linked to the purchase of fixed assets. Benefits related to direct taxes
are rather linked to the reduction in direct tax liability than to the purchase of fixed
assets since such a direct tax liability normally exists whether or not fixed assets are
purchased. This approach is also in line with the Commission's Guidelines for the
calculation of the amount of subsidy in countervailing duty investigations as set forth
in particular in Table 2 which is attached to the said Guidelines. Therefore, the
benefits under the scheme were calculated on the basis of income tax saved in the
investigation period in accordance with Article 7(4) of the basic Regulation.

(117) Two companies benefited from this scheme during the investigation period and

obtained subsidies of 0,42% and 0,40% respectively.

3.2

Tax credit for investment in important enterprises

(118) The GOT claimed that this scheme does not constitute a subsidy since there is no
financial contribution to invested companies. Tax deductions are only given to
investing stockholders, not stock issuing companies.

(119)

It is considered that there is a financial contribution by the GOT to the companies
claiming the tax credit, i.e. the companies investing in important enterprises. This
financial contribution in the form of government revenue foregone results in a benefit
for the investing stockholders in the form of a reduced tax liability. It is this benefit to
the investing company which is countervailed, not benefits to the companies in which
the investment is made.

(120) The GOT and the exporting producers claimed that this scheme, which was described
in recitals 59 to 66 of the provisional duty Regulation, concerns a tax credit which is
generally available and therefore not specific, as this programme is open to any legal
or moral person investing in certain enterprises. In particular, it is alleged that the
eligibility of the scheme is not limited to certain enterprises; that it is objective,
automatic and neutral and that the benefit of the tax credit does not accrue to a
company as a result of its production of the product concerned.

(121) As regards these claims, the Commission found that the access to this programme is
explicitly limited to companies which invest
in certain enterprises, since not all
investments in stocks are eligible for tax credits. Only investments in a limited number
of enterprises, i.e. important technology-based or important invested enterprises, will
qualify for a tax credit.

20

(122)

In addition, although the Commission agrees that
the definition of the eligible
required by
is clear and objective, eligibility is not neutral, as
enterprises
Article 3(2)(b) of the basic Regulation, since it limits the number of investments which
may result in a tax credit, on the basis of the activity of the firms concerned. If an
investing enterprise wishes to obtain the subsidy, its freedom of choice is restricted on
a sector-specific basis. Article 2 of the criteria for determining the scope of major
technology enterprises with respect to manufacturing industry and technical-service
industry limits the tax credit to 11 specific types of investments. Consequently, the
access to this programme is dependent upon making investments in certain enterprises
and it is not generally available. Thus, the claims of the exporting producers in this
respect have to be rejected.

(123)

It is also argued that that the benefit of the tax credit does not accrue to a company as a
result of its production of the product concerned. Benefits under this scheme are not
limited to the production of a particular product. There is no requirement that the
credit be used to benefit only the export, sale or production of another product. The
company receives a tax credit which benefits the production and exports of PSF.
Therefore, since the benefits of the subsidy are not linked to a particular product not
subject to the investigation, they are considered to benefit all sales, including sales of
PSF. Hence, the above claim made by the exporting producers must be rejected.

(124)

In conclusion, the finding that this scheme is considered specific in accordance with
Article 3(2)(a) of the basic Regulation and involves countervailable subsidies is
confirmed.

Calculation of the amount of the subsidy

(125) The benefit to the only exporting producer concerned has been calculated as explained
in recital 57 of the provisional duty Regulation, correcting the average commercial
interest rate from 9.03% to 8.52% as explained above which was added to the amount
of taxes unpaid during the investigation period.

(126) This company obtained a benefit of 0.71%.

3.3

Tax credits for R&D and personnel training

(127) As already established in the provisional duty Regulation (recitals 67 to 72), these tax
credits have been considered not to be specific. No written comments were received
from the parties concerned disputing this finding. Thus, this scheme is found not to be
specific in the meaning of Article 3 of
the basic Regulation, and thus not
countervailable.

3.4

Tax credit for investments in scanty natural resources areas

(128) The GOT made a green-light claim under Article 4(3) of the basic Regulation for this
fulfils the criteria for non-countervailable subsides to
scheme arguing that
disadvantaged regions. However, this claim was not substantiated with verifiable
evidence. Since it could not be established that the requirements in the said provision
are in fact fulfilled, this claim must be rejected.

it

(129) The GOT also argued that no benefits linked to PSF were received by the exporting
companies. This argument has to be rejected in accordance with the reply above in the
section on the « Assessment of the subsidies in relation to the product concerned ».

21

Calculation of the subsidy amount

(130) One company availed itself of this scheme and obtained a benefit of 0.01%.

3.5

Tax credits for establishing international brands

(131) As has been described in recital 81 of the provisional duty Regulation, one exporting
producer availed itself of this scheme but obtained no benefit. No comments were
received from the parties concerned.

3.6

Loans at preferential interest rates: incentives for automation, anti-pollution
incentives and energy conservation incentives

(132) These schemes, which were described in recitals 82 to 91 of the provisional duty
Regulation, are based on Article 21(1) of the Statute for Upgrading Industries
(hereinafter referred to as SUI).

(133) The GOT and the exporting producers claimed that these loans are available to almost
all Taiwanese companies and therefore they are not specific and are accordingly not
countervailable. Concretely, it
limited to certain
enterprises; that eligibility for the programme is objective and that, even if eligibility is
not objective, it does not automatically follow that the programme is specific.

is claimed that eligibility is not

(134) As regards these claims, it is a fact that the provisions of Article 21(1) of the above-
mentioned SUI explicitly limit the benefits thereunder to certain enterprises which
comply with a number of criteria or conditions. Those criteria or conditions, such as
investments in specific equipment under specific conditions set by the Executive Yuan
of the Development Fund, are not considered to be objective within the meaning of
Article 3(2)(b) of the basic Regulation. The provisions of Article 21(1) of the SUI
cannot be considered objective since the criteria are not neutral or economic in nature
or horizontal in application because it is known in advance that certain enterprises are
more likely than others to be in a position to benefit from these loans just by reason of
the type of business sector they are in. Therefore, benefits from this scheme will
inevitably be more relevant to some sectors than to others.

(135) A basic principle of specificity is that a subsidy that distorts the allocation of resources
within an economy, by favouring certain enterprises over others, should be subject to
countervailing measures if it causes injury. Where eligibility for subsidies is limited
within an economy, on the basis of non-neutral criteria such a distortion in the
allocation of resources is presumed to occur. This principle is at the basis of Article
3(2)(a) of the basic Regulation, which provides that a subsidy is specific if the
granting authority, or the legislation pursuant to which the granting authority operates,
explicitly limits access to a subsidy to certain enterprises. Thus, the above claims are
rejected.

(136)

It was claimed that, even if eligibility is not objective, it does not automatically follow
that
the programme is specific. This claim should also be rejected because no
automatic finding of specificity has been made. This scheme is considered specific
because it is limited to certain enterprises within the meaning of Article 3(2)(a) of the
basic Regulation, as explained above. The Commission therefore confirms its
provisional findings as described in recital 87 of the provisional duty Regulation.

22

(137)

It was also argued that with respect
the
countervailable subsidy only would represent the difference in interest rates between
the government's practice and commercial practice.

to loans at preferential

interest rates,

(138) The Commission Guidelines for

the calculation of the amount of subsidy in
countervailing duty investigations, however, specify that in the case of loans from the
government the subsidy represents the difference between the amount of interest paid
on the government
loan and the interest normally payable on a comparable
commercial loan during the investigation period.

(139) The GOT also claimed that only two companies had benefited under this programme
for the development of PSF. This claim has to be rejected in accordance with the reply
above in the section on the « Assessment of the subsidies in relation to the product
concerned ».

Calculation of the subsidy amount

(140) The exporting producers claimed that the interest rate used for the provisional findings
should have been the one which is used for comparable loans and that anyway, the
interest rate applied by the Commission is not commensurate with the interest rate
which the companies are capable of obtaining on the market and that commercial
loans were in fact made to the companies during the investigation period.

(141) A comparable loan should be a loan of a similar amount, purpose and with a similar
repayment period. As was mentioned in recital 89 of the provisional Regulation no
such comparable loan was identified for the exporting producers concerned. Therefore,
the Commission confirms the application of the benchmark interest rate as calculated
for Taiwan and explained above.

(142)

In addition, one exporting producer first claimed that the Commission included in its
calculation benefits which allegedly arose even where the company concerned did not
pay interest during the whole investigation period since the loan was only taken up in
tranches over the investigation period. In subsequent
letters, the same exporting
producer claimed, on the contrary, that interest payments had been made during the
investigation period.

(143) The company specifically refers to three loans for which the information provided in
the reply to the questionnaire, and verified during the on-spot visit, in the sense that no
interest payments had been made during the investigation period for these loans, was
not contested until after the first submission of this company in response to the
disclosure of the provisional findings.

(144) These loans were reported as loans without any interest payments by the company
during the investigation period and where the principal amounts of the loans were
granted in one-time grants. The Commission calculated the alleged subsidy amounts as
explained in the provisional Regulation.

(145) After disclosure of the provisional findings, the company claimed that for those loans
the

interest payments occurred during the investigation period and that

several
principal loan amount was granted to them in a series of grants.

(146)

It is found that the information provided in this respect contradicts the statements
explicitly made by the company in its response to the questionnaire and during the

23

verification visit. In addition, the new allegations do not correspond to earlier verified
data. Furthermore, such allegations have not been sufficiently substantiated by
objective and/or verifiable evidence. The Commission therefore confirms its original
calculation methodology with regard to those loans.

(147)

It was also argued that in calculating the amount of the subsidy, the Commission
should take into account the fact that no repayments of principal were made during the
investigation period due to a two-year grace period. This claim does not change the
calculation of the benefit made by the Commission, on the basis of the difference
between the amount of the interest paid and that normally payable. The Commission
therefore confirms its original calculation methodology with regard to these loans.

(148) The benefits to the exporting producers have been calculated as explained in

recitals 88 to 90 of the provisional duty Regulation.

(149) The benefits obtained by these four companies range from 0.04% to 0.31%.

3.7

Import duty exemption: purchases of new equipment and anti-pollution
equipment

(150) The legal bases for this alleged countervailable subsidy scheme are: Additional notes 3
and 9 of Chapter 84, Additional notes 4 and 5 of Chapter 85 and Additional notes 1
and 2 of Chapter 90 of the Customs Import Tariff and Classification of Import &
Export Commodities of the Republic of China (hereinafter referred to as "Customs
Code").

(151) The GOT claimed that this programme does not meet any of the definitions of a
subsidy as set forth in Article 2 of the basic Regulation, notably because there is no
direct transfer of funds, there are no goods or services provided and there is no price or
income support. This claim has to be rejected because this scheme involves a financial
contribution by the GOT in the form of import duties foregone, in accordance with
Article 2(1)(a)(ii) of the basic Regulation, and a benefit is conferred thereby.

(152) The GOT and the exporting producers claimed that this scheme, which is described in
recitals 92 to 99 of the provisional duty Regulation, was wrongly assessed by the
Commission in terms of the specificity of the subsidy and consequently of the
countervailability of the alleged subsidy.

(153)

(154)

In particular, it was claimed that the access to this import duty exemption scheme is
available to all Taiwanese companies who wish to purchase equipment which is not
produced locally and it can therefore not be considered specific because the range of
companies who wish to take advantage of such an exemption is not limited and is
administered on the basis of objective and neutral criteria.

It is considered that this criterion is not objective within the sense of Article 3(2)(b) of
the basic Regulation. This Article requires that objective criteria or conditions must be
neutral and also economic in nature and horizontal in application. The provisions of
the Additional Notes of the Customs Code mentioned above, are considered not to be
economic in nature and horizontal in application since the use of this scheme is limited
only to certain enterprises. The enterprises that may benefit from this scheme must be:
incorporated and qualified manufacturers or technical service industries who will use
this scheme to import machinery, equipment and instruments for prevention of air

24

pollution, water contamination, noise or vibration, or for environmental inspection and
test or wastage disposal, research and experiment or for examination and analysis
under the headings of the specific Chapters of the Customs Code. In addition it should
also be stressed that the specified equipment, after fulfilling these requirements, can
only be exempted from import duty if it has been verified by the Taiwanese authorities
that
this equipment has not yet been manufactured in Taiwan. Therefore, only
companies which are active in an industry where the machinery is not made in Taiwan
will benefit from this scheme.

(155) The above claims are rejected and the provisional findings, as described in recital 97

of the provisional duty Regulation, confirmed.

Calculation of the subsidy amount

(156) The benefits to the exporting producers have been calculated as explained in recital 98

of the provisional duty Regulation.

(157) The benefits obtained by the four exporting companies concerned range from 0.12% to

0.20%.

3.8

Import duty exemption: imports of raw material

(158) The legal basis for this alleged countervailable subsidy scheme, which is described in
recitals 100 to 106 of the provisional duty Regulation, is Additional note 6 of Chapter
29 of the Customs Import Tariff and Classification of Import & Export Commodities
of the Republic of China (hereinafter referred to as "Customs Code").

(159) The exporting producers argued that this scheme should not have been included in the
investigation since there was no reference to this scheme in the complaint and because
no information was requested by the Commission with regard to this programme until
the verification visits.

(160) Both the complaint and the Notice of Initiation referred to "import duty exemptions"
as alleged subsidy programmes benefiting the product concerned. Therefore, it is
considered that the complaint contained sufficient prima facie evidence to initiate an
investigation and that both the Notice of Initiation and the questionnaires and related
documents sent by the Commission were sufficiently clear in requesting information
on exemption of import duty, including on raw materials. Additionally, when lodging
a complaint, complainants cannot be expected to have knowledge of every last detail
of alleged subsidy programmes in a third country. Indeed, Article 10(2) of the basic
Regulation specifies that the complaint shall contain such information as is reasonably
available to the complainant. The complainant made also allegations concerning
import duty exemptions for purchases of new equipment and anti-pollution equipment.
In view of the nature of the subsidies and in particular the fact that import duty
exemptions for such equipment and raw materials were granted under the same
the
umbrella of "Additional Notes" to the Customs Code,
Commission is entitled to investigate them and to recommend countervailing action if
appropriate.

is concluded that

it

(161) The GOT claimed that this programme does not meet any of the definitions of a
subsidy as set forth in Article 2 of the basic Regulation, notably because there is no
direct transfer of funds, there are no goods or services provided and there is no price or

25

income support. This claim has to be rejected because this scheme involves a finical
contribution by the GOT in the form of import duties foregone, in accordance with
Article 2(1)(a)(ii) of the basic Regulation, and a benefit is conferred thereby.

(162) The GOT and the exporting producers claimed that this scheme was wrongly assessed
by the Commission in terms of the specificity of the subsidy and consequently of the
countervailability of the alleged subsidy.

(163)

It was claimed that such import duty exemptions are not in fact limited to certain
enterprises, because the criteria for allowing such exemptions are objective and
neutral.

(164) This scheme is explicitly limited to given manufacturers, which are subject to the
factory administration rules, for the importation of specifically listed raw materials, in
this case chemicals, which are exclusively used in the manufacturing of plastics,
artificial fibre, rubber and petrochemical intermediates by chemical reaction, and
provided that, in addition, such chemicals are not yet produced or sufficiently supplied
in Taiwan. As a result, the Commission finds that this scheme is explicitly limited to
certain enterprises which comply with the conditions contained in the provisions of the
specific Additional Note of the Customs Code. Such conditions are not considered to
be neutral or economic in nature or horizontal in application.

(165)

It was also argued by the exporting producers that this scheme cannot be considered a
subsidy because it does not involve the granting of benefits in excess of the import
charges levied, for imports which are fully incorporated in the product concerned.
Given that, according to Annex I of the basic Regulation, such an exemption would
not be regarded as a countervailable subsidy when it is contingent upon export, it is
claimed that a similar exemption, which is not contingent upon export performance,
must a fortiori be regarded as a non-countervailable subsidy.

(166) Annex I of the basic Regulation contains an illustrative list of export subsidies,
including item (i) which pertains to duty drawback schemes to which the argument
probably refers. However, under the scheme in question, there is no remission or
drawback of import charges since it was not claimed that there is a requirement to use
the imported goods as inputs for the production of the final exported product. It
considered, therefore, that Annex I as an illustrative list of export subsidies, does not
apply to the issue whether there this programme constitutes a subsidy, in particular
since the scheme is not considered to be an export subsidy. Article 2(1)(a)(ii) of the
basic Regulation requires explicitly that only exemptions granted in accordance with
Annexes I to III are not to deemed to be subsidies. Therefore, the regular definition of
a subsidy contained in Article 2 of the basic Regulation applies. This scheme
constitutes a subsidy since there is a financial contribution of the GOT in the form of
import duty foregone, which confers a benefit on the recipient by not having to pay the
import duty otherwise due.

(167) The Commission therefore confirms its provisional findings as described in recital 104

of the provisional duty Regulation.

Calculation of the amount of the subsidy

(168) The benefits to the exporting producers have been calculated as explained in recital

105 of the provisional duty Regulation.

26

(169) The benefits obtained by the four exporting companies concerned range from 0.16% to

0.51%.

3.9

Matching funds and Assistance funds

(170) The GOT made a green-light claim under Article 4(2) of the basic Regulation for this
scheme arguing that it fulfils the criteria for non-countervailable subsides for research
activities. However, this claim was not substantiated with verifiable evidence. Since it
could not be established that the requirements in the said provision are in fact fulfilled,
this claim must be rejected.

(171) The GOT also claimed that this programme is not related to the production of PSF.
This claim has to be rejected in accordance with the reply above in the section on the
« Assessment of the subsidies in relation to the product concerned ».

Calculation of the amount of the subsidy

(172) Two companies availed themselves of this scheme. One company did not obtain

benefits, the other received a benefit of 0.01%.

4.

AMOUNT OF COUNTERVAILABLE SUBSIDIES

(173) The following domestic subsidy rates for the cooperating companies were established:

Tax
Credits

Loans

Import Duty
Exemptions

Matching
Funds

Total
Subsidy

Nan
Ya
Plastics Corp.

Eastern

Far
Textile Ltd.

1.14

0.06

0.32

0.00

0.40

0.31

0.36

0

0.04

0.68

0.01

1.52

1.08

0.73

0.20

0.34

0

0.54

Shinkong
Synthetic
Fibres Corp.

Tuntex
Distinct Corp.

0

0

(174) The weighted average country-wide subsidy margin for all the exporting producers
investigated which virtually represent the totality of exports of the product concerned
to the Community originating in Taiwan is above the applicable de minimis margin of
1%.

D.

1.

INJURY

DEFINITION OF THE COMMUNITY INDUSTRY

(175) Since no comments were received regarding the definition of the Community industry,
the conclusions of recital 133 of the provisional duty Regulation are hereby confirmed.

27

2.

CONSUMPTION IN THE COMMUNITY

(176) Since no comments were received on consumption in the Community, its assessment
as indicated in recital 134 of the provisional duty Regulation is hereby confirmed.

3.

a)

(177)

IMPORTS OF PSF INTO THE COMMUNITY FROM THE COUNTRIES CONCERNED

Cumulative assessment of imports

It was provisionally considered that there were sufficient grounds for cumulating the
imports from Australia and Taiwan and to exclude from the analysis the imports from
the Republic of Korea, Thailand and Indonesia.

(178) Since, at the present stage of the investigation countervailable subsidies above the de
minimis threshold were found to exist with respect to Indonesia, the question had to be
examined whether, in accordance with Article 8(4) of the basic Regulation, imports of
PSF originating in Indonesia should be assessed cumulatively with imports from
Australia and Taiwan.

(179) The results of the subsequent examination showed that:

(a)

(b)

(c)

the country-wide margins of subsidy relating to Australia, Taiwan and
Indonesia were above the de minimis level;

the volume of imports from these countries was not negligible when compared
to Community consumption;

the analysis of the conditions of competition on the Community market
between imported PSF and the Community product and the conditions of
competition between imported PSF indicated that:

–

–

–

imported PSF from all exporting countries and Community-produced
PSF are like products,

imported PSF from all exporting countries was sold through similar sales
channels to the same customers,

imported PSF from all countries was sold at similar prices.

It was found that sales prices of the imports from the countries concerned were
undercutting those of the Community industry.

(180) Based on the above considerations, it was concluded that there were sufficient grounds

for cumulating the imports from Australia, Taiwan and Indonesia.

b)

Volume of imports and market share

(181) With the cumulation of Indonesia, between 1996 and the IP the imports of PSF from

the counties concerned developed as follows:

28

Imports tons

1996

1997

1998

IP

62

100

1.248

2007

11.254

11.799

18093

18969

20.213

26.811

35.524

34.878

100

4.696

100

133

176

173

12.238

25.276

22.871

260

538

487

Index

Index

Index

countries

24.971

40.297

72.054

69.548

Index

100

161

288

278

- Australia

- Taiwan

- Indonesia

Total

-
concerned

Source: Eurostat

(182) The above table shows that the volume of import from the countries concerned
increased significantly, particularly between 1997 and 1998 when it almost doubled.
The slight decline between 1998 and the IP is due to a low level of imports in the first
quarter 1999 as compared to the first quarter 1998.

Market share

1996

1997

1998

IP

- All countries concerned

5.5%

100

7.8%

12.3%

12.0%

142

224

218

Index

(183) The above figures include imports from Indonesia. The trend confirms the increase of
imports from the countries concerned on the Community market, both in absolute
terms and in terms of market share.

c)

Evolution of average import price

Average import price

1996

1997

1998

IP

- all countries concerned

Index: 1996 = 100

100

94

82

77

(184) The above table shows a significant decrease in average import price, particularly
between 1997 and 1998 (-12%). Import prices further decreased by 6% between 1998
and the IP. This negative evolution coincides with the surge of imports from the
countries concerned during the period 1997 to the IP.

29

d)

Price undercutting

(185)

It is recalled that price undercutting was provisionally established on the basis of a
comparison between the export price (CIF Community frontier, duties paid) and prices
charged by the Community industry (ex-works). The sales prices considered for
similar product types of PSF were those to independent customers after deduction of
discounts and rebates. Where necessary the export prices were adjusted to reflect the
same level of trade as those of the Community industry.

(186) The results of the comparison (on a weighted-average to weighted-average basis)
showed that price undercutting margins, expressed as a percentage of the Community
industry's average selling prices, were on average 21% for Australia and 6,1% for
Taiwan. As no comments were received regarding these undercutting calculations, the
undercutting margins are hereby confirmed.

(187) The same methodology was applied with regard to Indonesia. Based on the
information provided by the cooperating exporting producers and on the best facts
available for the non-cooperating exporting producers in Indonesia, the result of the
comparison showed a weighted average undercutting margin of 33,9% for that
country.

4.

a)

ECONOMIC SITUATION OF THE COMMUNITY INDUSTRY

Production, capacity and capacity utilization

(188) The GOA contested the method used by the Commission to assess the production
capacity of the Community industry for the product concerned. In its opinion, the
decrease in production capacity by 7% for PSF was determined with regard to capacity
used for the production of other products and was thus incorrect. The GOA considered
that production capacity for PSF should have been assessed exclusively on the actual
production of the PSF covered by the investigation.

(189)

In any event, the GOA considered that the reduction in the Community industry's
production capacity was not compatible with a finding of material injury: firstly
because this reduction did not allow the Community industry to participate in the
considerable growth of the market (+27%) during the period considered; and secondly,
because the reduction in capacity was motivated by the fact that other products were
more profitable than PSF.

(190) With respect to the assessment of production capacity, it should be underlined that the
product concerned is produced on the same production lines as other products of the
same family. It is therefore impossible to identify the actual capacity exclusively
installed for one product as compared to all the products produced on one and the
same production line. In these circumstances, the assessment of production capacity
for PSF was based on a ratio comparing the actual production of PSF to the total actual
production of all products produced on the same production lines. Consequently,
contrary to the claim made by the GOA, the assessment of production capacity for
PSF takes into account the actual production of PSF.

(191)

It also follows that the decrease in production capacity of the Community industry was
not determined by the inclusion of other products. This statement is strengthened by
the subsequent findings of the investigation, which confirmed that the Community

30

industry converted several production lines formerly attributed to the production of
PSF to other types of fibers not covered by the present investigation. The investigation
also showed that several PSF production sites were closed down during the period
considered.

(192)

It should also be noted that the switch from the production of PSF to the production of
other products was motivated mainly by the long-term losses incurred by the
Community industry on production and sales of PSF facing continued unfair
competition from dumped and subsidised imports from third countries. The reduction
in capacity, which indeed did not allow the Community industry to participate in the
market growth, is therefore particularly relevant for the determination of injury but
more specifically for the analysis of the causal link between the subsidised import and
the injury suffered by the Community industry discussed below.

(193) On this basis, the GOA's claims are considered to be unfounded. Accordingly, the data
provided, the method described for assessing production capacity for PSF and the
conclusions contained in recitals 141 and 142 of the provisional duty Regulation are
hereby confirmed.

b)

Profitability of the Community industry

(194) The GOA pointed out

that

the Community industry's profitability significantly
improved over the period considered, namely from a loss of around 4% to a profit of
over 6%. It was also claimed that while it was mentioned in the provisional duty
Regulation that the level of profitability was still inadequate, no figure were provided
as to what the profitability of the industry was prior to the appearance of subsidised
imports. Consequently, the GOA claimed that no proper assessment could be made as
to whether the injury suffered by the Community industry was material.

(195) The above statement rightly suggests that an improvement in profitability during the
period considered does not automatically lead to the conclusion that the Community
industry did not suffer material injury. In addition, the assessment as to whether the
injury suffered by the Community industry was material cannot only be based on the
profitability nor can it be based on a comparison of profitability between 1996 up to
the IP.

Indeed, the provisions of the basic Regulation enumerate a number of factors among
which the volume of dumped imports and the effect of dumped imports on prices on
the Community market for like products and specifies no one or more of these factors
can necessarily give decisive guidance for a negative finding on injury.

(196) As indicated below in the conclusions on the economic situation of the Community
industry, the conclusion of material injury was not only justified by the inadequate
profitability achieved by the Community industry but also based on the negative
developments observed for most of the economic indicators pertaining to that industry:
market share, production capacity, sales volume, sales prices, stocks, investments,
employment and significant price undercutting by subsidised imports from the
countries concerned.

(197) As far as profitability is concerned,

its
improvement was mainly the result of both the restructuring process undertaken by the
Community industry and the resulting reduction in sales, general and administrative

investigation showed that

the present

31

costs and the decrease of the raw materials purchase prices. Production costs were
reduced faster than sales prices decreased, allowing thus the Community industry to
return to profit from 1998 onwards. Nevertheless,
this
improvement in profitability may only be temporary and any adverse factors such as
unfavourable development in raw material prices could, have serious implications for
the current situation.

it was emphasised that

(198) Notwithstanding this, it should be noted that the Commission indicated in recital 179
of the provisional duty Regulation that a margin of 10% should be added to the full
cost of production in order to obtain the non-injurious price of the Community
industry. Consequently, it is considered that this margin represents the minimum profit
the Community industry could expect in the absence of subsidised imports from the
countries concerned.

(199) Based on the foregoing, since no further comments were received regarding the
profitability of the Community industry, the conclusion that profitability during the IP
is inadequate is hereby confirmed.

c)

Market share

(200) The GOT argued that one of the consequences of the restructuring of the Community
industry was the elimination of a number of inefficient Community producers of PSF
on the Community market. It further claimed that the remaining producers thus not
only became more competitive due to international competition but did not face a loss
in market share which can be considered as material.

(201) Regarding this claim, it should be pointed out that the development of market share
during the period considered was consistently assessed on the basis of the same
companies that constitute the Community industry in the present case. Therefore,
contrary to the GOT's claim,
the loss in market share (-17 percentage points)
experienced by the Community industry from 1996 to the IP is exclusively based on
the data pertaining to the companies constituting the Community industry. The
suggestion that market share of the Community industry include information of
companies which disappeared or withdrew from the market is therefore unfounded.

d)

Conclusion

(202)

In the light of the above and in view of the fact that the cumulation of imports from
Indonesia did not give grounds such as to change the provisional findings and the
conclusion that the Community industry suffered material injury during the IP, the
contents of recitals 151 and 152 of the provisional duty Regulation regarding the
conclusion on the situation of the Community industry are hereby confirmed.

E.

1.

CAUSATION

EFFECT OF SUBSIDISED IMPORTS

(203) Both the GOA and the GOT stated that there is no evidence that the injury suffered by
the Community industry was caused by the limited volumes imported from Taiwan
and Australia.

(204) The GOA claimed that the market share of Australian imports was too limited (2% of
consumption) to have any influence on prices on the Community market. Rather, they

32

had to follow the price trends imposed by the large operators on the Community
market. Accordingly, the GOA suggested that injury, if any, was caused by large
imports from other third countries.

(205) The GOT similarly argued that

the market share of approximately 6% held by
Taiwanese exports, in conjunction with the low price undercutting level established for
these imports, could not objectively have had an impact on the situation of the
Community industry which has a market share of over 50% in the Community.

(206) Regarding the arguments raised by the GOA and the GOT on their respective market
share, it is recalled that imports from Australia and Taiwan were found to be clearly
above the de minimis level during the IP. In addition, it was found that all conditions
required for a cumulated analysis were met. In these circumstances, comments
concerning individual market shares held by individual countries are irrelevant.

(207)

In addition, the prices at which the PSF imported from these countries was sold on the
Community market were undercutting the Community industry's prices. Accordingly,
subsidised PSF imported from Australia and Taiwan,
together with low-priced
subsidised PSF imported from Indonesia had a significant negative impact on the
economic situation of the still vulnerable Community industry. This finding is
reinforced by the fact that the PSF market is transparent and that, therefore, price
differentials or low priced offers can have a price depressing effect.

(208) Consequently,

it

is considered that the GOA and the GOT did not provide any
evidence which would contradict the provisional finding that the Community industry
suffered material injury as a result of low-priced subsidised imports. Accordingly, the
conclusion that subsidised imports, taken in isolation, had caused material injury to the
Community industry is hereby confirmed.

2.

CURRENCY FLUCTUATIONS

(209) The GOA argued that the Commission failed to look at the effect that exchange rate
fluctuations have had on import price from Australia, specifying that during the
investigation period PSF imported from Australia had benefited from a favourable
exchange rate appreciation.

(210)

(211)

In this respect it should be noted that imports from this country were invoiced in USD,
in DEM and in GBP and not in AUD on the Community market. The parity of the
Australian currency was therefore not relevant in the relevant determinations.

In any event, it should be pointed out that the Australian currency depreciated during
the first seven months of the IP and subsequently appreciated during the next five
months of the IP, as compared to its parity to the ECU/EUR of the first month of the
IP. Consequently, there was no constant decreasing trend of the Australian currency
during the investigation period.

3.

CONCLUSION

(212) Given that no new other arguments were received regarding the cause of the injury
suffered by the Community industry, the conclusion that subsidised imports, taken in
isolation, had caused injury to the Community industry, as stated in recital 168 of the
provisional duty Regulation, is hereby confirmed.

33

F.

1.

COMMUNITY INTEREST

INTEREST OF THE COMMUNITY INDUSTRY

(213) Since no comments were received regarding the above issues, the findings on the
interest of the Community industry cited in recital 170 of the provisional duty
Regulation are hereby confirmed.

2.

IMPACT ON USERS

(214) Following the publication of the Provisional Regulation, a number of users and
importers submitted their comments in writing. Furthermore, one users' association
reacted to the provisional duty Regulation and asked for and was granted a hearing
before the Commission.

(215)

It should be pointed out that most of the above users and importers either did not make
themselves known within the time limit set out in the Notice of Initiation of the
proceeding, or did not reply to the questionnaire sent to them by the Commission.
Consequently, most of them cannot be considered as interested parties under Article
31(2) of the basic Regulation and their views should not normally be taken into
account at this stage of the proceeding.

(216)

In addition, as stated in recital 171 of the Provisional Regulation, the overall low level
of cooperation in the Community interest investigation meant that the assessment of
the impact of the measures on the activities of users and importers was determined
according to the information available.

(217) The submissions made by the interested parties were examined and it was concluded
that their main argument was that the imposition of countervailing duties would have
negative effects on their competitiveness on the downstream products and would
ultimately threaten their survival on Community PSF market. Indeed, the imposition
of duties would, as a first step, trigger increases in PSF prices from the countries
concerned, forcing Community PSF users in turn to increase prices of the downstream
products. In their opinion this development would be the cause of the increase in
imports of low-priced downstream products from other third countries and from the
countries concerned by this investigation.

(218)

In the light of the contents of recitals 171 and 172 of the Provisional Regulation, the
investigation showed that certain users completely shifted from purchasing PSF from
the Community industry to exclusively purchasing PSF from the countries concerned.
It is therefore considered that, if no measures are taken to correct the distorting effects
caused by the presence of low-priced subsidised imported PSF, this situation will
amplify and the overall market will suffer in the long term: firstly, because a number
of Community producers will disappear leading to reduced competition on the
Community market; secondly, because it will encourage more low-priced subsidised
PSF to enter the Community market putting the users of such imports in a more
favorable competitive situation compared to those using other sources of supply.
Consequently, it is considered that the interest of all the operators on the Community
market
requires the existence of effective trade competition and therefore the
imposition of countervailing measures against subsidised imported PSF.

34

(219)

In any event, the information available on the cost structure of the user industry, the
level of the proposed measures and the share between subsidised imports and the other
sources of supply indicate that:

–

–

–

- PSF may represent between 25% and 45% of the users total cost of
production of downstream products;

- the average countervailing duty is about 3% for the countries concerned;

- the share of subsidised imports is 12% of total consumption of PSF.

The proposed measures may have the impact of increasing the cost of production of
users by between 0.1% to a maximum of 0.16%. This likely maximum increase is
considered to be negligible when compared to the positive impact of the proposed
measures in restoring effective competition on the Community market.

(220) Consequently, the conclusion of recital 172 of the provisional duty Regulation that the
impact of the proposed measures on the users' profitability and survival on the market
will be limited is hereby confirmed.

3.

CONCLUSION

(221) The new arguments received regarding the determination of the Community interest,
are not considered to be such as to reverse the conclusion that no compelling reasons
exist against the imposition of countervailing measures. The provisional findings are
therefore confirmed.

G.

DEFINITIVE DUTIES

(222)

In view of the conclusions reached regarding subsidies,
injury, causation and
Community interest, it is considered that definitive countervailing measures should be
taken in order to prevent further injury being caused to the Community industry by
subsidised imports from Australia, Indonesia and Taiwan.

1.

INJURY ELIMINATION LEVEL

(223) As explained in recital 179 of the provisional duty Regulation, a non-injurious level of
prices was determined which would cover
the Community industry's cost of
production and a reasonable profit which would be obtained in the absence of
subsidised imports from the countries concerned.

2.

FORM AND LEVEL OF THE DUTY

(224)

In accordance with Article 15(1) of the basic Regulation the countervailing duty rates
correspond to the subsidy margins, as the injury margins are found to be higher for all
exporters in the countries concerned.

a)

Australia

(225) This led to the following countervailing duty rates for the cooperating exporting

producer in Australia:

35

Company

Export
Subsidy
Margin

Total Subsidy
Margin

ProposedC
VD

Leading Synthetics

6.0%

Other companies

6.0%

6.0%

6.0%

6.0%

6.0%

(226) Given the high level of cooperation, which covered virtually all imports of the product
concerned originating in Australia, it was considered appropriate to establish the
residual duty rate at the same rate as the highest rate that has been established for the
cooperating company i.e. 6.0%.

b)

Indonesia

(227) Given the high level of non-cooperation in Indonesia, which was determined to be
above 30%, it was considered appropriate to apply a method which avoided granting a
bonus for non-cooperation. Accordingly, the duty rate for non-cooperating companies
was established on the basis of the facts available in accordance with Article 28 of the
basic Regulation, i.e. at 10%.

Company

Export
Subsidy
Margin

Total
Subsidy
Margin

Proposed
CVD

PT. Indorama Synthetics TbK

1.4%

1.4%

PT. Panasia Indosyntec TbK

PT. Susila Indah Synthetic Fiber
Industries

0%

0%

0%

0%

PT. GT Petrochem Industries
TbK

0.4%

0.4%

PT. Teijin
Corporation

Indonesia

Fiber

0.4%

0.4%

0%

0%

0%

0%

0%

Other companies

5%

10%

10%

c)

Taiwan

(228)

It is recalled that anti-dumping measures are already in place with regard to imports of
PSF originating in Taiwan. However, the subsidies found in this investigation are not
export subsidies and are therefore considered not to have affected the export price and
the corresponding dumping margin. Consequently, countervailing duties can be
imposed in cumulation with the existing anti-dumping measures. Accordingly, this
would lead to the following countervailing duty rates for the cooperating exporting
producers in Taiwan:

36

Company

Nan Ya Plastics Corp.

Far Eastern Textile Ltd.

Export
Subsidy
Margin

0%

0%

Shinkong
Fibres Corp.

Synthetic

0%

Tuntex Distinct Corp.

Other companies

0%

0%

Total Subsidy
Margin

Proposed
CVD

1.5%

1.0%

0%

0%

1.5%

1.0%

0%

0%

1.5%

1.5%

(229) Given the high level of cooperation, which has covered virtually all imports into the
Community of the product concerned originating in Taiwan,
it was considered
appropriate to establish the residual duty rate at the same rate as the highest rate that
has been established for the cooperating companies i.e. 1,5%.

(230) The individual company countervailing duty rates specified in this Regulation were
established on the basis of the 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'.

(231) Any claim requesting the application of these individual company countervailing duty
rates (e.g. following a change in the name of the entity or following the setting up of
new production or sales entities) should be addressed to the Commission4 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.

G.

COLLECTION OF THE PROVISIONAL DUTY

(232)

In view of the magnitude of the countervailing subsidies found for the exporting
producers, and in light of the seriousness of the injury caused to the Community
industry, it is considered necessary that the amounts secured by way of provisional
countervailing duty under Regulation (EC) No 123/2000 be definitively collected to
the extent of the amount of definitive duties imposed.

4

European Commission, Directorate-General Trade, Directorate C, DM 24 - 8/38, Rue de la
Loi/Wetstraat 200, B-1049 Brussels / Belgium

37

HAS ADOPTED THIS REGULATION:

Article 1

1.

2.

A definitive countervailing duty is hereby imposed on imports of synthetic staple
fibres of polyesters, not carded, combed or otherwise processed for spinning, falling
within CN code 5503 20 00 and originating in Australia, Indonesia and Taiwan.

The duty rate applicable to the net free-at-Community-frontier, before duty, for
products produced by the companies indicated shall be as follows for products
originating in:

1.

Australia

Company

Rate of duty (%) TARIC

additional code

Leading Synthetics Pty Ltd., Melbourne, Victoria

6.0%

All other Australian companies

6.0%

A059

A999

2.

Indonesia

Company

Rate of duty (%)

TARIC
additional code

PT. Indorama Synthetics TbK

0%

A051

Graha Irama, 17th floor

Jl. H. R. Rasuna Said Blok X-1 Kav. 1-2

PO Box 3375

Jakarta 12950

PT. Panasia Indosyntec TbK

0%

A052

Jl. Garuda 153/74

Bandung 40184

PT. Susilia Indah Synthetic Fiber Industries

0%

A054

Jl. Kh. Zainul Arifin Kompleks

Ketapang Indah

Blok B 1 No 23

Jakarta 11140

PT. GT Petrochem Industries TbK

0%

A053

Exim Melati Building, 9th floor

38

Jl. M.H. Thamrin Kav. 8-9

Jakarta 10230

PT. Teijin Indonesia Fiber Corporation Tbk

0%

A055

5th floor Mid Plaza 1

Jl. Jend. Sudiman Kav. 10-11

Jakarta 10220

All other companies

10%

A999

3.

Taiwan

Company

Rate of duty (%) TARIC additional code

Nan Ya Plastics Corp.,

1.5%

8193

201 Tung Kwa N.Road, Taipei

Far Eastern Textile Ltd.,

1.0%

8192

floor, no 207 Tun-Hwa South

33rd
Road, Sec.2, Taipei

Shinkong Synthetic Fibres Corp.,

0%

8194

7, 8th floor, 123 Sec.2, Nanking E.
Road, Taipei

Tuntex Distinct Corp.,

0%

A063

15th floor, no 376, Sec.4, Jen Ai road,
Taipei

All other companies

1.5%

8195

3.

1.

2.

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

Article 2

The amounts secured by way of the provisional countervailing duty on imports
originating in Australia and Taiwan under Regulation (EC) No 123/2000 shall be
collected at the rate of the duty definitively imposed by this Regulation. Amounts
secured in excess of the rate of definitive countervailing duty shall be released.

The provisions referred to in Article 1(3) shall also apply to the definitive collection
of the amounts secured by way of the provisional countervailing duties.

39

Article 3

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

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

Done at Brussels,

For the Council
The President

40