Commission Regulation (EC) No 1092/2000 of 24 May 2000 imposing a provisional countervailing duty on imports of styrene-butadiene-styrene thermoplastic rubber originating in Taiwan
Date: 2000-05-24
Institutions: European Commission
Subjects: Taiwan, countervailing charge, import, originating product, synthetic rubber

L 124/26

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Official Journal of the European Communities

25.5.2000

COMMISSION REGULATION (EC) No 1092/2000

of 24 May 2000

imposing a provisional countervailing duty on imports of styrene-butadiene-styrene thermoplastic
rubber originating in Taiwan

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

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

After consulting the Advisory Committee,

Whereas:

(6)

(7)

(8)

A. PROCEDURE

(1)

(2)

(3)

(4)

(5)

‘notice of

referred to as

In August 1999 the Commission announced by a notice
initiation’)
(here-in-after
published in the Official Journal of the European Communi-
ties (2) the initiation of an anti-subsidy proceeding with
regard to imports into the Community of styrene-buta-
diene-styrne thermoplastic rubber (hereinafter referred to
as ‘SBS’), originating in Taiwan and commenced an
investigation.

The proceeding was initiated as a result of a complaint
Industry Council
lodged by the European Chemical
(CEFIC) on behalf of Community producers representing
a major proportion of Community production of SBS.
The complaint contained evidence of subsidisation of
the said product, and of material injury resulting there-
to justify the
from, which was considered sufficient
initiation of a proceeding.

At the same time the Commission initiated a parallel
anti-dumping proceedng on the same product
from
Taiwan (3).

(10)

Prior to the initiation of the proceeding and in accord-
ance with Article 10(9) of Regulation (EC) No 2026/97
(hereinafter referred to as the ‘basic Regulation’), the
Commission notified the Government of Taiwan (herein-
after referred to as GOT) that it had received a properly
documented complaint alleging that subsidised imports
of SBS originating in Taiwan are causing material injury
to the Community industry.

The Commission officially advised the Community
producers, exporting producers and importers known to
be concerned,
the exporting
the representatives of
country and the complainant of the initiation of the
it gave the parties concerned the oppor-
proceeding,

tunity to make their views known in writing and to
request a hearing.

The GOT, a number of exporting producers as well as
some producers,
in the
Community made their views know in writing. All
parties who so requested were granted a hearing within
the time limits set in the notice of initiation.

and suppliers

importers

The Commission sent questionnaires
to all parties
known to be concerned and received replies from the
GOT and a number of companies in the Community
and Taiwan.

The Commission sought and verified all the information
it deemed necessary for the prupose of a preliminary
determination of subsidisation and injury, and carried
out
the following
competent government agencies, exporting producers,
Community producers, as well as unrelated importers
and users in the Community:

the premises of

investigations at

(9)

Government of Taiwan
— Ministry of Economic Affairs — Board of Foreign

Trade (BOFT), Taipei

— Ministry of Economic Affairs — Industrial Develop-

ment Bureau (IDB), Taipei

— Ministry of Finance — Department of Taxation,

Taipei

— Ministry of

Finance — Directorate-General of

Customs, Taipei

— Development Fund of the Executive Yuan, Taipei
— Chiao Tung Bank, Taipei
— Business Bank of Taiwan, Taipei.

Exporting producers in Taiwan
— Chi Mei Corporation, Taiwan
— Lee Chang Yung Chemical

Industry Corporation,

Taipei.

(11)

Community Producers
— Dynasol SA, Madrid, Spain (new name of Repsol

Quimica SA)

— Enichem SpA, Milan, Italy
— Fina Chemicals, Brussels, Belgium
— Shell Chemicals Ltd, London, UK.

(12) Unrelated Importers in the Community

— Biesterfeld France SARL, Rueil, France
— Tecnopolimeri, Milan, Italy.

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ C 241, 26.8.1999, p. 4.
(3) OJ C 241, 26.8.1999, p. 5.

(13) Users in the Community

— Thermoplastiques Cousin-Teissier, Tiffauges, France.

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Official Journal of the European Communities

L 124/27

(14)

The investigation of subsidisation covered the period
from 1 July 1998 to 30 June 1999 (hereinafter referred
to as the ‘investigation period’ or ‘IP’). The examination
of trends in the context of the injury analysis covered
the period from 1 January 1995 up to the end of the
investigation period (hereinafter referred to as the ‘injury
investigation period’ or ‘IIP’).

(i) Tax credits and tax exemptions;

(ii) Loans at preferential

interest rates;

(iii) Accelerated depreciation;

(iv) Import duty exemption.

(15)

(16)

(17)

(18)

B. PRODUCT UNDER CONSIDERATION AND LIKE

(20)

PRODUCT

1. Product under consideration

The product under consideration is styrene-butadiene-
styrene thermoplastic rubber, which is currently classifi-
able within CN codes ex 4002 19 00 and ex 4002 99.
A change to the Combined Nomenclature may be
adopted during the period of validity of provisional
measures.
the TARIC codes corre-
sponding respectively to the mentioned CN codes are:
4002 19 00 10; 4002 99 10 10 and 4002 99 90 91.

In such a case,

Schemes (i) to (iii) are based on the Statute for upgrading
industries which entered into force on 1 January 1991,
and which was last amended on 27 January 1995. These
programmes
a general
are designed to promote
upgrading of the industry by creating an advantageous
tax environment backed by appropriate financial meas-
ures. The implementation of these programmes is regu-
lated by the enforcement
the Statute for
upgrading industries as last amended on 21 July 1999.
these
Finally,
programmes is regulated by measures enacted by the
GOT.

implementation

rules of

practical

the

of

This product is used in a variety of applications such as
road asphalt and
thermodification of bitumen for
roofing membranes,
footwear
compounding (mixture of different types of polymers,
fillers and plasticisers), plastic modification, and adhe-
sives.

technical

and

for

(21)

Scheme (iv) is based on additional note 6 to Chapter 29
of the Customs import tariff and classification of import
and export commodities of the Republic of China.

2. Tax credits and tax exemptions

SBS is a polymer made from styrene and butadiene. It
can be either dry or, with the addition of oil at the
maufacturing stage, oil-extended SBS. Furthermore, SBS
can come in different types which can be identified
through different specifications (e. g. the ratio lof styrene
to butadiene and the oil content). Although the potential
range of various types of SBS is important, there are no
significant differences in their basic physical characteris-
tics. They are therefore considered as one product for
the purpose of this investigation.

(22)

(23)

2. Like product

The Commission found no differences between the basic
physical characteristics and uses of the SBS originating
in Taiwan and imported into the Community, that sold
on the domestic market
in Taiwan, and that SBS
produced by the Community industry and sold on the
Community market. It was therefore concluded that all
these products are alike within the meaning of Article
1(4) of the basic Regulation.

a number of

complainant made

The
allegations
concerning tax incentives granted to SBS producers in
Taiwan. However, the Commission found that only the
tax credits for the purchase of automation equipment
and pollution control equipment scheme was used.

Tax credits are available to private manufacturing and
technical-service-rendering Taiwanese companies. There
is no specific export requirement nor is availability
dependent on certain product
types or minimum
production quantity or turnover. However, tax exemp-
tions are only granted for
exceeding
600 000 TWD in the following limited areas:

investments

— equipment for automation of production,

— equipment for pollution control,

— technology for automation of production or for

pollution control.

(a) Practical

implementation

C. SUBSIDERS

1. Introduction

(19) On the basis of

the information contained in the
complaint and the replies to the Commission's question-
naires, the Commission investigated the following four
schemes, which allegedly granted subsidies:

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

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(25)

The amount of tax credit is determined as follows:

— for the purchase of domestically manufactured auto-
mated equipment or pollution control equipment,
the credit rate is 20 %,

— for

the purchase of

foreign-made automated or
pollution control equipment, the credit rate is 10 %,

— for

the purchase of

technology for automation

production, the permissible credit rate is 10 %,

— for the purchase of technology for pollution control,

the permissible credit rate is 5 %.

(26)

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

(b) Countervailability

(27) Under the purchase of automation equipment tax credit
and the pollution control tax credit, there is a financial
contribution by the GOT in the form of taxes foregone
and a benefit accrues to the recipient (i.e. the producer
concerned) by not having to pay a certain amount of
taxes.

(28)

(29)

The tax credits for domestically manufactured auto-
mated or pollution control equipment, constitute coun-
tervailable subsidies which are contingent upon the use
of domestic over imported goods.

Since this credit rate is only available for domestically
produced equipment and not for imported equipment, it
is contingent upon the use of domestic over imported
goods. This tax credit is therefore a specific and there-
fore countervailable import substitution subsidy in the
meaning of Article 3(4)(b) of the basic Regulation.

(c) Calculation of the subsidy amount

(30)

The amount of subsidy has been calculated on the basis
of the amount of taxes unpaid during the investigation
period. In order to encompass the full benefit to the
recipient, this amount has been adjusted by adding the
average commercial
interest during the investigation
period (9 %). The total amount of subsidy so attributed

to the investigation period should be allocated over total
sales since this subsidy benefits both domestic and
export sales.

(31)

Both cooperating companies, Chi Mei Corporation and
Lee Chang Yung Chemical Industry Corporation, availed
themselves of
these schemes, obtaining a benefit of
0,32 % and 0,42 % respectively.

3. Loans at preferential interest rates

(32)

It was alleged that
there are several programmes
regarding preferential loans available to the companies
under investigation. The Commission established that
only loans for automation and loans for anti-pollution
incentives were used by the producers of the product
concerned.

(a) Eligibility

(33)

These schemes are covered by Article 21(1)(3), item 3 of
the Statute for upgrading industries. The GOT has estab-
lished a development fund and makes use of
it for
providing loans in line with the government industrial
policy for assisting the sound development of industries.

(b) Practical

implementation

(34) A company has to file an application with the Chiao
Tung Bank (which is partly State owned), or with certain
other designated banks. The bank will verify whether the
application falls within the criteria laid down. Based on
the financial situation of the applicant, the Chiao Tung
Bank will decide on the amount of the loan. 25 % of the
Fund is financed through the Development Fund, the
remaining 75 % through the commercial banks. The
Chiao Tung Bank takes care of channelling the loans to
the benefiting companies.

(c) Countervailability

(35)

The Commission established that there is a financial
contribution by the GOT since the executive Yuan of the
Development Fund, which is responsible for drafting and
amending the rules relating to these types of loans is
State controlled. Furthermore, the Chiao Tung Bank,
which is also State-controlled, channels the loans to the
companies.

(36)

In addition, a benefit is conferred on the recipient of the
loan since the interest rates of these loans are generally
lower than comparable commercial

loans.

(37)

(38)

(39)

(40)

(41)

(42)

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loans are only available to companies
Low-interest
which purchase specific equipment under specific condi-
tions set by the Executive Yuan of the Development
Fund. These criteria are not considered to be objective
since it is established at the time of granting the loan
that only companies investing in certain equipment will
be in a position to benefit from this programme. Since
the eligibility is expressly limited to certain enterprises
and not based on neutral criteria within the meaning of
Article 3(2)(b) of the basic Regulation, the scheme is
considered specific in accordance with Article 3(2)(a) of
the basic Regulation.

energy resources, promotion of waste reclamation,
improvement in manufacturing processes are, following
approval of the GOT, exempted from import duties.

(45)

This exemption of import duty also exists for manufac-
turers who purchase equipment designed specifically for
prevention and control of air, noise, or water pollution,
vibration control, environmental monitoring or waste
processing.

(d) Calculation of the subsidy amount

(a) Eligibility

The subsidy is the difference between the amount of
interest paid on the loan during the investigation period
and the interest normally payable on a comparable
commercial

loan during the investigation period.

The comparable loan should be a loan of a similar
amount with a similar
repayment period actually
obtained by the recipient from a representative private
bank operating on the domestic market. In this invest-
igation there were no such comparable commercial
loans granted to the respective companies. Therefore the
Commission considered that the appropriate benchmark
would be the average commercial
interest rate during
the investigation period (9 %).

In order to encompass the full benefit to the company,
for any amount as calculated above, interest was added
at a rate which corresponds to the average commercial
interest rate described above. The full subsidy amount so
obtained was allocated over the total turnover of the
company during the investigation period.

Both cooperating companies, Chi Mei Corporation and
Lee Chang Yung Chemical Industry Corporation availed
themselves of these schemes and each obtained a benefit
of 0,07 %.

4. Accelerated depreciation

It was alleged that the GOT allows accelerated deprecia-
the
tion under a number of programmes. Whilst
these programmes exist
Commission established that
and that one company had made use of
the
amount of benefit was found to be negligible.

them,

(46)

This scheme is governed by the additional notes 3 and 9
to Chapter 84; additional notes 4 and 5 to Chapter 85;
and additional notes 1 and 2 to Chapter 90 of the
Customs import tariff and classification of import and
export commodities of the Republic of China (herein-
after referred to as the ‘Customs Code’).

(47) A manufacturing company which imports equipment
and machinery solely for the purposes outlined in recital
is
44, and which are not yet manufactured locally,
exempted from paying imports duties on those imports.

(48)

a

Furthermore,
as
outlined in recital 45 is exempted from paying import
duties.

company importing equipment

(b) Practical

implementation

(49) A company which intends to import the abovemen-
tioned machinery or equipment
files an application
which the Industrial Development Board (IDB) prior to
importation. If the IDB establishes that the machinery to
be purchased falls within the criteria outlined in recitals
44 and 45,
issue a certificate. This certificate
enables the company to import the specified machinery
without paying import duties. Random checks are made
by the customs services to ensure that the imported
machinery corresponds with the IDB certificate.

it will

(50)

(51)

5. Import duty exemption

(43)

It was alleged that the GOT granted import duty exemp-
tion for equipment and raw materials.

PURCHASES OF NEW EQUIPMENT AND ANTI-POLLUTION
EQUIPMENT

(44)

The purchase of
some specific new manufacturing
machinery and equipment which is not manufactured
locally and which is used by companies for the purposes
of development of new products,
improvement of
product quality, enhancement of productivity, saving of

(c) Countervailability

There is a financial contribution by the GOT in the form
of import duties foregone. Consequently this scheme
confers a direct benefit to the recipient in the form of
unpaid import duty.

a

import-duty exemption constitutes

specific
The
subsidy, as, de facto,
it can only be used by limited
sectors of the Taiwanese industry investing in specific
equipment. Eligibility for the import-duty exemption on
purchases of new equipment is limited to only those
companies who import machinery which is not available
on the local market. With regard to anti-pollution equip-
ment, it is a fact that only certain sectors will be in a
position to use this specific equipment and therefore
eligibility for this scheme is de facto limited to such
sectors.

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Official Journal of the European Communities

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(52)

(53)

considers

this
The Commission
programme is limited to certain companies and that this
scheme therefore is specific within the meaning of
Article 3(2)(a) of the basic Regulation. Therefore, this
subsidy is coutervailable.

access

that

to

(d) Calculation of the subsidy amount

The benefit to the companies represents the amount of
import duties normally payable without the benefit of
the exemption. The normal import-duty rate for machi-
nery lies between 2 % and 20 %. For the purchase of
imported machinery, this amount should be allocated
over the normal service life of the machinery in this
industry, i.e. eight years. In order to encompass the full
benefit to the recipient, this amount has been adjusted
interest during the
by adding the average commercial
investigation period (9 %). The total amount of subsidy
so attributed to the investigation period was allocated
over total sales since this subsidy benefits both domestic
and export sales.

(54)

Both cooperating companies, Chi Mei Corporation and
Lee Chang Yung Chemical Industry Corporation availed
themselves of this scheme and obtained a benefit of
0,05 % and 0,04 % respectively.

IMPORTS OF RAW MATERIAL

(55)

The customs import
tariff offers tax-exemptions for
imports of main raw materials of chemicals and subma-
terial, and that access to the tax exemption is explicitly
limited to certain enterprises, including the producers of
SBS.

(a) Eligibility

(56) Manufacturing companies which import certain specific
raw materials exhaustively described in the Customs
Code and which are not yet produced or sufficiently
available on the local market are exempted from paying
import duties on the purchases of those raw materials.

(b) Practical

implementation

(57) A company which intends to import the specified raw
files an application with the IDB prior to
material
importation.
If the IDB has established that the raw
material to be purchased is not produced in Taiwan or is
not supplied sufficiently in Taiwan, it will issue a certifi-
cate enabling the company to import the raw material
without payment of import duties. The customs services
randomly check that the imported raw material
is as
described on the certificate.

(58)

(59)

(60)

(61)

(62)

(c) Countervailability

There is a financial contribution by the GOT in the form
of import duties foregone. Consequently this scheme
confers a direct benefit to the recipient in the form of
unpaid import duties.

The import duty exemption pursuant to the Customs
Code constitutes a subsidy. Due to its nature,
it can
clearly be demonstrated that the programme can only be
the Taiwanese industry
used by limited sectors of
importing specific raw materials, as
those industry
sectors whose raw material is produced in Taiwan will
not be able to use this programme.

The scheme is not a general duty suspension scheme.
Utilisation of the scheme is dependant upon individual
applications from each company,
for each product
manufactured, and for each raw material to be improved
duty free. The GOT has discretion in the granting of
certificates. Further, it is considered that access to this
scheme is limited to certain companies. Therefore, this
scheme is specific within the meaning of Article 3(2)(a)
of the basic Regulation and the subsidy is countervail-
able.

(d) Calculation of the subsidy amount

The benefit
to the companies was calculated as the
amout of import duties normally payable without the
benefit of
the
product concerned. The normal import duty rate for raw
the manufacturing of SBS lies
material needed for
between 1,25 % and 5,00 %.

the exemption for the production of

In order to encompass the full benefit to the recipient,
this amount has been adjusted by adding interest. In this
case, since the companies obtained subsidies equivalent
to a series of grants during the investigation period, it is
considered appropriate to assume that an average grant
would have been received at the mid-point of the invest-
igation period, and therefore the interest should cover a
period of
the average
six months. Therefore, half
commercial rate (4,5 %) was added. The total amount of
subsidy so attributed to the investigation period was
allocated over the total sales turnover for the product
concerned since this subsidy benefits both domestic and
export sales.

(63)

Both cooperating companies, Chi Mei Corporation and
Lee Chang Yung Chemical Industry Corporation availed
themselves of this scheme and obtained a benefit of
0,97 % and 0,61 % respectively.

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(64)

The Commission determined that there were no other subsidy programmes used by the exporting
producers.

6. Other subsidies

7. Amount of countervailable subsidies

(65)

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

Tax credits

Loans at preferential interest rates

Accelerated depreciation

Import-duty exemption

Total amount of subsidy

Chi Mei Corporation

Lee Chang Yung Chemical
Industry Corporation

(in %)

0,42

0,07

0,00

1,02

1,51

0,32

0,07

0,00

0,65

1,04

D. INJURY

1. Definition of Community industry

(66)

Four companies produced SBS in the Community, all of them complainants in the present case.

(67) All four companies fully cooperated in the investigation and on this basis it was established that they
represent 100 % of the Community production of SBS. They, therefore, constitute the Community
industry within the meaning of Article 4(1) of the Basic Regulation and will, hereafter, be referred to
as the ‘Community industry’.

2. Consumption in the Community

(68)

The Community consumption of SBS was taken as the combined volume of sales made by the
Community industry, the import volume from Taiwan and the imports from other third countries.
Since no product-specific Eurostat statistics exist, and since cooperation was very low (30 %), actual
export figures could no be used in the calculation and, therefore, the Commission used the best
information available concerning the quantity of imports of the product concerned from Taiwan.

Consumption

1995

1996

1997

1998

IP

Tonnes

Index

170 543

176 902

212 301

195 140

203 450

100

104

124

114

119

Community consumption of SBS increased in volume 19 % between 1995 and the investigation
period.

3. Imports of SBS from Taiwan to the Community (1)

(a) Volume of imports

(69)

Between 1995 and the investigation period, imports originating in Taiwan developed in volume as
follows:

(1) The information concerning the volume of imports initially came from the Community producers of the product

concerned, and was cross-checked with the Community importers' figures during on-the-spot investigations.

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Imports

1995

1996

1997

1998

IP

Tonnes

Index

3 541

100

8 681

245

15 429

15 893

12 380

436

449

350

The volume of imports from Taiwan increased significantly over the period examined. Between 1995
and 1998 they increase 4,5 times, and by 3,5 times from 1995 to the end of the investigation
period.

(b) Market share of imports

(70)

(71)

The market share in volume held by imports from Taiwan confirms the sharp increase of these
imports in the Community market. The market share almost quadrupled between 1995 and 1998,
and increased threefold between 1995 and the investigation period.

The market share has followed the same trend as the volume of imports. Indeed, import volumes
from Taiwan increased substantially over the period 1995 to 1998, and show a certain reduction in
the investigation period:

Market share

1995

1996

1997

1998

IP

Total

Index

2,1 %

100

5,0 %

236

7,4 %

350

8,0 %

392

6,1 %

293

(c) Average price of imports

(72)

The average import price from Taiwan decreased 17 % between 1997 and the investigation period:

Average import price

In ECU/kg

Index

1997

0,92

100

1998

0,85

93

IP

0,76

83

These figures were obtained from the cooperating exporters and were not available for 1995 and
1996 because the companies had just set up at that time.

(d) Price undercutting

(73)

(74)

For the determination of price undercutting, the Commission compared export prices from Taiwan
with prices charged by the Community industry to independent customers at the same level of trade,
after excluding discounts and rebates.

Prices were compared for similar product types of SBS. The results of the comparison showed price
undercutting margins, expressed as a percentage of the Community industry's average selling prices,
of 12,3 %.

4. Economic situation of the Community industry

(a) Production, capacity and capacity utilisation

(75) Annual production of the Community industry fluctuated, going from 242 710 tonnes in 1995 to
235 926 tonnes in the investigation period. However, from 1997 to the investigation period
production fell by 8 %.

(76) As regards capacity, this increased from 271 999 tons in 1995 to 328 000 tons in 1997 or by 22 %.

It remained constant from 1997 onwards:

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1995

1996

1997

1998

IP

Production (tonnes)

242 710

222 139

257 808

226 880

235 926

Index

100

92

106

93

97

Capacity (tonnes)

271 999

310 011

328 000

328 000

333 008

Index

Capacity utilisation

Index

(b) Sales volume

100

89 %

100

114

72 %

80

120

79 %

88

120

69 %

78

122

71 %

79

(77)

The volume of SBS sold by the Community industry on the Community market increased by 13 %
during the period considered. It reached a peak in 1997 of 183 301 tonnes, falling to 167 877 in
1998, and recovering some of the lost ground to 180 920 tonnes during the investigation period:

Sales

1995

1996

1997

1998

IP

Tonnes

Index

159 543

160 902

183 301

167 877

180 920

100

101

115

105

113

(c) Average sales price and price evolution

(78)

Prices have decreased year on year throughout the whole period, from 1995 up to and including the
investigation period. Overall, the average price fell by 47 % during the period:

Average EC industry price

1995

1996

1997

1998

IP

ECU/kg

Index

(d) Market share

1,766

100

1,272

72

1,172

66

1,089

62

0,954

53

(79)

(80)

The development of sales volume compared to that of Community consumption shows that the
market share held by the Community industry decreased significantly during the period considered.

The negative trend was reserved during the investigation period, without recovering to the level
reached in 1995 and 1996:

1995

94 %

100

1996

91 %

97

1997

86 %

92

1998

86 %

92

IP

89 %

95

Market share

Index

(e) Stocks

(81)

Compared to 1996, stocks increased by 17 % in 1997 and the fell back in 1998 and the invest-
igation period to level 11 % below the 1996 figure:

1996

1997

1998

IP

Stocks (tonnes)

Index

39 741

100

46 417

117

43 494

109

34 453

89

The exact figures for 1995 could not be obtained accurately because of changes of accounting
system in one company and changes of the structure of an other company.

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(f) Profitability

(82)

In 1996, the Community industry showed a profit of 14,9 %, expressed as a percentage of net sales.
In 1997 profits declined to 0,5 %, then turned into a loss of 1,5 % in 1998, followed by a loss of
9,8 % in the investigation period:

1996

1997

1998

IP

Profitability (% of sales value)

Index

14,9 %

100

0,5 %

4

– 1,5 %

– 9,8 %

(10)

(66)

The exact figures for 1995 could not be obtained accurately because of changes of accounting
systems in one company and changes of the structure of an other company. Thiy decrease in
profitability reflects the fact that Community industry, in an apparent effort to hold on to market
share, reduced its selling prices by almost 50 % between 1995 and the investigation period as
mentioned above.

(g) Investments

(83)

Yearly investments made by the Community industry are very important in view of the fact that the
SBS industry is capital-intensive. Investment fell by 35 % between 1995 and the investigation period,
reflecting that investments for machinery equipment were made before 1995, and no important
investments have been made since then. Only during 1998 was the decreasing trend halted, when
investments were significantly higher than in either 1997 or the investigation period:

Investments

1995

1996

1997

1998

IP

Thousand ecus

Index

(h) Employment

12 687

100

9 555

75

8 550

67

14 428

114

8 304

65

(84)

Employment in the sector in the product concerned declined steadily by a total of 5 % between 1995
and the investigation period:

1995

1996

1997

1998

Employment

Index

575

100

570

99

563

98

561

96

IP

547

95

5. Conclusion on Injury

(85)

(86)

(87)

(88)

From 1995 up to the investigation period negative trends were found in investments (– 35 %),
employment (– 5 %), capacity utilisation (– 16 %), sales prices (– 47 %), market share (– 5 %), and
profitability (net loss of 9,8 %).

The figures for the investigation period show that the Community industry is now in a very critical
situation: – 9,8 % profitability.

The 3 % increase in production between 1995 and the investigation period should be seen in the
context that in both 1996 and 1998 production declined by 6 % and 2 % respectively and during the
same period consumption in the Community market of the product concerned increased by 19 %.

Between 1998 and the investigation period, a number of indicators showed modest rises. Capacity,
volume of sales, market share and production levels were all up on the previous year. Employment
continued its downward trend. More significant were the steep decline in sales prices, which fell
12 % from their 1998 level, and in the profit margin, deteriorating from a 1,5 % loss in 1998 into a
9,8 % loss during the investigation period.

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Official Journal of the European Communities

L 124/35

(89)

(90)

The investigation has shown that the Community industry has suffered continuous and significant
price pressure, with price undercutting averaging 12,3 % for imports from Taiwan. In parallel, the
market share of these imports developed from 2,1 % to 6,1 % between 1995 and the investigation
period.

In the light of this analysis, in particular price undercutting, sharply declining prices, and heavy
financial
losses, the Commission concluded that the Community industry has suffered material
injury.

E. CAUSATION

1. Introduction

(91)

It must first be noted that, since anti-dumping and anti-subsidy investigations are running in parallel,
and provisional anti-dumping measures are being imposed by Regulation (EC) No 1091/2000 (1)
relating to the same imports, the effect of the dumping and subsidisation cannot be considered in
isolation. Consequently the reference to ‘subsidised’ imports in this text should be read in the context
of the fact that these imports are subsidised as well as dumped.

(92)

In order to reach its conclusions on whether the subsidised imports caused material injury, the
Commission considered the impact of all known factors on the situation of the Community industry.

2. Effect of the subsidised imports

(93)

(94)

The Commission found that imports of SBS from Taiwan to the Community increased significantly
during the period examined, from 3 541 tons in 1995 to 12 380 tons during the investigation
period. At
these imports decreased from ECU 14 122 000 to
ECU 9 430 000, resulting in average sales prices falling 17 %.

the same time,

the value of

The market share held by Taiwan increased from 2,1 % in 1995 to 6,1 % during the investigation
period, whilst during the same period the Community industry lost five percentage points of market
share.

(95) During the investigation period, the level of underselling of imports from Taiwan was between 27 %

and 37 %, and price undercutting averaged over 12 %.

(96)

The Commission considers that these figures show that the price of imports of SBS from Taiwan
were responsible for pressure on prices in the market, and subsequently, for the critical decrease of
sales prices of the Community industry. Whilst other factors, (as outlined in recitals 101 to 109),
could have contributed to the losses of the Community industry, these are not as significant as the
price of imports from Taiwan.

(97)

The level of cooperation of exporters of the product concerned is extremely low (approximately
30 % in volume), leading to an uncertainty concerning the exact development of the prices practised
by the non-cooperating exporters.

(98) A strong causal link between the increasing volume of subsidised imports from Taiwan and the
deteriorating situation of the Community industry, was highlighted by the fact that the major losses
suffered by the Community industry occurred for those product types of SBS mainly imported from
Taiwan.

(99)

The Commission considers this to be particularly relevant as imported SBS and SBS produced in the
Community are like products, offered through similar sales channels in the Community market.
Increasing volumes of SBS imported from Taiwan had a significant impact on that market overall. In
the transparent SBS market, low-priced subsidised SBS from Taiwan had a major impact on the level
of prices in the Community.

(100) For these reasons, the Commission concluded that low-priced dumped and subsidised imports had a

significant negative impact on the situation of the Community industry.

(1) See page 12 of this Official Journal.

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Official Journal of the European Communities

25.5.2000

(a) Development of consumption

3. Impact of other factors

(101) From 1995 up to the investigation period, consumption in the Community market increased by
19 % in volume terms indicating a growing SBS market. Therefore, the injurious situation suffered by
the Community industry cannot be explained by the development of consumption.

(b) Imports of SBS from other third countries

(102) Total imports of SBS on to the Community market from countries other than Taiwan, developed as

follows:

Import
(tonnes)

Brazil

Index

Mexico

Index

South Korea

Index

USA

Index

Other countries
(excluding Taiwan)

Index

Total
(excluding Taiwan)

Index

1995

1996

1997

1998

IP

1 500

100

2 000

100

1 500

100

2 500

125

300

100

3 000

2 705

100

959

100

90

314

33

2 500

167

3 000

150

1 000

333

6 328

211

743

77

2 000

133

3 500

175

1 600

533

3 963

132

307

32

1 500

100

3 500

175

1 300

433

3 500

116

350

36

7 549

7 319

13 571

11 370

10 150

100

97

180

151

136

Year to year change

– 3 %

+ 83 %

– 29 %

– 10 %

(103) The imports from other third countries increased by 36 % in terms of volume. However, a peak was

reached in 1997, since when import volumes have been falling back.

(104)

In market share, the evolution is shown in the following table:

Market share

1995

1996

1997

1998

Brazil

Mexico

South Korea

USA

Total

0,9

1,2

0,0

1,8

3,9

0,8

1,4

0,2

1,5

3,9

1,2

1,4

0,5

3,0

6,1

1,0

1,8

0,8

2,0

4,6

(in %)

IP

0,7

1,7

0,6

1,7

4,7

(105) That imports on to the Community market from other third countries did have an impact on the
economic situation of the Community industry cannot be discounted. Nevertheless, the market share
of Taiwan in the investigation period (6,1 %) is well above the total amount for all other countries
taken together. Taking into account that the level of these imports has decreased since 1997, they
cannot break the causal
link between the imports from Taiwan and the injury suffered by the
Community industry.

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Official Journal of the European Communities

L 124/37

(c) Export activity and other activities of the Community industry

(106) Exports to third countries between 1995 and the investigation period represented between 26 % and

30 % of total sales:

Exports

1995

1996

1997

1998

IP

Tonnes

Index

67 213

66 535

67 831

61 926

64 047

100

99

101

92

95

(107) Considering the proportion of exports to total sales, this relatively small reduction of export volume

cannot be considered as an important cause of injury.

(d) Prices of raw materials

(108) The product concerned is composed, on average, of 70 % butadiene and 30 % styrene. The average

purchase price for these two components for the Community industry were:

Styrene

1996

1997

1998

Price in ECU/t

Index

449

100

495

110

429

95

Butadiene

1996

1997

1998

Price in ECU/t

Index

370

100

413

112

356

96

IP

416

93

IP

325

88

(109) Although there is a price decrease for raw materials during the investigation period, the price
evolution does not show a constant trend over the period 1996 to the investigation period, and any
decrease in the price of raw materials has been far less than the decrease in the sales price of the final
product in the Community. Therefore, this cannot explain the decrease of sales prices or the decrease
in profitability of SBS.

4. Conclusion on causation

(110)

It cannot be excluded that factors other than subsidised imports from Taiwan, in particular the
imports from other third countries, contributed to the difficult state of the Community industry.
However, in view of the substantial increase in import volume from Taiwan, and the considerable
degree of price decreases and price undercutting for these imports, the Commission concluded that
they had material negative consequences on the situation of the Community industry.
It was
therefore concluded that the subsidised imports from Taiwan, taken in isolation, have caused
material

injury to the Community industry.

(111) One importer claimed that in fact only one exporter from Taiwan had been responsible for the
significant price drop and only this exporter, consequently, should be subject to measures. However,
the Commission found that both cooperating exporters from Taiwan did significantly undersell and
undercut European Community industry prices, although in different degrees.

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25.5.2000

F. COMMUNITY INTEREST

1. Introduction

(112)

In order to reach its final conclusions the Commission examined; whether, despite the conclusions
on subsidisation and injury caused thereby, compelling reasons existed which would lead to the
conclusion that it is not in the Community's interest to adopt measures in this particular case. For
this purpose, and pursuant to Article 31 of the basic Regulation, the Commission services considered
the impact of measures for all parties involved in the proceedings.

2. Interest of the Community industry

(113) The Community industry has been suffering from low priced imports of SBS. The objective of
provisional countervailing measures is to re-establish fair competition in the Community market
between the Community producers and their exporting counterparts in third countries.

(114) The Community industry has been making considerable efforts to improve its productivity in recent
years, in an attempt to lower its cost of production and to enhance its competitiveness in this
price-sensitive market. The Community industry deployed particular efforts of rationalisation during
the period examined.

(115)

In view of the nature of the injury suffered by the Community industry, the Commission considers
that,
in the absence of the imposition of countervailing measures, further deterioration of the
situation of the Community industry is quite probable.

(116) The investigations show that a capacity reduction may result in closure of certain production sites,

which could not operate economically in view of the low-priced imports.

(117) Furthermore, the ongoing restructuring efforts made by the Community industry show that it is not
ready to abandon this segment of production, particularly as the market is rapidly growing. The
adoption of countervailing measures would therefore be in the interest of the Community industry.

3. Impact on importers and users

(118) The Commission sent questionnaires to 15 known importers unrelated to the exporting producers in
Taiwan, as well as to 15 users of SBS in the Community. Five importers and three users submitted
their replies.

(119) Some importers claimed that the imposition of countervailing duties would diminish competition in

the Community market and would negatively affect the price and availability of SBS.

(120) However, the imposition of provisional countervailing measures, does not foreclose the Community
to imports; it will merely establish fair trading conditions. As to the availability of SBS, there are a
number of producers operating in the Community;
these producers have unused production
capacity, and there are other sources of imports which, under fair trading conditions, will find the
Community market more appealing again.

(121) No further evidence was provided by the users concerning any potential disadvantage that counter-

vailing measures could bring to their business.

(122) On the basis of the above the Commission concluded that the imposition of provisional counter-
vailing measures against imports of SBS from Taiwan would not cause any significant deterioration
of the situation of the users.

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L 124/39

4. Conclusion on Community interest

(123) On the basis of the above facts and considerations in particular, and having examined the arguments
submitted by the Community industry, importers, and Community users of the product concerned,
to impose, measures
the Commission concluded that
concerning imports from Taiwan. Rather, the Commission concluded that measures should be
imposed in order to ensure competitive conditions of fair pricing and to prevent the continuation of
injury to the Community industry.

there were no compelling reasons not

G. PROVISIONAL DUTY

(124)

In view of the conclusions reached with regard to subsidies,
injury, causation and Community
interest, provisional countervailing measures should be taken in order to prevent further injury being
caused to the Community industry by the subsidised imports from Taiwan.

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

(126)

In accordance with Article 24(1) of the basic Regulation no product shall be subject to both
anti-dumping and countervailing duties for the purposes of dealing with one and the same situation
arising from dumping or from export subsidisation. The subsidy schemes concerned by this
proceeding did not constitute export subsidies within the meaning of Article 3(4)(a) of the basic
Regulation. As such, the subsidies affect both the export prices and the domestic prices of the
exporting producers, thus not affecting the margin of dumping.

(127) To that effect, the Commission considered that the prices of subsidised imports should be increased
to a non-injurious level. The necessary price increase was determined on the basis of a comparison
of the import price, as established for the undercutting calculations, with the non-injurious price of
the different models sold by the Community industry on the Community market. The non-injurious
price has been obtained by adding to the sales price of the Community industry its average actual
loss and by further adding a profit margin of 8 %. This profit margin is a reasonable profit for this
product that would be earned in absence of unfair trade; it has been used in previous cases før this
type of industry and is well below the profit margin that was being achieved by the Community
industry in the mid-1990s.

(128)

In accordance with Article 12(1) of the basic Regulation, the countervailing duty should correspond
to the amount of subsidy, unless the injury margin is lower. Accordingly, this would lead to the
following provisional countervailing duty rates for the cooperating exporting producers in Taiwan:

— Chi Mei Corporation

— Lee Chang Yung Chemical Industry Corporation

1,5 %

1,0 %

(129) The two exporting companies who cooperated in these investigations were responsible for less than
30 % of the SBS imported into the European Community during the period of investigation and
originating in Taiwan.

(130) Given this low level of cooperation, it was considered inappropriate to establish the duty rate for
non-cooperating companies at the same rate as the highest rate that has been established for the
cooperating companies i.e. 1,5 %. Rather, in order not to reward non-cooperation nor to disadvan-
tage those companies which did cooperate with the Commission in this proceeding, it is proposed to
set a countrywide residual duty at a level equivalent to the mid- point of the highest duty rate found
(1,5 %) and the level of subsidisation alleged in the complaint (15,0 %). The mid-point figure was
used because the Commission, on the basis of this and other countervailing duty investigations in
Taiwan, found the 15 % figure in the complaint to be unrealistically high. The resulting provisional
residual duty rate is 8,2 %. This is lower than the residual underselling margin of 44,0 %, which was
established on the basis of the highest margin found for an individual subproduct type.

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Official Journal of the European Communities

25.5.2000

H. FINAL PROVISION

(131)

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

HAS ADOPTED THIS REGULATION:

Article 1

1.
A provisional countervailing duty is hereby imposed on imports of styrene-butadienestyrene thermo-
plastic rubbers, falling within CN codes ex 4002 19 00 and ex 4002 99 and originating in Taiwan. These
codes may change during the period of validity of this duty as set out in recital 15 of this Regulation.

The rate of the provisional countervailing duty applicable to the net, free-at-Community-frontier

2.
price, before duty, shall be as follows:

Producer

Rate of duty

TARIC additional code

Chi Mei Corporation, Tainan, Taiwan

Lee Chang Yung Chemical Industry Corporation, Taipei, Taiwan

All other Taiwanese companies

1,5 %

1,0 %

8,2 %

A127

A128

A999

3.

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

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

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

Article 2

1. Without prejudice to Article 30 of Regulation (EC) No 2026/97, the interested parties which made
themselves known within the time limit specified in the notice of initiation may make known their views in
writing and apply to be heard orally by the Commission within 15 days of the date of entry into force of
this Regulation.

Pursuant to Article 31(4) of Regulation (EC) No 2026/97, the parties concerned may comment on the

2.
application of this Regulation within one month of the date of its entry into force.

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

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

Article 3

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

Done at Brussels, 24 May 2000.

For the Commission

Pascal LAMY

Member of the Commission