Commission Regulation (EC) No 1741/2000 of 3 August 2000 imposing a provisional countervailing duty on imports of polyethylene terephthalate (PET) originating in India, Malaysia, Taiwan and Thailand
Date: 2000-08-03
Institutions: European Commission
Subjects: India, South-East Asia, Taiwan, anti-dumping duty, import, plastics

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Official Journal of the European Communities

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COMMISSION REGULATION (EC) No 1741/2000

of 3 August 2000

imposing a provisional countervailing duty on imports of polyethylene terephthalate (PET) origin-
ating in India, Malaysia, Taiwan and Thailand

(5)

(6)

(7)

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:

(1)

(2)

(3)

(4)

A. PROCEDURE

In November 1999 the Commission announced by a
notice (hereinafter referred to as a ‘notice of initiation’)
published in the Official Journal of the Communities (2) the
initiation of an anti-subsidy proceeding with regard to
imports in to the Community of polyethylene terephtha-
late (hereinafter referred to as ‘PET') originating in India,
Indonesia, the Republic of Korea (hereinafter referred to
as
and
‘Korea’) Malaysia, Taiwan and Thailand,
commenced an investigation.

The proceeding was initiated as a result of a complaint
by the Association of Plastic Manufacturers in Europe on
behalf of Community producers representing a major
proportion of Community production of PET. The
complaint contained evidence of subsidisation of the
said product, and of material injury resulting therefrom,
which was considered sufficient to justify the initiation
of a proceeding.

The complaint which was lodged also covered imports
originating in Saudi Arabia. However, following the pre-
initiation consultations with the government of Saudi
the volume of
Arabia, evidence was submitted that
imports of PET from Saudi Arabia accounts for less than
4 % of total imports. In accordance with Article 14(4) of
Regulation (EC) No 2026/97 (hereinafter referred to as
the ‘Basic Regulation’), the Commission has excluded
imports originating in Saudi Arabia from the scope of
the present investigation.

Prior to the initiation of the proceeding and in accord-
ance with Article 10(9) of the Basic Regulation, the
Commission notified to the Governments of India, Indo-
nesia, Korea, Malaysia, Taiwan and Thailand that it had
received a properly documented complaint alleging that
subsidised imports of PET originating in India, Indo-
nesia, Korea, Malaysia, Taiwan and Thailand are causing
material
injury to the Community industry. These
Governments were invited for consultations with the

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ C 319, 6.11.1999, p. 2.

aim of clarifying the situation as regards the contents of
the complaint and arriving at a mutually agreed solu-
tion. The Government of Korea accepted the offer of
consultation which was held with the Commission on
24 October 1999. Due note was taken of the comments
made in regard to the allegations contained in the
complaint regarding subsidised imports and material
injury being suffered by the Community industry.

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

the representatives of

as

complainant Community

The Governments of India, Indonesia, Korea, Malaysia
Taiwan and Thailand, a number of exporting producers
producers,
as well
Community users and importers made their views
known in writing. All parties so requested within the
time limits set in the notice of initiation were granted a
hearing.

and

India,
Thailand

The Commission sent questionnaires
to all parties
known to be concerned and received replies from the
Governments of
Indonesia, Korea, Malaysia
complaining
Taiwan
Community producers, twenty exporting producers in
the countries concerned, as well as from their related
importers in the Community. The Commission also
received replies from three unrelated importers/traders
five
in the Community as well as from nine users,
suppliers and five professional associations.

from nine

The Commission sought and verified all the information
it deemed necessary for the purpose of a preliminary
determination of subsidisation and injury, and carried
out, as appropriate, investigations at the premises of the
following companies:

(a) Community producers

— Du Pont Polyesters Ltd (UK),

— Eastman Chemicals BV (NL),

— INCA International SpA (I).

— Italpet Preforme SpA (I),

— KOSA GmbH (D),

— Shell Chemicals Ltd (UK),

— Wellman PET Resins Europe (NL),

— Aussapol SpA (I),

— CEP (F);

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(b) Government of India

(i) Exporting producers in Malaysia

— Ministry of Commerce, New Delhi,

— Hualon Corporation (M) Sdn. Bhd., Kuala

— Ministry of Chemicals and Petrochemicals, New

Delhi,

— Ministry of Finance, New Delhi,

— Central Board of Excise and Customs, New

Delhi,

(c) Exporting producers in India

— Pearl Engineering Polymers Ltd., New Delhi,

— Futura Polymers Ltd, Chennai,

— Elque Polyesters Ltd, Calcutta,

— Reliance Industries Ltd, Mumbai,

(d) Government of Indonesia

— Ministry of Industry and Trade, Jakarta,

— Ministry of Finance, Jakarta,

— Investment Coordinating Board (BKPM), Jakarta,

— Agency for Export Facility Services (Bapeksta),

Jakarta,

— Sucofindo, Jakarta;

(e) Producers/exporters in Indonesia

— PT. Bakrie Kasei Corporation, Jakarta,

— PT. Indorama Synthetics TbK., Jakarta,

(8)

— PT. Polypet Karyapersada, Jakarta;

(f) Government of Korea

— Ministry of Commerce,

Industry and Energy

(MOCIE),

— Ministry of Finance and Economy (MOF),

(9)

— Ministry of Foreign Affairs and Trade (MOFAT),

— Korea

Asset

Management

Corporation

(KAMCO),

(g) Exporting producers in Korea

— Honam Petrochemical Corporation,

— Samyang Corporation,

— SK Chemicals Co., Ltd,

— SK Global Co., Ltd (related company of SK

Chemicals),

— Tongkook Corporation,

— Daehan Synthetic Fiber Co., Ltd;

(h) Government of Malaysia

— Ministry of
(MITI),

International Trade and Industry

Lumpur,

— MPI Polyester Industries Sdn. Bhd., Shah Alam

(Selangor D.E.);

(j) Government of Thailand

— Department of Foreign Trade, Bangkok,
— Board of Investment, Bangkok,
— Customs Department, Bangkok,
— Revenue Department, Bangkok;

(k) Producers/exporters in Thailand
— Thai Shingkong Ltd;

(l) Government of Taiwan

— Ministry of Economic Affairs,
— Ministry of Finance,
— Chiao Tung Bank;

(m) Exporting producers in Taiwan

— Shinkong Synthetic Fibers Corporation, Taipei,
— Tuntex Distinct Corp., Hsichih, Taipei County,
— Far Eastern Textile Ltd, Taipei.
— Nan Ya Plastics Corporation, Taipei

The investigation of subsidisation covered the period 1
October 1998 to 30 September 1999 (hereinafter
referred to as the ‘investigation period’ or ‘IP’). The
examination of injury covered the period from 1 January
1996 to 30 September 1999 (hereinafter referred to as
the ‘analysis period’).

In November 1999 the Commission initiated an anti-
dumping investigation concerning imports of the same
product originating in India, Indonesia, Korea, Malaysia,
Taiwan and Thailand (1).

B. PRODUCT UNDER CONSIDERATION AND LIKE

PRODUCT

1. Product under consideration

(10)

The product under consideration is polyethylene tereph-
thalate, normally used in the plastics industry, for the
production of bottles and sheet.

(11) Another kind of polyethylene terephthalate, for use in
polyester fibre production, is not covered by the present
investigation.

— Malaysian Industrial Development Authority

(12)

(MIDA),

— Bank Negara Malaysia,

— Malaysian Institute of Accountants,

— Malaysia External Trade Development Corpora-

tion,

The production process of the two qualities of polyethy-
lene terephthalate is identical up to a certain stage since
they are both produced by the polycondensation of
purified terephtalic acid (PTA) or dimethyl terephtalate
with mono ethylene glycol (MEG). Polyethylene tereph-
thalate for use in the plastics industry is polymerised in a
similar way to that for fibre production, in some cases in
common facilities.

— Ministry of Taxation (Customs

and Excise

Department, Inland Revenue Board);

(1) OJ C 319, 6.11.1999, p. 1.

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(13)

(14)

The difference between the two types of polyethylene
terephthalate is primarily determined by the fact that the
product concerned undergoes a further process called
‘solid state processing’ which increases its ‘intrinsic
viscosity’ value (IV value or ItV value). It is thus the level
of IV that differentiates the product concerned from the
polyethylene terephthalate used in the polyester fibre
industry. Polyethylene terephthalate used for the produc-
tion of plastic bottles and sheet requires an IV value of
0,7 or above. Polyethylene terephthalate with an IV
value below 0,7 is used for the production of polyester
fibre and is thus not concerned by this anti-subsidy
investigation.

The viscosity of polyethylene terephthalate may also be
expressed in a different form, namely in terms of the
‘coefficient of viscosity’ or ‘viscosity number’. During the
investigation it was found that the equivalent of an IV
value of 0,7 is a coefficient of viscosity of 78 ml/g as
measured by tests performed according to DIN 53728
and not, as indicated by the complainant, a coefficient of
173. This value resulted from the incorrect use of the
test standard DIN 53728 in a report issued by Hoechst
in 1991. Consequently the Commission has decided to
use the corresponding value of 78 ml/g, or higher, that
according to the correctly applied DIN 53728 test is the
coefficient of viscosity for the type of polyethylene
terephthalate used in the production of plastic bottles
and sheets.

(15)

In view of the above, the product under consideration is
hereby defined as polyethylene terephthalate with a coef-
ficient of viscosity of 78 ml/g or higher, corresponding
to an intrinsic viscosity value of 0,7 or higher (‘PET’ or
‘polyethylene terephthalate’),
imported under CN code
3907 60 20 and CN code ex 3907 60 80.

(19)

(20)

2. Like product

C. SUBSIDIES

I. India

1. Introduction

(17) On the basis of

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

— Duty Entitlement Passbook Scheme (DEPB),

— Export Promotion Capital Goods Scheme (EPCG),

— Export Processing Zones/Export Oriented Units

(EPZ/EOU),

— Income Tax Exemption Scheme.

(18)

The first three schemes are based on the Foreign Trade
(Development and Regulation) Act 1992 (No 22 of
1992) which entered into force on 7 August 1992. The
Foreign Trade Act (Section 5) authorises the Govern-
ment of India (GOI) to lay down India's export and
import policy. These notifications are summarised in the
‘Export and Import Policy’ documents which are issued
by the Ministry of Commerce every five years and
updated every year. One Export and Import Policy docu-
ment is relevant to the investigation period of this case,
i.e. the five-year plan relating to the period 1 April to 31
March 2002. In addition, the GOI also specified the
procedures governing India's foreign trade in the ‘Hand-
book of procedures for exports and imports — 1 April
1997 to 31 March 2002’ (Volume 1).

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

It is to be noted that four companies producing and
exporting the product concerned were investigated. Only
two of those companies exported this product to the EC
during the investigation period i.e. Reliance Industries
and Pearl Polymers. The two other co-operating expor-
ters requested to be included in the investigation. Their
exports to third countries allowed for their level of
subsidisation to be properly established. It was therefore
considered appropriate to include those two companies
in the investigation i.e. Futura Polymers and Elque Poly-
ester.

2. Duty Entitlement Passbook Scheme (DEPB)

(16)

The Commission services found that PET produced by
the Community industry and sold on the Community
market as well as PET produced in the countries
concerned and exported to the Community are like
products, since there are no differences in the basic
characteristics and uses of the different types of PET. The
same is true with regard to the PET sold on the domestic
market of
the exporting countries and the types
exported to the Community. It was therefore concluded
that all are like products within the meaning of Article 1
(5) of the basic Regulation.

Legal Basis

(21)

The DEPB entered into force on 1 April 1997 by means
of Customs Notification 34/97. Paragraphs 7.25 to 7.41
of the Exim Policy and paragraphs 7.32 to 7.50 of the
Handbook of procedures contain a detailed description
of the scheme. DEPB constitutes the successor scheme to
the Passbook Scheme (PBS) which was terminated on 31
March 1997 and is of two types:

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— DEPB on pre-export basis,

— DEPB on post-export basis.

(c) Conclusions on DEPB pre-export basis

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

(26)

(a) Eligibility

(22)

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

(b) Practical

implementation

(23) Any eligible exporter can apply for a licence which
grants a credit amount to be used to offset customs
duties due on future imports of goods. The licence
granting the credit, which is equivalent to (i) 10 % of the
average fob value of all exports during the previous
three years, or (ii) the rate of credit actually permitted in
the case of the exported product, is issued automatically.
The granting of the licence carries with it an export
obligation.

(24)

The DEPB on pre-export basis allows duty-free imports
of subsequent inputs (which are not on the ‘Negative list
of imports’) Required for production of goods in the
factory of the company concerned (‘Actual user condi-
tion’). Determination of what products may be imported
duty free is made by reference to the inputs listed in the
‘Standard Input-Output Norm (SION)’
and varies
depending upon the product to be manufactured. Such
duty-free imported inputs may not be transferred,
loaned, sold, parted with, or disposed of in any manner
whatsoever by the company, other than as a constituent
part of the finished product.

(25) DEPB credits are not transferable. The DEPB licence is
valid for a period of 12 months from the date of
granting of the licence. Upon importation, the exporter
undertakes to use the imported goods as inputs for the
export of the finished product. Export will attract a
benefit based on the type and quantity of
finished
product. The benefit is calculated by reference to the
SION. Once the licence holder has made exports of such
a value which will entitle him to a benefit equivalent to
the credit already given under DEPB on pre-export basis,
his obligation is fulfilled. When all credits have been
used, the company has to pay a fee to the relevant
authority. In that case, the company may apply for a
further credit amount which will be calculated in the
same manner as explained above.

The DEPB on pre-export basis is not a permitted remis-
sion/drawback or substitution drawback scheme within
the meaning of the provisions of the Basic Regulation
despite the existence of an ‘Actual User Condition’. The
DEPB pre-export is a value and not a quantity based
scheme where the credit granted is a percentage of the
value of prior export performance. The DEPB is not
calculated in relation to specific physical quantities of
inputs actually consumed or to be consumed in the
production process of the exported product. Concretely,
inputs are determined on the basis of SIGN which set
notional costings based on what are considered to be the
value of inputs that have to be imported to manufacture
a particular product.

(27) Once the DEPB rate has been set for a particular finished
product, inputs can be imported duty-free under a DEPB
licence. There is no mechanism in place
pre-export
which would prevent an exporting producer
from
shifting the ratios of his inputs actually imported, since
he is only required to remain within the overall credit
ceiling granted. In addition, there is no obligation to
actually import all different inputs on the SION list for
which credit has been granted. The only limit to the
quantity of any particular product that may be imported
under the scheme, is the value of the licence granted and
the corresponding commitment
to export a finished
product manufactured by the company. Therefore, there
is no requirement that the imported inputs being substi-
tuted must be equal in quantity to, and have the same
quality and characteristics as the home market inputs.

(28) A company which can obtain its inputs at a lower price
than that set in the SIGN programme, or which can
obtain some of the inputs on the domestic market,
would be able to import duty-free inputs that could be
used in its domestic production or domestic sale since
the actual imported quantities will have no relation to
those set in the SION. There would appear to be no
provision within the SION programme to prevent such a
situation arising.

(29) No evidence was found of any other system or proce-
dure in place to confirm either which duty-free inputs
are actually consumed in the production process of the
exported finished product or in what quantities. It is to
be noted that the offset that may take place when goods
are exported is not carried out on the basis of actual
quantities of duty-free imported inputs used in the
manufacturing process of the exported products, but
rather on the basis of standard value assumptions
concerning inputs of the exported product.

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(30)

The GOI believes that this scheme only permits remis-
sion of import charges on imported inputs used for
export production in accordance with the provisions of
Annexes II and III of the basic Regulation, and, as such,
it cannot be considered as being a countervailable
subsidy. Article 2(1)(ii) of the basic Regulation provides
that the exemption of an exported product from duties/
charges shall not be deemed a subsidy provided it is
granted in accordance with the provisions of Annexes I
to III of the basic Regulation. Item (i) of Annex I (the
the
illustrative list of export subsidies) specifies that
remission or drawback of import charges in excess of
those levied on imported inputs that are consumed in
the production of the exported product constitutes an
export subsidy.

(31)

This provision is to be interpreted in accordance with
Annex II to the basic Regulation. This Annex requires
in determining whether inputs are
the Commission,
consumed in the production process,
to determine
whether the government of the exporting country has in
place a system or procedure to confirm which inputs are
consumed and in what amounts in the production of the
exported product.
In this case, no such verification
system exists.

(32) Annex II(II)(5) and Annex III(II)(3) of the basic Regula-
tion provide furthermore that, where it is determined
that the government of the exporting country does not
have a proper verification 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 deter-
mining whether an excess payment occurred.

the recipient since the exporting producers do not have
to pay normal import duties; and the scheme is clearly
contingent upon export performance since it cannot be
obtained without an export commitment.

(d) Calculation of the benefit

(35)

The benefit to the exporting producers has been calcu-
lated on the basis of
the amount of customs duty
normally due on imports made during the investigation
period but which remained unpaid under the DEPB pre-
export scheme.

(36) One company benefited from this scheme and obtained

subsidies of 4,27 %.

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

(a) Eligibility

(37)

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

(b) Practical

implementation of DEPB post-export basis

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

(33)

(34)

The GOI did not carry out such an examination. There-
fore, the Commission did not examine whether there
was in fact an excess drawback of import charges on
the exported
inputs consumed in the production of
product.

(39) DEPB on post-export basis allows for the use of such
credits for any subsequent imports (e.g. raw materials or
capital goods) except
for goods the importation of
which is restricted or prohibited. Such imported goods
can be sold on the domestic market (subject to sales tax)
or used otherwise.

In any event, the excess remission of import duties is the
basis for calculating the amount of the benefit only in
the case of bona fide drawback and substitution draw-
back schemes. Since it has been established that the
DEPB pre-export scheme is not a drawback or substitu-
tion drawback scheme within the meaning of Annex I(i)
and Annexes II and III to the basic Regulation, the
benefit is the total remission of import duties, not any
it is considered
supposed excess remission. Therefore,
that this scheme constitutes a countervailable export
subsidy under Article 3(4)(a) of the basic Regulation. It
involves a financial contribution by the GOI since
government revenue (i.e.
import duties on imports)
otherwise due are not collected; there is also a benefit to

(40) DEPB licences are freely transferable and, as a conse-
quence, are frequently being sold. The DEPB licence is
valid for a period of 12 months from the date of
granting of the licence. When all credits have been used,
the company has to pay a fee to the relevant authority.

(c) Conclusions on DEPB on post-export basis

(41)

is

clearly

scheme

contingent upon export
This
performance. When a company exports goods,
is
granted a credit which can be used to offset amounts of
customs duties due on future imports of any goods
(whether raw materials or capital goods) or which can
just be sold.

it

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(42)

The credit is automatically calculated on the basis of a
formula, using SION rates,
independently of whether
inputs have been imported, duty has been paid on them
or whether the inputs were actually used for export
production and in what quantities. Indeed a company
can claim a licence irrespective of whether it makes any
imports or purchases
from other
sources.

imported goods

(43) DEPB on post-export basis is not a permitted remission/
drawback scheme within the meaning of the basic Regu-
lation. In particular, the exporter is under no obligation
to actually consume the goods imported free of duty in
the production process and the amount of credit is not
calculated in relation to actual

inputs used.

imports made during the investigation period but which
remained unpaid under the DEPB.

(49)

Two companies benefited from this scheme during the
IP and obtained subsidies of 5,01 % and 6,52 % respec-
tively. These companies had claimed deductions for
licence fees paid. The Commission services verified those
claims and considered that they were justified. Conse-
quently, in calculating the benefits, the fees necessarily
incurred to obtain the subsidies have been deducted.

3. Export

Promotion Capital Goods
(EPCGS)

Scheme

(44)

(45)

(46)

(47)

(48)

Furthermore, there is no system or procedure in place to
confirm which inputs are consumed in the production
process of the exported product or whether an excess
payment of import duties occurred within the meaning
of item (i) of Annex I and Annexes II and III of the basic
Regulation.

In the absence of a requirement that imported inputs be
consumed in the production process and of a system of
verification as required under Annex II of the basic
Regulation, the DEPB on post-export basis cannot be
considered as a permitted drawback or substitution
drawback scheme. In fact, the remission of import duties
is not limited to that payable on goods consumed in the
production process of the exported product and there-
fore an excess remission is involved, in accordance with
Article 2(1)(a)(ii) of the basic Regulation.

(a) Legal Basis

(50)

The EPCG scheme originally entered into force on 1
April 1990. During the period of
investigation the
scheme was regulated by Customs Notification No 28/
97 and 29/97 which entered into force on 1 April 1997.
Details of the schemes are contained in chapter 6 of the
1997/2002 Export and import policies as well as the
relevant Handbook of procedures.

(b) Eligibility

(51)

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

The scheme constitutes a subsidy as the financial contri-
bution by the GOI in the form of duties foregone on
imports confers a benefit upon the DEPB holder who
can import goods duty-free using credits earned on
exports. It is a subsidy contingent in law upon export
performance and is therefore deemed to be specific
under Article 3(4)(a) of the basic Regulation.

(52)

(d) Calculation of the subsidy amount for DEPB post-export

basis

(c) Practical

implementation

To benefit from the scheme, a company must provide to
the relevant authorities details of the type and value of
the capital goods to be imported. Depending on the
level of export commitment which the company is
prepared to undertake, the company will be allowed to
import capital goods at either a zero rate of duty or a
reduced rate. A licence authorising the import of capital
goods at preferential rates is issued automatically. An
application fee is payable to obtain the licence. In order
to meet the export obligation, goods exported must have
been produced using the imported capital goods.

The benefit to the exporters can be calculated in two
separate ways according to the use the company has
made of the DEPB licences: sales of the licences or use of
the licences to make duty-free imports.

(d) Conclusion on EPCGS

In this case, the companies concerned did not sell the
licences, therefore the benefit was calculated, for the use
of the licences to import duty-free goods, on the basis of
the amount of customs duty normally payable due on

(53)

The EPCGS is a subsidy as the payment by an exporter
of a reduced or zero rate of duty constitutes a financial
contribution by the GOI, since revenue otherwise due is
foregone.
to the recipient by
lowering the duties payable or by fully exempting him
from paying the import duties.

It confers a benefit

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(54)

This subsidy is countervailable since it is contingent in
law upon export performance within the meaning of
Article 3(4)(a) of
the basic Regulation. The licence
cannot be obtained without a commitment to export
goods, and is therefore deemed to be specific.

(55)

(56)

(57)

(e) Calculation of the subsidy amount

The benefit to the exporting producers should be calcu-
lated on the basis of the amount of unpaid customs duty
due on imported capital goods by spreading this amount
across a period which reflects the normal depreciation of
the product
such capital goods in the industry of
concerned. This period has been established by using the
average of the depreciation periods for capital goods
actually imported by each company, resulting in a
normal depreciation period of 18 years.

(60)

The amount so calculated which is attributable to the
investigation period has been adjusted by adding interest
during the investigation period in order to establish the
full benefit
the
commercial interest rate during the investigation period
in India,

i.e. 14 % being considered appropriate.

to the recipient under this scheme,

For one company, this amount has then been allocated
over total exports during the investigation period. Since
the other exporter only provided verifiable information
for capital goods allocated to the polyester sector, the
benefit for this company has been allocated over the
related sector export turnover during the investigation
period. Two companies benefited from this scheme
during the IP and obtained subsidies of between 0,79 %
and 1,71 %.

4. Export Processing Zones (EPZ)/Export Oriented

Units (EOU)

(a) Legal Basis

(58) Another instrument under the Export
is

import policy
involving export-related incentives
the EPZ/EOU
scheme. This scheme was introduced in 1965. During
the period of investigation the scheme was regulated by
Customs Notification No 53/97, 133/94 and 126/94.
Details of the schemes are contained in Chapter 9 of the
1997/2002 Export and Import Policies as well as the
relevant Handbook of Procedures.

companies under investigation is located in an EPZ (Falta
EPZ). EOUs can be located anywhere in India. They are
bonded units under the surveillance of Customs officials
in accordance with Section 65 of the Customs Act. One
manufacturer/exporter investigated has been granted the
status of EOU. Although EOU/EPZ are to export their
entire production, the GOI allows those units to sell also
a part of their production on the domestic market under
certain conditions.

(c) Practical

implementation

Companies requesting treatment as EOUs or located in
an EPZ must apply to the relevant authorities. Such
application must include details for a period of the next
five years, on, inter alia, planned production quantities,
projected value of exports,
import requirements and
indigenous requirements. If the authorities accept the
company's
and conditions
the
attached to the acceptance will be communicated to the
company. Companies in EPZs and EOUs can be involved
in the production of any product. The agreement to be
recognised as a company in an EPZ/EOU is valid for a
five-year period. The agreement may be renewed for
further periods.

application,

terms

(61)

EPZ/EOU units are entitled to the following benefits:

(i) exemption from import duties on all types of goods
(including capital goods, raw materials and consum-
ables) required for the manufacture, production,
processing, or in Connection therewith, provided
they are not prohibited items in the Negative list of
imports;

(ii) exemption from excise duty on goods procured

from indigenous sources;

(iii) exemption of

income, on which income tax is
normally due in accordance with section 10B of the
Income Tax Act, for a period of 10 years;

(iv) reimbursement of central sales tax paid on goods

procured locally;

(v) 100 % foreign equity ownership;

(vi) facility to sell a part of production in the domestic

market.

(b) Eligibility

(59)

Companies undertaking to export their entire produc-
tion of goods and services may be set up under
EPZ/EOU scheme. Once the status is granted,
those
companies can avail
themselves of certain benefits.
There are seven identified EPZs in India; one of the

(62)

The importer should maintain in the specified format, a
imports concerned and of the
proper account of all
consumption and utilisation of all
imported materials
and of the exports made. These should be submitted
periodically, as may be required, to the Development
Commissioner.

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(63)

The importer must also ensure minimum net foreign
exchange earnings as a percentage of exports and export
performance as stipulated in the policy. The entire
operations of an EOU/EPZ are to be done in Customs
bonded premises.

(64)

(65)

(d) Conclusions on EPZ/EOU

In the present proceeding, the EPZ/EOU scheme was
used for the import of capital goods, raw materials and
consumables as well as for the procurement of goods on
the domestic market. The Commission services found
that only concessions related to the suspension of
import duties and excise duties on capital goods, raw
materials and consumables during the period of bonding
were used by the exporting producers. Therefore, the
Commission only examined the countervailability of
these concessions. In this regard, the EPZ/EOU scheme
involves the granting of subsidies as the concessions
granted under the scheme constitute financial contribu-
tions by the GOI, since revenues otherwise due are
foregone and a benefit is conferred on the recipient. In
the case of suspension of the collection of duties, this
suspension has the same effect as an exemption since, as
long as the export requirements are fulfilled, it is solely
within the discretion of the company if and when to
de-bond the goods in question.

contingent

subsidy is

This
in law upon export
performance within the meaning of Article 3(4)(a) of the
basic Regulation, since it cannot be obtained without the
company accepting an export obligation, and it is there-
fore deemed to be specific and thus countervailable.

C a p i t a l g o o d s

(68) With regard to the import of capital goods this has been
done on the same basis as explained above for the
EPCGS: the benefit to the exporting producers should be
calculated on the basis of the amount of unpaid customs
duty due on imported capital goods by spreading this
amount across a period which reflects the normal depre-
ciation of such capital goods in the industry of the
product concerned. This period has been established by
using the average of the depreciation periods for capital
goods actually imported by each company, resulting in a
normal depreciation period of 18 years.

(69)

to the recipient under this scheme,

The amount so calculated which is attributable to the
investigation period has been adjusted by adding interest
during the investigation period in order to establish the
full benefit
the
commercial interest rate during the investigation period
in India,
i.e. 14 % being considered appropriate. The
benefit has then been allocated over total exports during
the investigation period for one of
the cooperating
companies. Due to unforeseen events, the commercial
production of the other exporter ceased in early 1998.
This led to unrealistic sales figures during the invest-
igation period. It was therefore decided not to take the
sales turnover during the investigation period for the
calculation of the subsidy margin.

(70)

The Commission services accordingly made an adapta-
tion of the export sales figures for the calculation of the
subsidy margin based on verified data from this
company in a normal commercial production situation
which was reflected in the turnover given for 1997.

(e) Calculation of the subsidy amount

R a w m a t e r i a l s , s p a r e s a n d c o n s u m a b l e s

(66) One company operated as a recognised EOU; the other
company was located in an EPZ. Both companies used
this scheme for the import of capital goods, raw mate-
rials and consumables.

(71)

For the import of raw materials and consumables the
benefit was calculated on the same basis as explained
above for the DEPB pre-export scheme: the benefit to
the exporting producers has been calculated on the basis
of the amount of customs duty normally due on imports
made during the
investigation period but which
remained unpaid.

(67)

The benefit to these exporters has been calculated on the
basis of the amount of duty or taxes normally due on
imported or indigenously sourced goods (i.e. raw mate-
rials, consumables and capital goods) during the invest-
igation period.

(72)

Two companies benefited from this scheme during the
IP and obtained subsidies of 16,81 % and 11,15 %
respectively.

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5. Income Tax Exemption Scheme (ITES)

(75)

Since no exporting producer of the product concerned
availed itself of section 10A, section 10B or section
80HHC exemptions, there is no need for the Commis-
sion to assess these exemptions in the context of this
investigation.

(a) Legal Basis

(73)

The Income Tax Act 1961 is the legal basis under which
ITES operates. The Act, which is amended yearly by the
Finance Act, sets out the basis for the collection of taxes
as well as various exemptions/deductions which can be
claimed. Among the exemptions which can be claimed
by firms are those covered by sections 10A, 10B and
80HHC of the Act, which provide an income tax exemp-
tion on profits from export sales.

(b) Eligibility

(74)

Exemption under section 10A can be claimed by firms
located in Free Trade Zones. Exemption under section
10B can be claimed by Export Oriented Units. Exemp-
tion under section 80HHC can be claimed by any firm
which exports goods.

6. Amount of countervailable subsidies

(76) All subsidies found were identified as being export subsi-
dies. The level of cooperation for India appeared to be
high (above 90 %). The countrywide weighted average
subsidy margin is 12.97 % which is above the applicable
de minimis margin of subsidisation of 3 %.

Type of Subsidy

DEPB

DEPB

Pre-export

Post-export

EPCGS

EPZ/EOU

Total

Reliance Industries Limited

4,27 %

6,52 %

1,71 %

12,5 %

Futura Polymers Limited

Pearl Engineering Polymers
Limited

Elque Polyester Limited

All Others

(77)

In view of the high level of cooperation, the residual rate
for non-cooperating companies was determined as the
the cooperating company with the highest
rate of
subsidy margin i.e. 16,81 %.

II. INDONESIA

(78)

The amounts of subsidies found for the individual
exporters vary from 0,07 % to 1,46 % and are therefore
below the de minimis threshold for subsidisation for
Indonesia, pursuant
the basic
Regulation, i.e. under 3 %. Therefore, the Commission
does not need to consider whether the subsidies in
question are countervailable.

to Article 14(5)(b) of

16,81 %

16,81 %

5,01 %

0,79 %

5,8 %

11,15 %

11,15 %

16,81 %

IV. MALAYSIA

1. Introduction

(80) On the basis of

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

the Commission services

— pioneer status

— investment tax allowance

— reinvestment allowance

III. KOREA

— double deduction for the promotion of exports

(79)

The amount of subsidies granted to the individual
Korean exporters did not exceed 0,46 %. This is below
the de minimis
threshold of 1 % and therefore the
Commission does not need to consider whether the
subsidies in question are countervailable.

— double

deduction of

export

credit

insurance

premiums

— deduction granted for promoted activities

— double deduction for expenses on approved training

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— double deduction of insurance premiums for expor-

ters

areas of Malaysia. Neither company concerned is located
in the promoted areas.

— double deduction of insurance premiums for impor-

ters

— double deduction for Research and Development

— export credit refinancing

— import duty exemptions

— sales tax exemptions

— capital expenditure allowance

— incentives for strategic projects

— incentive for promoting Malaysian brand names

— infrastructure allowance

2. Pioneer status

(81)

(82)

(83)

(a) Legal basis

the

The legal basis for a company to obtain pioneer status is
the Promotion of Investments Act of 1986. This Act
also contains
list of promoted activities and
promoted products. The list of promoted areas is listed
in the Promotion of Investments (promoted areas) Order
of 1994. The Promotion of Investments Order of 1995
contains special rules for promoted products for high
technology companies.

(b) Eligibility

status may be granted to all

companies
Pioneer
intending to produce a ‘promoted’ product (manufac-
turing sector) or a ‘promoted’ activity (service sector)
including a product/activity which is of national and
strategic importance to Malaysia. Promoted products are
products which are listed in the schedule to the Promo-
tion of Investments Act.

Pursuant to section 4 of the Act, the Minister of Inter-
national Trade and Industry ‘shall from time to time
determine such activities or products as he may deem fit
to be promoted activities or promoted products’.
According to the Act,
in order to promote a certain
product, the Minister may take into consideration the
following criteria:

— activity to be carried out or the product

to be
produced in Malaysia on a commercial scale which is
suitable to the economic requirements or develop-
ment of Malaysia,

— favourable prospects for further development of the

activity or product,

— national and strategic requirements of Malaysia.

(85)

Pioneer status can only be granted if
the promoted
activity or promoted product is new for the company
and it cannot be cumulated for the same tax year with
tax allowance or reinvestment allowance.
investment

(c) Amount of benefit

(86) Any company which is granted pioneer status enjoys a
tax exemption on 70 % of its statutory income (= gross
for
income less allowable expenses and incentives
double deductions on certain expenses)
from the
‘production day’.

(87)

(88)

(89)

Companies with pioneer status and which are located in
a promoted area obtain a tax exemption on 85 % of
their income. The ‘production day’
is fixed by the
Minister of International Trade and Industry by means of
the pioneer certificate; it determines the commencement
of the pioneer period for implementation of the tax
benefit with the Inland Revenue Board. The tax exemp-
tions granted are limited to a five-year period. In prin-
ciple, no extensions for the benefits are given except
where the Minister decides that the activity is of national
and strategic importance to Malaysia. Finally, companies
which produce promoted products for high technology
will obtain a 100 % tax exemption for a period of 10
years.

(d) Practical

implementation

In order to obtain the pioneer status, a company makes
an application to the Malaysian Industrial Development
Authority (MIDA), a statutory body reporting directly to
the Minister of International Trade and Industry.

It is verified whether the future production falls within
the list of promoted products and whether at least two
out of the four following conditions are met by the
company:

— value added,

— local content,

— industrial

linkage, and

— technology measures by way of an increase in the
number of managerial, supervising and technical
employees in the company.

(84)

The promoted areas are the eastern corridor of
the
Malaysian peninsular, Sabah, Sarawak and the federal
territory of Labuan. An additional list of promoted prod-
ucts was drafted for companies located in promoted
areas. These areas are considered to be lesser-developed

(90)

the above requirements are fulfilled,

the Action
If
Committee on Industries, a committee composed of
representatives of MITI and the Department of Treasury
will recommend the Ministers of International Trade and
of Finance to approve the granting of pioneer status to
that company.

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(91)

it submits a
If a company is granted pioneer status,
claim to the Inland Revenue Board together with the
annual tax return containing the calculation of the claim
for the tax incentive.

(92)

The company can claim the first tax exemption in the
tax year following the year of first production.

(93)

(94)

(e) Countervailability

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

Furthermore, the GOM has wide discretion in the desig-
nation of promoted products. The criteria, i.e. the suit-
ability to the economic development of Malaysia,
favourable prospects for further development and the
national and strategic requirements of Malaysia, under
which a product can be classified as a promoted product
are vague and cannot be considered as objective criteria.
It was established that there is no further definition of
these criteria. Furthermore, the GOM has provided for
differentiated rates of tax exemption depending on the
type of promoted product and the location in a
promoted area. As a consequence, the GOM favours
certain enterprises over other enterprises whether it is
because of the production of a ‘more’ promoted product
or the location in a certain geographical area. Finally,
since local content is one of the criteria which in prac-
tice is taken into account,
this programme aims to
promote the use of domestic over imported goods.

(95)

The scheme constitutes a subsidy, as the financial contri-
bution by the GOM in the form of
tax exemption
confers a benefit. It is a subsidy that is specific to certain
enterprises in Malaysia pursuant to Article 3(2)(a) of the
basic Regulation.

3. Investment Tax Allowance and Double deduc-

tion of insurance premiums for exporters

(98) Although one

company was

these
programmes,
it did not obtain a benefit since the
company was loss making. Therefore, it is not necessary
to further evaluate these schemes.

eligible under

4. Double deduction of

insurance premiums for

importers

(a) Legal Basis

(99)

This programme is regulated by subsection 154 of the
Income Tax Act of 1967 and the Income Tax Rules of
1982.

(b) Eligibility

(100) The double deduction is available for manufacturing or
agricultural companies in respect of premiums payable
for insurance of cargo imported by that person or
company, provided that the insurer is a company incor-
porated in Malaysia. All importers are eligible to apply
for this double deduction regardless of whether the
imported products are to be consumed domestically or
subsequently re-exported.

(c) Countervailability

(101) The double deduction of insurance premiums for impor-
ters constitutes a subsidy as there is a financial contribu-
tion by the GOM in the form of double deduction of
expenses (i.e. a reduced tax liability) which confers a
benefit.

(102) However, this double deduction of insurance premium
for
importers does not constitute a countervailable
subsidy in the sense of the basic Regulation because it is
not specific. The GOM has not limited the access to the
subsidy to certain enterprises and applies objective
criteria in the granting of the subsidy.

5. Double deduction for research and development

(f) Calculation of the benefit

(a) Legal basis

(96)

The benefit to the exporting producers should be calcu-
lated on the basis of the corporate income tax exemp-
tion and the resulting tax saving that was effectively
granted to the exporting producers during the invest-
igation period. The amount of benefit should be allo-
cated over the total turnover during the investigation
period.

(97) One company benefited from this scheme and obtained

a subsidy of 4 %

(103) This programme is regulated by sections 34A and 34B

of the Income Tax Act of 1967.

(b) Eligibility

(104) The double deduction is available for manufacturing or
agricultural companies in respect of expenses incurred
directly for R & D purposes except with regard to capital
expenditures in R & D.

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(105) However, the double deduction of this type of expenses
does not constitute a countervailable subsidy in the
sense of the basic Regulation because it is not specific.
The GOM has not limited the access to the subsidy to
certain enterprises and applies objective criteria in the
granting of the subsidy.

(113) After approval, the imports made under this scheme are
declared through import declaration form 1 to the
customs authorities. The imports are registered and
examined by customs to verify if they are in compliance
with the declaration approved by the State Director of
Customs.

6. Import duty exemption and sales tax exemption

(114) Exemptions (import duty and sales tax) are consequently
granted by the customs authorities by means of a ‘stamp’
on the import declaration form.

‘ L i c e n s e d m a n u f a c t u r i n g w a r e h o u s e ’

( L M W )

(a) Legal basis

(106) Pursuant to Item 88 of the Customs Duties (Exemption)
Order 1988, which is part of the Customs Act 1967,
imported raw materials, machinery and equipment of a
‘Licensed manufacturing warehouse’
are
exempted from import duties. The sales tax exemption
for LMW companies is regulated by Item 83 Schedule B
of the Sales Tax (Exemption) Order 1980.

(LMW)

(107) One co-operating producer/exporter is identified as a

LMW.

(b) Eligibility

(108) LMW companies are manufacturing companies which
are export oriented, i.e. companies having in 1998 an
obligation to export a minimum 80 % of their produc-
tion; this rate has become 50 % since 1 January 1999.

(109)

In order to qualify for the import duty exemption and
the sales tax exemption on raw materials, machinery and
equipment (including accessories and spare parts), an
LMW company has to use those directly in the manufac-
turing process of an approved finished product which is,
at least for a major part, exported to a third market and
the equipment is to be used for environmental control,
recycling, maintenance and quality control. The manu-
facturing process starts from the initial stage of manu-
facturing until the finished product is finally packed
ready for export; this includes packaging materials and
casings.

(d) Countervailability

(115) This scheme constitutes a subsidy under Article 2 of the
basic Regulation since it consists of a financial contribu-
tion by the GOM in the form of import duties and sales
taxes foregone that are otherwise due and it confers a
benefit to the recipient.

(116) Since, for LMW, it is limited to companies located in
is contingent upon
certain areas and furthermore it
export performance, it is deemed to be specific within
the meaning of Article 3(2)(a) and 3(4)(a) of the basic
Regulation.

(e) Calculation of the benefit

(117) The amount of subsidy is the difference between the
amount of import duties and sales tax actually paid on
machinery/equipment and the amount of import duties
and sales tax which would normally be payable without
the benefit of the exemption.

(118) The benefit should be allocated over the normal lifetime
of
the machinery which is on average 10 years in
Malaysia. The amount pertaining to the investigation
period should be allocated over the total export turnover
during the period of investigation for LMW companies.
One company benefited from this scheme and obtained
subsidies of 0,21

(c) Practical

implementation

‘ P r i n c i p a l c u s t o m s a r e a ’

( P C A )

(110) As regards the imported raw materials, it was found that
the main raw materials for the manufacturing of the
product
cooperating
company, were subject to ‘nil’ import duty rate and sales
tax rate.

imported by

concerned,

the

(111) For the imported machinery and equipment (including
accessories and spare parts), the procedure is as follows:

(112) The company, prior to importation, files an application
to the State Director of Customs which verifies whether
the input can be directly used in the manufacturing
process of the finished product

(a) Legal basis

(119) Section 14(2) of the Customs Act 1967 provides for
customs duties exemption on imported raw materials,
machinery and equipment for all companies not consid-
ered as LMW companies nor as ‘free zone’ companies
which can then only be companies located in a ‘Principal
customs area’ (PCA). The legal basis for the sales tax
exemption on imported raw materials, machinery and
equipment
the sales Tax Act. One
co-operating producer/exporter is located in a ‘principal
customs area’.

is section 10 of

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(b) Eligibility

(120) With regard to PCA companies, the import duty exemp-
tion and sales tax exemption on raw materials, machi-
(also including accessories and
nery and equipment
spare parts) is granted by the Minister for Finance only
to manufacturing companies fulfilling ‘the conditions he
may deem fit to impose’.

(121) These conditions include, amongst others, the require-
ment
the machinery and equipment concerned
should be used directly in the manufacturing process of
the finished goods.

that

(127) For PCA companies, the import duty exemptions and
sales tax exemptions are only available to manufacturing
companies which import
specific equipment under
conditions set by the GOM ‘which it may deem fit to
impose’. These conditions are not considered to be
objective since they are not neutral and economic in
nature and horizontal in application. These criteria are
furthermore not clearly set out by law. Since the eligi-
bility 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.

(c) Practical

implementation

(e) Calculation of the benefit

(122) As regards the imported raw materials, it was found that
the main raw materials used in the manufacturing
process of
imported by the
cooperating company, were subject to ‘nil’ import duty
rate and sales tax rate.

the product concerned,

(128) The amount of subsidy is the difference between the
amount of import duties and sales tax actually paid on
machinery and the amount of import duties and sales
the
tax which would normally be payable without
benefit of the exemption.

(123) The raw materials concerned are consequently not

subject to an import duty and sales tax exemption.

(124) For the imported machinery and equipment (including
accessories and spare parts) the practical procedure is as
follows:

(125) The company, prior to importation, files an application
(form PC 1 (97)) to the Malaysian Industrial Develop-
ment Authority (MIDA), a government body, which veri-
fies whether the equipment can be directly used in the
manufacturing process of the finished product. After
approval, MIDA proposes to the Minister for Finance to
grant import duty and sales tax exemptions to the appli-
cant company for the specified machinery/equipment.
The Minister for Finance issues an exemption letter
listing
be
imported without paying the normal duties (import and
sales tax). The approval to import the listed equipment is
valid for one year. When the machinery is imported, the
company completes and files the Import declaration
form 1 with the customs authorities. The imports are
registered and examined by customs to verify if they are
in compliance with the authorisation granted by the
Minister for Finance. Exemptions (import duty and sales
tax) are consequently granted by the customs authorities
by means of a ‘stamp’ on the import declaration form.

all machinery/equipment

approved

to

(d) Countervailability

(126) This scheme constitutes a subsidy under Article 2 of the
basic Regulation since it consists of a financial contribu-
tion by the GOM in the form of import duties and sales
taxes foregone that are otherwise due and it confers a
benefit to the recipient.

(129) The benefit should be allocated over the normal lifetime
the machinery which is on average 10 years in
of
Malaysia. The amount pertaining to the investigation
period should be allocated over the total turnover during
the period of investigation for PCA companies.

(130) One company benefited from this scheme and obtained

subsidies of 0,91 %

7. Programmes found not to be used

(131) The complainant alleged that the exporting producers of
the product concerned benefited from a number of other
subsidy programmes. The questionnaire response and
the verification revealed that the exporting producers did
not use the programmes listed below:

— reinvestment allowance

— double deduction for the promotion of exports

— double

deduction of

export

credit

insurance

premiums

— deduction granted for promoted activities

— double deduction for expenses on approved training

— export credit refinancing

— capital expenditure allowance

— incentives for strategic projects

— incentive for promoting Malaysian brand names

— infrastructure allowance

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Therefore, the Commission has not made an assessment as regards these programmes.

8. Amount of countervailable subsidies

(132) The level of cooperation for Malaysia was very high (above 90 %). The two companies producing
PET in Malaysia did cooperate. The countrywide weighted average subsidy margin is 4,2 % which is
above the applicable de minimis level of 2 %.

Export

Export

Domestic

Export

Type of Subsidy

Double
Deductions

Pioneer
Status

Hualon Corporation (M)
Sdn. Bhd.

MPI Polyester Industries

All others

0

0

4 %

0

Import duty
exemption
and Sales Tax
Exemption

Import duty
exemption
and Sales Tax
Exemption

Total

0

0,21 %

4,27 %

0,91 %

0

0,91 %

4,2 %

(133)

In view of the high level of cooperation, the residual rate
for non-cooperating companies was determined as the
the cooperating company with the highest
rate of
subsidy margin i.e. 4,2 %

V. TAIWAN

1. Introduction

(134) On the basis of

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

investigated

1. tax credits and exemptions,

2.

import duty exemption,

3.

loans at preferential

interest rates,

4. matching funds.

(135) The tax credits, loans and matching funds are based on
the Statute for Upgrading Industries as last amended on
January 27, 1995. The
these
programmes is regulated by the Enforcement Rules of
the Statute for Upgrading Industries as last amended on
22 January 1997. Finally, the practical implementation
of these programmes is regulated by Measures enacted
by the Executive Yuan of Taiwan. The import duty
exemptions are based on the Customs Code.

implementation of

2. Tax credits and exemptions

Statute for Upgrading Industries as last amended on 27
January 1995. The tax credits are covered by Article 6 of
the SUI. Furthermore, the practical implementation of
the scheme is regulated by the Measures Governing the
Application of Tax Deductions promulgated on 15 April
1991 by the Executive Yuan which was last amended on
27 February 1995.

(b) Eligibility

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

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

— investment in equipment for automation of produc-

tion,

— investment in equipment for pollution control.

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

2.1. Tax credits for the purchase of automation and

pollution control equipment

(c) Amount of tax credit

(a) Legal basis

(136) The basic instrument involving economic development
of the Taiwanese industry is the Statute for Upgrading
Industries (SUI) which entered into force on 1 January
1991 and was last amended on 27 January 1995. The
Statute is supplemented by the Enforcement Rules of the

(140) Any eligible company which invests in the abovemen-
tioned equipment types may credit 10 to 20 % of the
the corporate income tax
purchase amount against
payable for the current year.
In case 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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(141) The amount of tax credit is determined as follows:

(f) Calculation of the benefit

— 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 is at the rate of
10 %.

(146) The benefit to the exporters was calculated on the basis
of the difference between the tax credit for imported
machinery and domestically purchased machinery i.e.
10 % that was granted to the exporters during the
investigation period. The amount of benefit should be
allocated over
the product
concerned during the investigation period.

turnover of

total

the

(147) Two companies benefited from this
obtained benefits of 0,41 % and 0,43 %.

scheme

and

(d) Practical Implementation

2.2. Tax credits for investment in certain enterprises

(142)

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

(e) Countervailability

for

(143) The tax credits under Article 6 of the SUI constitute
countervailable subsidies in the sense of Article 3(4)(b)
of the basic Regulation. The tax credits constitute subsi-
dies which are contingent upon the use of domestic over
imported goods. Although the programme provides for
a tax credit
imported as well as domestically
produced equipment, the subsidy is doubled for the
purchase of domestic equipment and therefore, directly
provides an incentive for the purchase of Taiwanese
made equipment. The verification revealed that
the
Taiwanese authorities intend to favour the purchase of
domestically manufactured equipment over imported
machinery by providing for a differentiated level of
benefit (20 % for domestic versus 10 % for imported
equipment).

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

(145) For the abovementioned reasons, it is considered that

the tax credits constitute countervailable subsidies.

(a) Legal basis

(148) The tax credits are regulated by Article 8 of the SUI.

(b) Eligibility

(149) The tax credit is available to any investor which buys
registered stocks issued by an important technology-
based enterprise or an important
invested enterprise
designated by the government (invested company). The
investing company should hold the registered stocks for
a period of at least two years. There is no precise defini-
tion of
technology-based enterprise. An
invested enterprise may be any enterprise
important
with a capital of NTS2 billion providing it has been
designated as such by the GOT.

important

(c) Amount of tax credit

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

(d) Practical

implementation

(151)

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

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(e) Countervailability

3. Import duty exemption

(152) The tax credits under Article 8 of the SUI constitute
countervailable subsidies in the sense of Article 3(2)(a) of
the basic Regulation. The GOT has limited the access to
the subsidy to enterprises which make a specific invest-
ment. In addition, the GOT has large discretion in the
designation of eligible investments. There are no objec-
tive criteria to determine what constitutes a technology-
based or important invested enterprise. The verification
revealed that the Taiwanese authorities intend to favour
certain types of investment without establishing clear
criteria.

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

(154) One company alleged that this scheme is not specific
since a large number of private persons and companies
have benefited from this scheme. The Commission is of
the view that
the number of beneficiaries is not a
criterion for determining specificity in accordance with
Article 3 of the basic Regulation. A large number of
companies may benefit from an export subsidy and this
does not
render a programme not countervailable.
Therefore, this claim cannot be accepted.

(f) Calculation of the benefit

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

3.1. Import duty exemption for machinery

(a) Legal basis

(159) Chapters 84, 85 and 90 of the Customs import tariff
and classification of import and export commodities of
the Republic of China (hereinafter ‘the Customs Code’).

(b) Eligibility

(160) Pursuant

to the abovementioned provisions of

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

is exempt

(c) Practical

implementation

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

identical

it will

(156) One company benefited from this scheme and obtained

(d) Amount of duty exemption

a benefit of 0,69 %.

2.3. Tax credits for r & d and personnel training

(157) The tax credits for R&D and personnel training under
Article 6 of the SUI do not constitute countervailable
subsidies. The tax credits are generally available for all
manufacturing,
industries
service
investing in R&D and personnel training.

agricultural

and

2.4. Tax credit for establishing international brands

(158) Only one company availed itself of this scheme and
obtained a negligible benefit. Therefore, the countervail-
ability of this scheme does not need to be addressed.

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

(e) Countervailability

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

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

(f) Calculation of the benefit

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

i.e. seven years.

specific raw materials. The industry sectors whose raw
material is produced in Taiwan will not be able to use
this programme. The scheme is not a general duty
scheme
suspension scheme. Utilisation of
is
the
dependent upon individual applications
from each
company, for each product manufactured, and for each
raw material to be imported 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 Regu-
lation and the subsidy is countervailable.

(166) All companies made use of

this programme and

obtained benefits of 0,07 % to 1,92 %.

(d) Calculation of the subsidy amount

3.2. Imports of raw material

(167) The Customs import tariff offers tax exemptions for
imports of main raw materials of chemicals and sub-
material, and that access to the tax exemption is expli-
citly limited to certain enterprises, including the produ-
cers of PET chips.

(171) The benefit

the exemption for the production of

to the companies was calculated as the
amount of import duties normally payable without the
benefit of
the
product concerned. 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. All
companies benefited from this programme and obtained
benefits from 0,12 % to 0,73 %

(a) Eligibility

4. Loans at preferential interest rates

(168) 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.

(172)

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.

(b) Practical

implementation

(169) A company which intends to import the specified raw
material
to the
files an application to IDB prior
importation of the raw material. If 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 certificate 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.

(a) Eligibility

(173) These schemes are covered by Article 21, paragraph 1,
item 3 of the SUI. The GOT has established a develop-
ment fund and makes use of such a development fund
for providing loans in line with the government indus-
trial policy for assisting the sound development of
industries.

(c) Countervailability

(b) Practical

implementation

(170) 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, the programme can only be used by
the Taiwanese industry importing
limited sectors of

(174) A company has to file an application to the Chiao Tung
Bank (which is partly State owned), or to certain other
designated banks. The bank will verify whether the
application falls within the criteria. Based on the finan-
cial situation of the applicant, the Chiao Tung Bank will
decide on the amount of the loan.

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(c) Countervailability

(175) 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. 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. Low-interest loans are only available to companies
which purchase specific equipment under specific condi-
tions set by the executive Yuan of the Development
Fund. 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 anti-subsidy
Regulation, the scheme is considered specific in accord-
ance with Article 3(2)(a) of the basic Regulation.

(d) Calculation of the subsidy amount

(176) 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 investigation there were
no such comparable commercial
loans granted to the
respective companies. Therefore the Commission consid-
the appropriate benchmark would be the
ered that
average commercial interest rate during the investigation
period (9 %). All companies availed themselves of this
scheme and obtained a benefit of 0,02 % to 0,09 %.

5. Matching funds and assistance funds

(177) Only one company availed itself from this scheme and
the issue of

obtained a negligible benefit. Therefore,
countervailability does not need to be addressed.

6. Other subsidies

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

7. Amount of countervailable subsidies

(179) The amount of subsidy was calculated according to the
methodology set out
the
above.
following subsidy rates for the co-operating companies
were established:

In this

respect,

Tax credit — automation & pollution control
equipment (Domestic only)

Tax credit — investment in certain enter-
prises

Import duty exemption on raw materials

Import duty exemption on machinery

Loans

Matching Funds

Nan Ya Plastics

Far Eastern

Shingkong

Tuntex

0,12

0,64

0,70

0,07

0,02

0

1,56

0,26

0

0,26

0,23

0,05

0

0,80

0

0

0,11

1,92

0,02

0

2,06

0

0

0,18

0,62

0,08

0

0,88

(180) For information, it should be noted that the weighted average country-wide subsidy margin for the
exporting producers investigated, which represent the totality of the exports to the Community
originating in Taiwan, expressed as a percentage of the cif price at Community frontier level is
1,08 % which is above the de minimis threshold for Taiwan (i.e. 1 %). In view of the high level of
cooperation (above 90 %), the residual rate for non-cooperating companies was determined as the
rate of the cooperating company with the highest subsidy margin i.e. 2 %.

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VI. THAILAND

1. Introduction

(181) On the basis of

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

the Commission

investigated

services

— exemption or reduction on duties on imports of

machinery,

— exemption from corporate income tax,

— additional incentives for enterprises in special invest-

ment promotion zones,

— exemption of import duties on raw and essential

materials,

— incentives

for enterprises

in special

investment

production zones,

— other subsidies such as packing credits, pre-shipment
finance facilities and investment inducements.

(182)

It was established that, during the investigation period,
the cooperating exporting producer availed itself only of
schemes under the Investment Promotion Act.

2. General

(183) The Investment Promotion Act (IPA) B.E. 2520 of 1977
and its amendment B.E. 2534 of 1991 provides incen-
tives to promote development of the Thai economy. The
IPA, which is administered by the Board of Investment
(BOI), grants the exemption of import duties and other
taxes with respect to qualifying projects. According to
the BOI, the Investment Promotion Scheme is used as a
tool to encourage companies to relocate to less devel-
oped areas in Thailand.

(184)

In order to receive IPA benefits, each company makes an
application to the BOI for a ‘certificate of promotion’
(licence), which specifies the goods to be produced and
the benefits granted.

(185) The BOI stressed that its major political aim was decen-
tralisation and counteracting the danger of the develop-
ment of a dual economy, with the Bangkok area
absorbing most investment due to its competitive advan-
tage in infrastructure. This policy is spelled out in the
five-year national development plan (as regards the
period of investigation the eighth version is relevant,
running from 1997 to 2001).

development, with zone 1 being the most developed and
zone 3 being the least developed one.

(187) Zone 1 covers Bangkok and vicinities (Samut Prakan,
Samut Sakhon, Pathum Thani, Nontha Buri, and Nakhon
Pathom); zone 2 covers Samut Songkram, Ratchaburi,
Kanchanaburi, Suphanburi, Ang Thong, Ayuthaya, Sara
Buri, Nakhon Nayok, Chachengsao and Chonburi; zone
3 covers the rest of the country.

(188) The production facility of Thai Shingkong Ltd, the only

cooperating exporter,

is located in zone 3.

(189) Approved projects located in zone 1 are eligible for a
50 % reduction of import duties on machinery that is
not included in the tariff reduction notification of the
Ministry of Finance (notification No C.3/2533) and is
subject to a tariff greater than or equal to 10 % if they
export at least 80 % of total sales or are located in
industrial estates or promoted industrial zones; a three-
year exemption of corporate income tax if they export at
least 80 % of total sales or are located in industrial
estates or promoted industrial zones; and exemption of
import duties on raw materials and essential materials
used in the manufacture of exports.

reduction notification of

(190) Approved projects located in zone 2 will receive 50 %
reduction of import duties on machinery that is not
included in the tariff
the
Ministry of Finance (notification No C.3/2533) and is
subject to a tariff greater than or equal to 10 %; three-
year exemption of corporate income tax or seven-year
exemption of corporate income tax if they are located in
industrial estates or promoted industrial zones; and
exemption of import duties on raw materials and essen-
tial materials used in the manufacture of exports.

(191) Approved projects located in zone 3 will receive exemp-
tion on the import duty on machinery, eight-year
exemption of corporate income tax, exemption of
import duties on raw materials and essential materials
used in the manufacture of exports, and special privilege
for investment promotion zone (i.e. double deduction of
transportation, electricity and water supply cost; deduc-
tion of 25 % of infrastructure, installation or construc-
tion costs).

R e g i o n a l s p e c i f i c i t y

(186)

In response to the general framework of regional devel-
opment set out
in the seventh national social and
economic development plan, the BOI divided the entire
country into three zones since April 1993. The classi-
fication into zones is based on the level of economic

(192) Since firms located in zones 2 and 3 are entitled to more
generous incentives than those located in zone 1, all
subsidies granted in zones 2 and 3 by the BOI are by
definition regionally specific, in accordance with Articles
3(2)(a) of the basic Regulation.

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S e c t o r s p e c i f i c i t y

certain industries, the GOT has limited the access to the
subsidy to certain enterprises.

(193) As regards sector specificity, the BOI claimed that it has
established objective criteria in granting incentives, and
that these criteria are clearly set out in BOI announce-
ments and publications and consistently adhered to. The
list of activities eligible for investment promotion is
contained in chapter 5 of the Guide to the Board of
Investment. The GOT claims that it does not promote
particular sectors, and that these incentives are therefore
not specific. The BOI argued that any projects under-
taking activities eligible for promotion announced by the
BOI can apply for incentives, and that the BOI applies
objective criteria governing the eligibility for incentives.
Projects applying for incentives are required to meet the
objective project approval criteria which are based on
economic and technological
factors, namely ‘value-
added’ (minimum 20 %), debt-equity ratio not exceeding
4 to 1, technological level of production process and
machinery involved,
and environmental protection
systems.

(194) The sectors eligible for promotion are enumerated in a
list of activities. It was claimed that this list of activities
was open-ended and updated on a relatively regular
basis if the market shows demand for promotion for
new sectors. The list has been updated about 30 times
since 1987. It is clear that although a wide range of
activities are eligible, the Thai Government has used its
discretion to determine which sector can obtain benefits,
including in which zones the companies had to be
located.

(195) The BOI is empowered to decide which activities should
be promoted. The BOI may temporarily or permanently
suspend activities on the Investment Promotion List if it
considers that promotion is no longer needed; or the
BOI may add new activities to the list if it considers that
such activities should be promoted. This was the case
when the BOI decided to exempt machinery in 61 cate-
gories of activities from import duty, for projects located
in zones 1 and 2 (BOI announcement No 12/2540
effective from 27 October 1997). Furthermore, sectors
or industries, which are not listed in the activities list are
excluded from investment promotion. As
already
mentioned,
it is the discretion of the BOI to decide
which industries are eligible for promotion. In excluding

I m p o r t s u b s t i t u t i o n c o n d i t i o n

(196) Any subsidy to an enterprise or industry would therefore
by definition be specific. The 20 % value-added criterion
effectively encourages enterprises to use domestic over
imported goods and will effectively mandate the use of
domestic goods in cases where the value added is less
than 20 %. Therefore, any subsidy linked to this require-
ment is specific according to Article 3(4)(b) of the basic
Regulation.

C o n c l u s i o n o n s p e c i f i c i t y

(197) BOI incentives are therefore specific in accordance with
Articles 3(2)(a) and 3(4)(b). Therefore,
in addition to
regional specificity for zones 2 and 3, all BOI subsidies
in the whole of Thailand including zone 1 are specific.

G r e e n - l i g h t c l a i m

(198)

It was claimed that zone 3 qualifies as a disadvantaged
the
region within the meaning of
ASCM and the basic Regulation. Most notably, it was
claimed that per capita income of zone 3 was less than
85 % of the country's average, and that this per capita
income has always been well below the national average.

the provisions of

(199)

In order to assess the merits of this claim, it is necessary
to evaluate the implementation of the criteria set out in
Article 4(3) of the basic Regulation in Thailand.

(200)

It is acknowledged that zone 3 is a clearly designated
contiguous geographical area.
It is not disputed that
zone 3 meets the definition of disadvantaged region in
accordance with Article 4(3) of the basic Regulation.
Indeed, evidence was provided that
the per capita
income in zone 3 between 1994 and 1996 were in the
region of 50 % of the national average.

(201) However, it has already been established that the BOI
incentive system limits the access and is therefore
specific. As a result, none of the regions qualify for
green light treatment. As regards zone 3, the fact that
only sectors listed are eligible for promotion, plus the
value-added requirement makes incentives within the
zone specific. Consequently, the green-light claim has to
be rejected.

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3. Exemption or reduction on duties on imports of

(e) Calculation of the subsidy amount

machinery

(a) General

(202) Section 28 of the IPA is the legal basis to grant the
exemption of import duties on machinery provided that
such machinery is not being produced or assembled in
Thailand and will be used in the promoted activity.
Section 29 of the IPA provides the legal basis for the
50 % reduction on import duties on imported machi-
nery.

(b) Eligibility

(203) The company under investigation was subject to the
criteria effective from April 1993, based on current
zoning. Different criteria in granting exemption and
reduction of import duties on imported machinery are
applied to different zones. Investments in zone 1 will be
granted a 50 % reduction of import duties in case of
import duties greater or equal to 10 % if they export at
least 80 % of total sales. Investments in zone 2 will be
granted a 50 % reduction of import duties in case of
import duties greater or equal to 10 %. Investments in
zone 3 will be granted exemption of import duties on
machinery.

(207) The benefit to the exporters should be calculated on the
basis of the amount of unpaid customs duty due on
imported capital goods, by spreading this amount across
a period which reflects the normal depreciation of such
capital goods in the industry of the product concerned.
This period has been established by using the average of
the depreciation periods
for capital goods actually
imported under this scheme by the company, resulting
in a normal depreciation period of 11 years. The
amount so calculated which is attributable to the invest-
igation period has been adjusted by adding interest
during the investigation period in order to establish the
full benefit
the
commercial interest rate during the investigation period
in Thailand, i.e. 12,04 % being considered appropriate.
This amount has then been allocated over total sales
during the investigation period.

to the recipient under this scheme,

(208) Thai Shingkong Ltd received a benefit of 0,35 %.

4. Exemption from corporate income tax

(a) General

(204) Thai Shingkong Co. Ltd was granted an exemption of
import duties on machinery issued in 1994 due to its
location in zone 3 (Investment Promotion Certificate No
1823/2537).

(209) Sections 31 and 34 of the IPA provides the legal basis
for corporate income tax exemption and exclusion, from
taxable income, of dividends derived from promoted
activity during the corporate income tax exemption
period respectively.

(c) Practical

implementation

(b) Eligibility

(205)

In order to avail itself of this scheme, the company must
possess a Certificate of promotion which specifies that it
is entitled to an exemption or reduction on taxes on
imports of machinery pursuant to Article 28 or 29 of
the IPA. The Customs Department will receive a copy of
the licence, and will, on importation of the machinery
declared to be BOI exempted, check that it is for the
promoted activity.

(d) Countervailability

(206) The import duty exemption is a subsidy because govern-
ment revenue which is otherwise due is foregone by the
the
government. As explained in the general part,
programme is limited to firms located in certain zones
and to certain sectors and requires companies to have
20 % value added. Therefore, the import duty exemption
is specific and countervailable under Article 3(2)(a) and
3(4)(b) of the basic Regulation.

(210) By virtue of Section 31 of the IPA, the BOI is authorised
to provide three to eight year exemptions from the
corporate income tax depending on the location of
investments. Different eligibility criteria are applied to
different zones.

(211)

Investments located in zone 1 exporting at least 80 % of
total sales and located in industrial estates or promoted
industrial zones will be granted three-year corporate
income tax exemption. Projects in zone 2 will receive
three-year seven-year corporate income tax exemption
respectively depending on whether they are located in
industrial estates or promoted industrial zones. Invest-
ments in zone 3 will be granted eight-year corporate
income tax exemptions.

(212) Thai Shingkong Ltd located in zone 3, has been granted
an eight year tax exemption from corporate income tax
pursuant to Section 31 of the IPA.

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(c) Practical

implementation

(219)

It was established that the exporting producer did not
benefit from these additional incentives. Therefore, it is
not necessary to make an assessment of these schemes.

(213)

In order to avail itself of the exemption of corporate
income tax, the company must fill out all costs and
income derived from the promoted activity in a special
column (non-taxable). The claim must be made on line
46 of the tax return and accompanied by supporting
documents.

6. Exemption of import duties on raw and essential

materials

(d) Countervailability

(a) General

(214) The income tax exemption is a subsidy since govern-
ment revenue which is otherwise due is foregone by the
government. As stated above, this scheme is countervail-
able pursuant to Article 3(2)(a) and 3(4)(b) of the basic
Regulation.

(e) Calculation of the benefit

the BOI

(215) Thai Shingkong Ltd claimed on the tax return, income
tax exemption under the licence for the financial year
ending 31 December 1998, which ended within the
period of investigation. The company claims that it was
not liable to pay corporate income tax in 1998 since net
losses were carried forward from previous tax years.
However,
and the Revenue Department
confirmed that a company which can carry forward
losses and benefits from income tax exemption can
choose either to claim the benefit under the BOI certifi-
cate or offset its profits against previous year's losses. In
the present case, Thai Shingkong opted to use the
income tax exemption and not to offset profits with
accumulated net losses. Therefore, it is concluded that an
effective benefit was granted to the company under this
scheme.

(216) The benefit should be calculated as the taxes which were

not paid on profits realised on BOI activity.

(217) Thai Shingkong obtained a benefit of 8,13 %.

(220) Section 36(1) of the IPA provides the legal basis for
exemption of import duties on the raw and essential
materials imported for use specifically in producing,
mixing, or assembling products or commodities for
export.

(b) Eligibility

(221) Under Section 36(1) of the IPA, the BOI is authorised to
grant the exemption of import duties on raw materials
and essential materials used in the manufacture for
exports. Companies in every zone are eligible for this
scheme provided that they are promoted.

(c) Countervailability

(222) As mentioned above, the schemes in zone 3 are specific.
However, it was established in the present case that the
import duty exemption did not result in an excess remis-
sion of import duties for the exporter concerned. There-
fore, there is no subsidy according to Article 2 of the
basic Regulation and it is not necessary to further eval-
uate this scheme since no benefit was conferred on the
exporting producer.

7. Other subsidies

(223)

It was established that the exporting producer in Thai-
land did not benefit from any other subsidy schemes.
Therefore it is not necessary to make an analysis as
regards the countervailability of these schemes.

5. Additional incentives for enterprises in special

investment promotion zones

(218) Section 35(3) of the IPA provides the legal basis for
double deduction of transportation, electricity and water
supply costs while Section 35(4) provides the legal basis
for deduction of up to 25 % of infrastructure, installa-
tion and construction costs.

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

8. Amount of countervailable subsidies

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Company

Income tax exemption

Import duty exemption
on machinery

Thai Shingkong, Ltd

8,13 %

0,35 %

Total

8,4 %

(225)

It was established that
the level of cooperation in this proceeding has been very high. The
cooperating exporting producer covers virtually all exports from Thailand to the EC during the
investigation period, as shown by the comparison of import figures provided by Eurostat with export
figures supplied by the cooperating exporting producers. In view of the large cooperation, the
residual rate for non-cooperating companies was determined as the rate of the cooperating company
with the highest subsidy margin i.e. 8,4 %.

D. COMMUNITY INDUSTRY

(226) The following nine Community producers cooperated in the investigation,

information when requested:

i.e. replied to the
Comission's questionnaires, allowed on the spot verifications and provided the Commission with
additional
— Du Pont Polyesters Ltd (UK),
— Eastman Chemicals BV (NL),
— INCA International SpA (I),
— Italpet Preforme SpA (I),
— KOSA GmbH (D),
— Shell Chemicals Ltd (UK),
— Wellman PET Resins Europe (NL),
— Aussapol SpA (I).
— CEP-Tergal Fibre (F).

(227)

(228)

It should be noted that, although Aussapol SpA and CEP-Tergal Fibre were not among the
companies on whose behalf the complaint was lodged, these companies supported the complaint
and cooperated in the investigation.

It should also be noted that, although it operates a plant in Malaysia, Eastman has been considered
part of the Community industry because its affiliated company has exported only insignificant
quantities of PET to Eastman itself. No other cooperating companies imported PET from the
countries concerned during the IP.

(229) None of the three other European producers replied to the Commission's questionnaires or expressed

opposition to the proceeding.

(230) The cumulated production of the nine cooperating producers during the investigation period was
1 042 350 tonnes out of an estimated total Community production of 1 220 000 tonnes, i.e. 85 %
of the Community production.

(231) The Commission, therefore, considers that the nine cooperating producers constitute the Community

industry within the meaning of Article 4(1) of the basic Regulation.

E. INJURY

1. Preliminary remarks

(a) Information used

I m p o r t d a t a

(232) Eurostat information, together with data submitted by exporting producers, was used as the source
of the import data. The Combined Nomeclature heading used, CN 3907 60 00, includes polyethy-
lene terephthalate under primary forms i.e. not only the product concerned but also polyethylene
terephthalate chips used to produce polyester fibres. As the Community production of the polyester
fibres in which they are used was stable between 1996 and the beginning of the IP (1), the
Commission estimated that imports of PET chips used for the production of polyester fibres
remained stable too.

(1) See inter alia Commission Regulation (EC) No 124/2000 (OJ L 16, 21.1.2000 p.30).

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(233) According to the complaint, the product concerned represented, in terms of quantity, 90 % of all
imports in 1998, the remaining 10 % (approximately 47 000 tonnes) being used to produce
polyester fibres. This information was confirmed during the investigation on the basis of estimates
established by various Community producers and market research publications. For all the years
under review, the same estimated amount of imports of PET chips used for the production of
polyester fibres (47 000 tonnes) was deducted from imports shown in Eurostat to establish the total
quantities imported into the Community of the product concerned.

(234) On a country basis, imported quantities were established by the same methodology but also taking

into account data submitted by cooperating exporting producers.

C o m m u n i t y i n d u s t r y d a t a

(235) Community industry data were obtained from the verified questionnaire responses of the nine
cooperating Community producers. Data were requested for the period 1995 to the IP; however,
during this period, the Community industry was considerably restructured with several mergers and
demergers. As a consequence, it was not possible for all the companies to provide data as far back as
requested. As a result, 1996 is the earliest year for which data are sufficiently complete for the
Community industry in the structure it had in the IP.

(236) However to have a full understanding of the situation of the Community industry, especially
concerning prices and profitability,
it is necessary to have a view on the development of the
Community PET market over a longer period. Data submitted by the Community industry and
obtained from external professional sources were thus used wherever necessary.

2. Development of the Community PET market since the beginning of the 1990s

(237) PET is a product which started to be widely used in the Community to bottle soft drinks in the late
1980s and mineral and spring water progressively thereafter. As a consequence, Community demand
for PET has been growing very quickly since the beginning of the 1990s (by more than 10 % per
year). The growth potential of this market is still considerable, with the water market not yet mature
in many Community countries and demand for other applications (beer, milk, prepared food)
starting to develop.

(238) At the beginning of the 1990s, the Community PET industry started to develop through the
conversion of existing polyester fibres or yarn plants. Rapidly, however, growing demand required
completely new production lines to be built specifically for PET and for its major raw materials.
Despite the rapid expansion of investments in new facilities, supply did not meet demand, and this
was also the case in other parts of the world. As a result, during the first half of 1995, there was a
worldwide shortage of PET. This resulted in huge increases in the prices of PET and of its major raw
materials. These increases proved temporary because sufficient capacities for PET and its raw
materials came into production in the Community a few months later. Users of PET, anticipating that
prices would drop, stopped purchasing as soon as the summer 1995 peak was over (the consump-
tion of PET follows the same seasonality as the consumption of soft drinks and water). Prices started
then to decrease dramatically. This drop came earlier and was more significant than the drop in
prices of raw materials. As a result of this gap, the Community industry registered losses at the
beginning of 1996. These losses were expected to be temporary, but as a result of the arrival of
subsidised imports on the Community market, as will be shown below, the situation in fact
deteriorated further.

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3. Consumption

(239) Apparent consumption of PET in the Community was established on the basis of the total imports of
the product concerned into the Community, plus the total verified sales of the Community industry
on the Community market, and estimates of sales of the non-cooperating Community producers
(based on their known production capacities and the average sales to capacity rates calculated for the
Community industry).

(240) Community consumption of PET reached approximately 1 350 000 tonnes during the IP. As shown
in the table below, it increased by 63 % from 1996 to the IP. Compared with 1998, consumption in
the IP remained almost stable, due mainly to the building of stocks by users in 1998, taking
advantage of the very low level of prices at that time.

Company

1996

1997

1998

IP

825 608 t

1 090 915 t

1 311 008 t

1 349 169 t

Index (1996 = 100)

100

132

159

163

4. Imports into the Community from the countries concerned

(a) Cumulative assessment of the effects of the imports concerned

(241)

It was first examined whether imports from all countries concerned should be assessed cumulatively,
taking into account the findings on subsidy as established above.

I m p o r t s o r i g i n a t i n g i n K o r e a a n d I n d o n e s i a

(242) The subsidy margins found for Korea and Indonesia are below de minimis, therefore, both countries

should be provisionally excluded from the injury assessment.

I m p o r t s o r i g i n a t i n g i n I n d i a , M a l a y s i a a n d T h a i l a n d

(243)

It was found that:

— the subsidy margins found were more than de minimis for all three countries,

— the volumes of imports were not negligible during the IP, as is illustrated by the market shares of
these countries that ranged from 2,6 to 3,3 % (more than 9 % in terms of import shares),

— the cumulative assessment appeared appropriate in view of the conditions of competition both
between the imports originating in these countries, and between these imports and the like
Community product. This is evidenced by the fact that volumes and market shares of these
imports have been multiplied by at least a factor of 3 between 1996 and the IP. Their price
behaviour was similar, with a decrease ranging from 42 % to 66 % between 1996 and the IP. In
the IP, their prices were at levels close to each other and they undercut the Community industry's
average prices up to 15,4 %. Furthermore, they used the same or similar channels of trade.

(244) For these reasons, it was provisionally concluded that imports originating in India, Malaysia and

Thailand should be assessed cumulatively.

I m p o r t s o r i g i n a t i n g i n T a i w a n

(245) Similar to imports originating in the above countries,

— the subsidy margins found were more than de minimis for imports originating in Taiwan,

— the volumes of these imports were not negligible during the IP, as is illustrated by a market share

of 2,8 %,

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— their price behaviour was similar, with a decrease of 42 % between 1996 and the IP. In the IP, the
prices of these imports were at levels close to the prices of the countries above, though not
undercutting the Community industry's average prices. Furthermore, the same or similar channels
of trade were used.

(246) However, the development of volume imported differed from that of the countries above. Volumes
of imports originating in Taiwan decreased by 42 % between 1996 and the IP, but this was the result
of a decrease of 51 % between 1996 and 1997, an increase of 92 % between 1997 and 1998 and a
decrease of 18 % between 1998 and the IP.

(247)

In view of the above, it is provisionally concluded that imports originating in Taiwan were mostly
made under the same conditions of competition, used the same channels of trade, grew steadily
between 1997 and 1998 (like imports of the countries above), had substantial market shares during
the IP and were made at the same level of prices that were found to be subsidised. It was therefore
appropriate to assess imports originating in India, Malaysia, Taiwan and Thailand cumulatively.

(b) Volume of imports concerned

(248) Volume of imports concerned developed as follows:

Imports

1996

1997

1998

IP

Total
Taiwan, Thailand

India,

Malaysia,

67 748 t

68 669 t

164 833 t

161 897 t

Index (1996-100)

100

102

243

239

(249) The volume of imports originating in India, Malaysia, Taiwan and Thailand grew by 139 %, between
1996 and the IP, to reach a level of 161 897 tonnes. After a steady rise that took place from the
beginning of 1998 to the end of that year, imports started to slightly decrease at the beginning of
1999, at a time when the Community industry had decreased its prices, and users' and importers'
stocks were high;

imports, however, remained substantial.

(c) Market shares of imports concerned

(250) Market share of imports concerned developed as follows:

Market shares of
imports

1996

Total
Taiwan, Thailand

India,

Malaysia,

8,2 %

1997

6,3 %

1998

PI

12,6 %

12,0 %

Index (1996-100)

100

77

153

146

(251) The market share of the imports originating in India, Malaysia, Taiwan and Thailand reached 12 %
during the IP, an increase of 46 % on its 1996 level. Between 1998 and the IP, the market share of
these imports decreased slightly, as result of the reduction in import volumes described above.

(d) Prices of imports concerned

(252) Prices of imports concerned originating in India, Malaysia, Taiwan and Thailand decreased by 49 %
from 1996 to the IP, by 28 % between 1996 and 1997, by 12,5 % between 1997 and 1998 and by
19 % between 1998 and the IP. On average, the cif duty unpaid price for the product concerned
originating in these countries was EUR 532/t during the IP. The investigation showed that a large
number of exporters were selling at a loss to the Community, indicating an aggressive pricing policy
regarding the Community market.

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(e) Price undercutting

(253) A comparison of selling prices on the Community market during the IP was made between the
prices of the Community industry and those of the exporting producers in the countries concerned.
This comparison was made after deduction of rebates and discounts. The prices of the Community
industry were adjusted to ex-works prices. The prices of the subsidised imports were cif Community
frontier, plus duties, and with an adjustment for level of trade and handling costs. The adjustments
have been based on information collected during the investigation, notably from cooperating
unrelated importers.

(254) On this basis, the price undercutting by the subsidised imports was:

Undercutting margins: ranges

India

Malaysia

1,2 - 7,9 %

11,8 - 12,9 %

Taiwan

0 %

Thailand

0 %

These low average rates of undercutting are due to the price suppression caused by the behaviour of
the exporting producers in the countries concerned which sold not only at subsidised prices, but also
at loss-making prices. The Community industry was in fact forced to match the prices of these
subsidised imports to try and keep its market share. It should be borne in mind that, given the
market power of several large buyers of products made of PET, the market is driven almost entirely
by price considerations.

5. Situation of the Community industry

(a) Production, production capacity and capacity utilisation

(255) As shown in the table below, production over the period 1996 to the end of the IP increased by
89 %. During the same period, capacity increased by 83 % reflecting the investment efforts made by
the Community industry to be in a position to supply the fast growing Community market. The
capacity utilisation rate of the Community industry remained fairly stable over the period. The plant
and equipment used by the Community industry are almost totally dedicated to production of the
product concerned.

Production

543 318 t

750 254 t

920 988 t

1 030 781 t

1996

1997

1998

IP

Index (1996-100)

100

138

169

189

Capacity

721 252 t

1 031 086 t

1 276 569 t

1 325 745 t

Index (1996-100)

Capacity utilisation

100

75 %

142

73 %

176

72 %

183

78 %

(b) Sales volume, value and unit prices

(256) As shown in the table below, sales made by the Community industry to unrelated customers on the
Community market during the period 1996 to the investigation period increased in volume by 62 %
(in this context, selling prices of Italpet have not been considered reliable and have been disregarded).
Average selling prices fell by 36 % over the same time period, and between 1998 and the IP alone,
prices decreased by 18 % to reach a level of EUR 670/t delivered to the final customer.

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Sales volume

522 925 t

708 272 t

783 415 t

847 376 t

1996

1997

1998

IP

Index (1999-100)

100

135

150

162

Av. Selling price (delivered)

1 055 EUR/t

861 EUR/t

827 EUR/t

670 EUR/t

Index (1999-100)

100

82

78

64

(c) Market share

(257) The Community industry's market share was 63 % in 1996, 65 % in 1997, 60 % in 1998 and 62 %
during the IP. Between 1997 and 1998, market share fell by 5 percentage points,
it partially
recovered in the IP, at a time when the Community industry considerably decreased its prices as
shown above.

(d) Profitability

(258) Before 1995, the Community industry was profitable at a time when, as explained earlier, it was
operating in a fairly new and fast growing market. In 1995, when supply was very tight, the
Community industry was earning a profit around 20 % return on sales. As the fall in PET prices from
the last quarter of 1995 was not immediately matched by corresponding reductions in costs, losses
started to be registered in 1996: on annual averages, raw material costs, especially those of PTA,
increased by 8 % between 1995 and 1996, whereas prices for PET fell by 35 %. As a result, losses of
19 % were registered in 1996. The price decrease, however, was seen as an overreaction of the
market after a shortage. The Community industry had been expecting to see prices and profit
margins slowly recover, but at a time of low priced imports from the countries concerned, margins
did not rise and,

losses remained at 19 %.

in 1997,

(259)

In 1998, losses started to be reduced, but towards the end of the year, at the beginning of the IP, the
Community industry had to match prices of subsidised imports in order to regain lost market share.
As a result, financial losses deteriorated by a further 15 percentage points to reach 32 % of net
turnover during the IP.

(260) Several interested parties have claimed that the PET market is cyclical, with regular undercapacity
crises that lead to price increases and thus profits at high levels, followed by overcapacities that
depress prices and may result in losses. They requested that this cyclical element be taken into
consideration in the analysis and claimed that the IP corresponded to the low phase of the cycle.
Furthermore, they claimed that it was already clear that the Community industry was recovering and
that a new peak in the cycle would be reached sometime between 2002 and 2003. They therefore
asked that profits should be looked at over a longer period and not viewed at a given moment of
time.

(261) The Commission has rejected this claim, considering that PET is a product in which large consump-
tion developed fairly recently and that it was too early to judge whether the market was cyclical or
not. Furthermore, the bottom of the cycle, if it can be seen as such, lasted from the mid 1996 to mid
1999; this is too long to be attributed to the cycle.

(e) Employment

(262) At the end of the IP, approximately 1 450 people were employed by the Community industry, an
increase of 20 % compared to 1996. Between 1998 and the IP, this trend ended as approximately 30
people were made redundant in order to reduce costs.

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(f) Investment

(263) From 1996 to 1998 the Community industry invested a total of EUR 516 million in new or
extended capacities, an average of EUR 172 million per year. During the IP, only 31 millions were
invested.

(264) To meet future demand, which is expected to continue to grow steadily in the coming years, new
investment will be needed. Most of the Community producers had plans to invest, but losses during
the IP were so significant that shareholders refused to agree to these plans. As a result, no significant
increase in the capacity of the Community industry will take place between 2000 and the beginning
of 2002, since it takes approximately two years to bring a new PET plant into production.

6. Conclusion on injury

(265) From 1996 to the IP, imports concerned increased by 139 %, gaining nearly 4 percentage points in
market share to reach a share of nearly 12 %. This share reached 12,6 % in 1998, before the
Community industry decided to defend its market position (that had declined by 5 percentage points
between 1997 and 1998) by decreasing its prices significantly.

(266) From 1996 to the IP, average prices of the imports concerned decreased by 49 %, with a decrease of
19 % between 1998 and the IP alone. Between 1996 and the IP, prices of the Community industry
decreased by 36 %, with a similar decrease of 18 % between 1998 and the IP.

(267) The Community industry, which had been suffering from depressed profit margins and financial
losses since 1996 was not able to return to a healthier situation. On the contrary, during the IP, the
Community industry experienced worsening financial losses because it had to decrease its prices to
defend its market position. Furthermore, despite a rapidly expanding market, the Community
industry was not able to invest owing to its precarious situation.

(268) The Commission therefore considers that the Community industry has suffered material

injury

within the meaning of Article 8 of the basic Regulation.

F. CAUSATION OF INJURY

1. Introduction

(269)

In accordance with Article 8(6) of the basic Regulation, the Commission examined whether the
material injury suffered by the Community industry had been caused by the subsidised imports from
the countries concerned. In accordance with Article 8(7) of the basic Regulation, the Commission
also examined other factors in order to ensure that injury caused by other factors was not attributed
to the subsidised imports.

2. Effect of the subsidised imports

(270)

In 1997, low-priced imports from the countries concerned started to depress prices and suppress
price increases that would have been necessary to take into account the development in raw material
costs. The structure of the market, with a limited number of large buyers and, in comparison, many
suppliers, was such that the effect of the subsidised imports spread rapidly across the market.

(271) Between 1997 and the IP,

imports from these countries developed as follows:

— volumes more than doubled (in the second half of 1998, imports were growing even faster than
in the first half of the year, a pattern totally contradicting the seasonal pattern of consumption
and confirming that some customers or traders were taking advantage of the low price level, of
the imports concerned),

— their market share reached 12 % whereas it had been 6,3 % in 1997,

— their prices fell by 29 %.

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(272) During the same period, the Community industry:

— was forced to match price decreases because some major customers were halting purchases and

demanding prices as low as those of subsidised imports,

— saw its profitability further deteriorate,
— completely halted all

its investment plans.

(273)

In view of this clear coincidence in time between the development of import volumes and prices, on
one hand, and, the deterioration of the situation of the Community industry on the other, it was
concluded that the low priced subsidised imports from the countries concerned had a significant
negative impact on the situation of the Community industry.

3. Effect of other factors

(a) Dumped imports from Indonesia and Korea

(274)

In the parallel anti-dumping investigation, it was provisionally established that dumped imports from
Korea and Indonesia, cumulated with dumped imports from India, Malaysia, Taiwan and Thailand,
considered in isolation, caused material

injury to the Community industry.

(275)

Imports originating in Korea and Indonesia should, therefore, be provisionally considered as having
contributed to the injury suffered by the Community industry.

(b) Imports from other countries

(276) During the investigation period, other imports into the Community of the product concerned
originated mainly in Saudi Arabia, Turkey and the United States. During the IP, these imports had
market shares of 1,3 %, 1 % and 1,6 % respectively. The volume of imports originating in the United
States nearly halved between 1996 and the IP, while imports originating in Saudi Arabia doubled
and those originating in Turkey increased by 7 %, as shown in the table below.

1996

1997

1998

IP

Countries other than the 6 concerned

Quantities

83 054 t

88 994 t

79 376 t

71 186 t

Market share

10 %

8 %

6 %

5 %

cif prices

1 358 EUR/t

1 674 EUR/t

1 869 EUR/t

1 431 EUR/t

Of which United States

Quantities

40 978 t

37 109 t

30 479 t

21 983 t

Market share

5,0 %

3,4 %

2,3 %

1,6 %

cif prices

1 242 EUR/t

1 023 EUR/t

1 181 EUR/t

1 250 EUR/t

Of which Turkey

Quantities

12 013 t

19 430 t

11 939 t

12 811 t

Market share

1,5 %

1,8 %

0,9 %

0,9 %

cif prices

995 EUR/t

848 EUR/t

903 EUR/t

740 EUR/t

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1996

1997

1998

IP

Of which Saudi Arabia

Quantities

8 373 t

22 212 t

17 512 t

16 952 t

Market share

1 %

2,0 %

1,3 %

1,3 %

cif Prices

605 EUR/t

711 EUR/t

691 EUR/t

512 EUR/t

(277) The prices of imports originating in the United States and Turkey were well above those of imports
originating in the countries concerned and also above the Community industry's average selling
prices.

(278) Prices of imports originating in Saudi Arabia reached a very low level during the IP. Although their
market share was only 1,3 %, it cannot be excluded that they contributed to the injury suffered by
the Community industry.

(c) Development of Community consumption

(279) Community consumption of PET has grown quickly and is estimated to continue do so for the next

10 years at least. A contraction of the market, therefore,

is not a cause of injury.

(d) Overcapacity and exacerbated price competition on the Community market

(280) Several interested parties contended that the Community industry had misjudged the cyclical nature
of the market, thus creating an overcapacity that had depressed prices and exacerbated price
competition between Community producers. Certain parties also claimed that the Community
industry's injury was self inflicted because of an attempt by the industry to exclude Asian exporting
producers from the Community market by substantially decreasing selling prices.

(281)

In addition, certain users claimed that the Community industry had overreacted to pricing pressures
and should have known that considerations of security of supply on the part of major users in the
Community would have afforded it a substantial degree of protection.

(282) The Commission has examined these claims:

— regarding overcapacity of PET producers located in the Community market, the investigation did
not support this contention. It was found that, over the analysis period, the capacity of the
Community industry and of the other Community PET producers was approximately of the same
furthermore increases in capacity were in the same
size as the Community consumption,
proportion as increases in consumption on a medium term basis. On the other hand, a large
excess capacity existed in Asia, which was worsened by a collapse of demand in China at the
beginning of 1998 for the closely allied PET product used for the production of polyester fibres
produced in identical facilities. This meant that exporting producers in the countries concerned
had spare capacity available for the production of PET, and that they used this to sell products in
the Community at subsidised prices,

— regarding an exacerbation of price competition between Community producers, the investigation
has shown that since 1996, competition on the Community market was indeed intense between
all suppliers, including exporting producers in the countries concerned. None the less, the pricing
pressure exercised by the imports concerned increased in mid-1998 because import volumes
were growing rapidly (volumes nearly doubled in a few months) and very low price offers were
being made. Attempts made by the Community industry to resist the price decreases demanded
by users led to falling sales. The Community industry's reaction to these developments was to
follow the prices of the subsidised imports down in an effort not to lose customers,

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— as to the security of supply considerations, the Commission found that the fact that some
customers halted their purchases was a clear indication to the Community industry that users
could very well find other suppliers, provided they were offering cheaper prices,

— the contention that price decreases had been made only to try and exclude competitors from the
countries concerned from the Community market cannot be accepted since the Community
industry decreased its prices mainly in reaction to market share losses.

(283) The claim that injury was self inflicted and/or due to an overcapacity situation on the Community

market was, therefore, not retained.

(e) Prices of raw materials

(284) Several interested parties claimed that price decreases were driven by decreases in the prices of the

main raw materials.

(285) Raw material costs represent approximately 60 % of the total costs of production of PET. Purified
terephthalic acid (PTA) is the major raw material used in PET. PTA is mostly made with paraxylene
(PX), itself a distillate of oil. PX, PTA and PET, therefore, roughly follow oil price and US dollar
fluctuations, with mark up effects that depend on the supply/demand situation at a given time for
these three different products.

(286) There is a strong link between PTA prices and PET prices, and PET producers, therefore, do not have
much room to set their prices. Indeed, the investigation has shown that PET users carefully followed
PTA prices in order to be in a good position to negotiate PET prices.

(287) The Commission noted that from the second quarter 1998 to the fourth quarter 1998, there was a
severe erosion in margins vis-a-vis PTA prices. This deterioration corresponds to the time when
subsidised imports concerned doubled their already significant market share, and the Community
industry had to react by decreasing its prices to a greater extent than the decreases in PTA prices. The
contention that prices decreased only because raw material prices were decreasing has therefore not
been confirmed by the investigation.

4. Conclusion on causation

(288) The Commission found that there was strong evidence of the causal link between the subsidised
imports and the material injury. This conclusion is based, in particular, on the fact that prices on the
Community market were depressed and suppressed since the beginning of 1997, when prices of
imports originating in the countries concerned started to decrease more rapidly than prices of the
Community industry. During the third quarter of 1998, a new phase started as the subsidised
imports grew very rapidly and doubled their market share (from 6,3 % in 1997 it went to 12,3 % in
1998) while the Community industry had lost 5 percentage points in market share. With the prices
of these subsidised imports still decreasing, the Community industry was forced to further decrease
its prices to stop its market share falling; this resulted in deteriorating financial losses and a complete
halt in investment plans, despite a clearly foreseeable rapid growth in demand.

(289) The investigation has further shown that it cannot be excluded, that imports originating in Saudi
Arabia may have contributed to the injury suffered by the Community industry as well as dumped
imports originating in Indonesia and Korea. However, the investigation has shown that neither these
factors nor the other factors examined above had an impact on the situation of the Community
industry such as to break the causal
link between the subsidised imports originating in India,
Malaysia, Taiwan and Thailand and the injury suffered by the Community industry.

(290)

It is therefore provisionally concluded that the subsidised imports of India, Malaysia, Taiwan and
Thailand have caused material injury to the Community industry within the meaning of Article 8(6)
of the basic Regulation.

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G. COMMUNITY INTEREST

1. General remarks

(291) The Commission examined whether, despite the conclusion on injurious subsidisation, compelling
reasons existed that could lead to the conclusion that it is not in the Community interest to adopt
measures in this particular case. For this purpose and in accordance with Article 31 of the basic
Regulation, the impact of possible measures on all parties involved in this proceeding, and the
consequences of taking or not taking measures, were considered on the basis of all evidence
submitted.

2. The investigation

(292) The Commission sent questionnaires to importers, suppliers of raw materials, industrial users of the
product concerned, and to associations representing mineral water and soft drinks producers. In
total, 93 questionnaires were sent out, but only 17 replies were received within the time limits set.

(293) Questionnaire responses were received within the time limits set from:

Three importers

— Polytrade Gmbh (Germany),

— Global Services International (Italy),

— Helm AG (Germany).

These importers represent 35 % of the imports concerned.

Five direct suppliers of raw materials:

— BASF AG (Germany),

— BP Amoco Chemicals Ltd (UK),

— Exxon Mobil Chemical Europe Inc. (Belgium),

— INEOS plc (UK),

— Interquisa (Spain).

These suppliers represent more than 75 % of raw materials purchased by the Community industry.

Nine users of PET in three sectors (for the description of these sectors, see below):

P r e f o r m s / b o t t l e c o n v e r t e r s :

— Crown Cork and Seals — European division (France),

— Guala Closures, Polybox Group (Italy),

— IFAP SpA (Italy),

— Sodripack NV (Belgium).

M i n e r a l a n d s p r i n g w a t e r p r o d u c e r s :

— Evian — Volvic, Danone Group (France),

— Perrier Vittel M.T, Nestlé Group (France).

S o f t d r i n k s i n t e g r a t e d b o t t l e r s :

— Cott Beverages Ltd (UK),

— Schweppes Belgium (Belgium),

— Silver Spring Mineral Water Ltd (UK).

These users represent 16 % of the imports concerned and 17 % of the Community consumption of
PET.

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(294) The Commission was also contacted by five professional associations that gave some aggregated

information, and made comments on behalf of their members:

— The Union of EU Soft Drinks Associations,

— Unesem (The European Association of Mineral and Spring Water Producers),

— Aneabe (The Spanish Association of Mineral Water Producers),

— Mineracqa (The Italian Association of Mineral Water Producers),

— Chambre syndicale des eaux minerales (The French Association of Mineral Water Producers).

3. Likely effects of imposition of measures on the Community industry

increased and substantial

(295) As mentioned above, the Community industry consists of nine producers which suffered material
injury caused by subsidised imports originating in the countries concerned. This injury consists
losses due to price depression and suppression.
mainly of
Moreover, because of these losses, the Community industry has postponed investments in new plants
(the average cost of a PET plant is more than EUR 100 million) despite foreseeable growth in
demand. Since 1996, this industry has been heavily restructured and during the last two years,
because of prolonged financial losses, two of the multinationals engaged (ICI and Shell) have sold
their PET activities.

financial

(296)

It is clear that the measures proposed would benefit the Community industry which, by its
restructuring efforts, has demonstrated its ambition to maintain a presence in a sector in full
expansion, and which is totally viable, as is demonstrated by its export performance: its sales outside
the Community represented 18 % of its total sales during the IP and they developed more rapidly
than sales in the Community.

(297)

If, on the other hand, measures are not imposed, losses at the level observed in the IP are not
sustainable and the future of the Community industry, which employs 1 450 people, would be
seriously jeopardised.

(298) Although certain volatile factors, evoked by several interested parties, such as exchange rate fluctu-
ations and oil prices, can have temporary positive effects on the industry's performance (in this
industry it seems that periods of increasing prices of raw materials are favourable for increased profit
margins of PET producers), without anti-subsidy measures to remove the effects of unfair trade, the
industry has little prospect of a lasting recovery from its present poor financial situation. Further-
more, to allow the new investments necessary for the long-term viability, it is essential that the
industry is given the opportunity to improve its profits.

4. Likely effects of imposition of measures on importers

(299) For one of the cooperating importers, the product concerned represented the majority of

its
turnover. If duties were imposed on imports of PET, the importer argued that the whole company
would be endangered.

(300) For the second cooperating importer, the product concerned represented around a quarter of its

turnover. Therefore it is likely that this importer would be less affected by measures.

(301) For the third cooperating importer, the product concerned represented a very minor percentage of its
turnover. Therefore it is likely that this importer would not be seriously affected by measures.

(302) Total staff directly employed in selling the product concerned is only some 10 people for the three

cooperating companies in the Community.

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(303) As the purpose of anti-subsidy measures is only to restore fair trade and not to prohibit imports, the
Commission considers it likely that a number of clients of importers will continue to purchase PET
originating in the countries concerned. Therefore the existence of these importers seems not to be at
stake.

5. Likely effects of the imposition of measures on upstream industries

The PTA and PX producers

(304) The three cooperating producers (BP AMOCO, Interquisa, Exxon) are part of petrochemical groups
which have made huge investments in the last five years in order to respond to the growing
Community demand for these products.

(305) Total staff employed in their PTA/PX production facilities was around 700 people during the IP.

(306) The only purchaser of PTA is the polyester industry (of which the PET industry represents 60 % of
Community purchases of PTA). Community PTA producers sell more than 75 % of their production
in the Community. Therefore the situation of
the Community PTA producers is very much
dependent on the health of Community PET producers. In a situation of very low prices of PET, the
producers of PTA are also obliged to lower their prices. Indeed, during the IP, the cooperating
suppliers lowered their profit margins, because their clients were in such a difficult situation they
were afraid they would stop producing and thus consuming PTA.

(307) The cooperating PX Community producer situation is even worse because it operates in a very
competitive market and,
its profit margin was very low or negative. In 1999,
Community PX production was reduced because the level of prices was considered unacceptable.

in recent years,

(308) The imposition of measures, therefore, will benefit both these industries and allow new investments

to be made to match the growing demand.

The MEG producers

(309) The two cooperating producers (BASF, INEOS) are part of chemical groups and produce a large
range of chemical products. The staff employed in MEG production numbered about 100 people.

(310) PET production is not the only possible outlet for this product, which is widely used for other
purposes and notably in the car industry. Hence, these companies are less directly affected by the
price and demand trends of PET. The investigation has shown, however, that the market for this
product is very competitive and that profitability has deteriorated in the last two years because of the
difficulties of the Community PET industry.

Conclusion

(311) The imposition of anti-subsidy measures clearly appears to be in the interest of the upstream
industries. They would not only improve their situation but also be in a position to invest in the
coming years.

6. Likely effects of imposition of measures on downstream industries

Description of the user sectors

(312) PET is at present mostly used to produce bottles for soft drinks and mineral and spring water. Its use
to produce packages other than for drinks (solid foodstuffs or detergents) is still marginal. Bottles in
PET are produced in two steps in order to obtain enough strength: ‘preforms’ are obtained by mould
injection of PET, these preforms are then blown and transformed into bottles. Preforms can be fairly
easily transported because they are small and dense, while empty bottles are fragile and very
expensive to transport.

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(313) The water and soft drinks markets are organised differently in terms of bottling:

— mineral and spring water producers have more constraints in terms of health regulations. They
are generally obliged to have a bottling plant close to their springs, their raw materials have to
follow strict norms and, in certain countries, to be authorised by health authorities. The large
majority of preforms used by water producers are self produced, usually in workshops close to
the blowing and filling lines,

— soft drinks producers tend to locate in places convenient to minimise distribution costs,

— producers with well-known trade marks tend to buy preforms and/or blown bottles. They have a
network of certified suppliers called preforms/bottle converters. None of these producers replied
to the questionnaire or made themselves known. Hence, the Commission has not been able to
take them into account,

— smaller soft drink producers or producers of products branded by customers (especially the mass
retailing trade sector), tend to produce their own preforms and to blow their own bottles.

(314) On this basis three major groups of users of PET can be identified:

— preforms/bottle converters, that account for approximately 40 % of PET consumption in the

Community,

— mineral and spring water producers, whose share in PET consumption is around 35 %,

— soft drinks integrated bottlers, that account for around 7 % of PET consumption.

The remaining consumption of PET is used by different food and pharmaceutical packaging sectors
and by plastic sheet producers.

Preforms/bottle converters

(315) The preforms converters are the main users of PET, but the four cooperating companies represented
only some 7 % of Community consumption of PET. The imports of these companies were some
10 % of imports from the countries concerned. These imports represented more than 30 % of their
consumption of PET.

(316) Some of the major converters (Schmalbach Lubeca, Alpla and Resilux) did not cooperate in the

investigation.

(317) Total staff employed by the cooperating companies amounted to more than 400.

(318) On the basis of information available to the Commission, the amount of PET used to produce
preforms represents some 75 % of the manufacturing costs of a preform and some 70 % of the total
cost of production. It is therefore a critical element for these companies. The investigation found
that,
in most cases, the negotiation of the selling price of preforms includes a mechanism for
reflecting the variation of PET prices.

(319) However, since competition in the industry is very strong and purchases of soft drinks preforms/
bottles are concentrated in the hands of a few big buyers (the well known branded soft drink
producers), it is not clear to what extent the converters will be able to transfer the increase of PET
prices on to the prices of preforms.

(320) Users, as well as importers, argued that duties would push some multinational preform converters
and/or soft drink bottlers to move their highly standardised preforms production plants to countries
in eastern Europe in order to avoid the anti-subsidy duties. Most of the big companies in this
industry already have some plants in these countries and would seem, therefore, able to quite easily
move part of their production outside the Community. The import of preforms is free of custom
duties.

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(321) According to the information made available to the Commission, the cost of transport is not a
sufficient barrier to avoid such a relocation, for example a lorry of 0,5 preforms contains some 17
tonnes instead of 24 tonnes of PET chips; the transport cost of preforms is therefore some 30 %
higher than the transport cost of PET but the overall impact on such increases in transport prices on
costs of production is only some 2,5 %. However, competitive advantages already existed in the
Community's neighbouring countries at the time when no anti-subsidy duties were applicable
without causing relocation. This is owing to the fact that these advantages were more than
compensated by considerations of proximity, flexibility and reliability of supplies essential to the
users.

(322) On the basis of the information provided by the cooperating companies, it was concluded that the
imposition of anti-subsidy measures would have a major impact on the manufacturing cost of
converters. However, the impact on profitability of converters cannot be clearly stated. Moreover, as
the
mentioned above,
converter industry. It is therefore difficult to assess the likely effect on this industry as a whole.

the cooperating companies represent only a very small proportion of

The mineral and spring water producers

(323) The two cooperating companies in this industry represented approximately 10 % of Community
consumption of the product concerned. The imports of these companies were some 1 % of imports
from the countries concerned. These imports represented less than 4 % of their consumption of PET.

(324) Total staff employed in production using the product concerned amounted to more than 4 000 in

the two companies considered together.

(325) The two cooperating companies are the two biggest players in the French mineral water market. The
Danone and Nestle groups also own mineral water springs in other Member States but replied only
for their French branches. Therefore the cooperating companies represent a rather small part of the
Community mineral water sector, which is itself only a part of the bottled water sector. Moreover,
the cooperating companies are only involved in the production of branded mineral water and have
thus a specific cost structure.

(326) The cost of PET is the biggest component in these companies' manufacturing costs (less than a

quarter) and some 10 % of the total cost of production.

(327) Concerning low range mineral water and spring water, the associations representing these companies
pointed out that, since their general and administrative costs are very low compared to those of
branded mineral water producers, the cost of PET has a bigger impact on their total cost of
production and on profitability. Therefore, the increases in price consequent to the imposition of
anti-subsidy measures would severely affect those producers, that already operate with low margins
and would not be able to increase their selling prices because their main customers, the supermarket
chains, would refuse price increases.

(328) With regard to the low range mineral water and spring water sectors, no producers cooperated on an
individual basis. The only information provided to the Commission, by associations of water
producers, was submitted very late and has not been verified, therefore it did not allow conclusions
to be reached on the impact of measures on companies in these sectors.

(329) On the basis of the verified information provided by the cooperating companies, the Commission
concludes that the impact of the measures proposed on the mineral water producers will not be
significant, because they are very profitable and because they import only small volumes of PET.
Moreover, given their position on the market, the top range mineral water producers can probably
increase their selling prices.

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The soft drink integrated bottlers

(330) The three cooperating companies in this industry represented approximately 2 % of Community
consumption of the product concerned. The imports of these companies were some 5 % of imports
from the countries concerned. These imports represented more than 65 % of their consumption of
PET.

(331) Total staff employed in production using the product concerned amounted to some 200 people in

the three companies considered together.

(332) The cooperating companies are vertically integrated backwards and forwards i.e. they produce
preforms, convert them into bottles and fill them with soft drinks. These companies represent only a
small percentage of the total soft drinks industry and are mainly producing for distributors and low
range brands.

(333) On the basis of information available to the Commission, the PET used to produce soft drink
containers represented more than 10 % of manufacturing costs and some 8 % of the total cost of
production. It was therefore an important cost element for these companies.

(334) The soft drink integrated bottlers sold mainly to supermarket chains. Since the retail prices of low
range soft drinks have decreased in recent years, and since the large retailers involved have very
strong market power, the producers of soft drinks will face resistance to any attempt at increasing
their selling prices.

(335) The Commission considers that the imposition of measures may reduce margins in this industry as
the increase in costs resulting from the measures is unlikely to be matched by a corresponding
increase in revenue.

7. Likely effects of imposition of measures on supply of PET on the Community market

(336) Several users and importers of PET have expressed their concern about a possible shortage of PET on
the Community market in the next two years and the fact that imports will be necessary and should
not be discouraged by high duties.

(337) The Commission considered that, if there is a shortage of supply on the Community market, this will
be because the Community industry suffered injury from subsidised imports and was not in a
position to invest, despite the foreseeable growth in demand.
is therefore urgent that the
Community industry be assured of the fair competitive conditions to allow it to make the invest-
ments that have been postponed as a result of injurious subsidisation.

It

(338)

Imports at fair non-subsidised prices will, in any case, be possible, since existing overcapacities in
Asia will not be exhausted before the necessary new investments by the Community industry enter
into production.

8. Conclusion on Community interest

(339)

It is clear that the imposition of anti-subsidy measures is in the interest of both the Community
industry and its suppliers of raw materials.

(340) The imposition of measures will allow these sectors to improve profitability and to have the
possibility of making the new investments which are crucial for the long-term viability of these
capital-intensive sectors.

(341) The assessment of the effects on the other sectors concerned is much less clear, principally because
conclusions are being drawn on the basis of information provided by the cooperating companies, the
representativeness of which was estimated to be low. Although there are indications that measures
could have an impact in certain sectors, it is difficult, at this stage, to draw firm conclusions on the
effect of measures on a wider basis due to a lack of information. As such, this lack of cooperation
suggests that any negative effect for the sectors concerned is not significant.

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(342) What is clear, however is that the Community industry has suffered from injurious subsidisation
which has suppressed its prices and prevented the restoration of a healthier financial situation. If this
situation remains unchanged, losses at the levels reached during the IP will be unsustainable and the
Community industry will cease producing PET in the Community.

(343)

If the Community industry were forced to cease, or dramatically reduce, the production of PET, the
Community would become dependent on external supplies and would face stronger price fluctu-
ations in case of shortages. Such a situation would indeed be detrimental to the interest of users who
have said that they do not want to rely only on imported PET.

(344)

In view of the above, the Commission concluded that, at the provisional stage, no compelling
reasons exist not to impose provisional anti-subsidy measures in the present case.

H. NON-IMPOSITION OF DUTIES

(345)

In the light of the above findings that the country-wide weighted average subsidy margins for
imports originating in Indonesia and Korea are de minimis, it is provisionally decided not to impose
countervailing duties as regards imports originating in these countries.

I. PROVISIONAL DUTY

(346) On the basis of the conclusions on subsidisation, injury, causal link and Community interest, the

Commission considers it necessary to adopt provisional countervailing measures.

(347) 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.

(348) As the injury consists principally of price depression and the suppression of price increases necessary
to restore profitability, the removal of such injury requires that the industry should be able to
increase selling prices. To achieve this, prices of imports of the product concerned originating in
India, Malaysia, Taiwan and Thailand should be increased to a non-injurious level.

(349) To this end, the Commission determined a non injurious price based on production costs of the
Community industry (not taking into account costs of some companies of the Community industry
considered as exceptional or unduly high), together with a reasonable profit margin of 7 %, this
being considered necessary to ensure the viability of the industry and being a profit which this
industry could expect in the absence of subsidised imports. In view of the financial losses incurred by
the Community industry in the years prior to the IP, the Commission will examine, at the definitive
stage, whether this non-injurious price accurately reflects the situation in the present case, in the
in particular, of developments in exchange rates and in the prices of raw materials.
light,

(350) The non injurious price was compared with the prices of the subsidised imports used to establish
undercutting, as outlined at recital 253. Differences resulting from this comparison were then
expressed as a percentage of the total cif import value.

(351) That PET prices can fluctuate in line with fluctuations in crude oil prices, should not entail a higher
duty. It was therefore considered appropriate to impose duties in the form of a specific amount per
tonne. These amounts result from the application of the countervailing duty rate to the cif export
prices used for the calculation of the injury elimination level during the IP.

(352)

In accordance with Article 12(1) of the basic Regulation the duty rate (EUR per tonne) should
correspond to the amount of subsidy, unless the injury margin is lower. The following rates of duty
therefore apply for the cooperating producers:

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(a) India

Reliance Industries Ltd

Pearl Engineering Polymers Ltd

Elque Polyester Ltd

Futura Polymers Ltd

(b) Malaysia

MPI Polyester Industries

Hualon Corporation

(c) Taiwan

Nan Ya Plastics Corp.

Far Eastern Textile Ltd

Shinkong Synthetic Fibres Corp.

Tuntex Distinct Corp.

(d) Thailand

Thai Shingkong Ltd

EUR 63/t

EUR 31,3/t

EUR 55,9/t

EUR 84,6/t

EUR 0

EUR 19,9/t

EUR 8,4/t

EUR 0

EUR 12/t

EUR 0

EUR 49,6/t

(353)

In order to avoid granting a bonus for non-cooperation, it was considered appropriate to establish
the duty rate for the non-cooperating companies as the highest rate established for any cooperating
exporting producers, i.e. EUR 84,6/t for Indian producers, EUR 19,7/t for Malaysian producers,
EUR 11,2/t for Taiwanese producers and EUR 49,9/t for Thai producers.

(354) 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
countrywide 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’.

(355) Any claim requesting the application of these individual company countervailing duty rates (e.g.
following a change in the name of the entity or following the setting up of new production or sales
entities) should be addressed to the Commission (1) forthwith with all relevant information,
in
particular any modification in the company's activities linked to production, domestic and export
sales associated with for example 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.

J. FINAL PROVISION

(356)

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

(1) European Commission

Directorate-General for Trade
Directorate E
DM 24 — 5/77
Rue de la Loi/Wetstraat 200
B-1049 Bruxelles/Brussel

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HAS ADOPTED THIS REGULATION:

Article 1

A provisional countervailing duty is hereby imposed on imports of polyethylene terephthalate with a
1.
coefficient of viscosity of 78 ml/g or higher, according to DIN (Deutsche Industrienorm) 53728, classified
under CN code 3907 60 20 and CN code ex 3907 60 80 (TARIC code 3907 60 80 10) and originating in
India, Malaysia, Taiwan and Thailand.

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

2.
follows:

Producers in India

Duty (EUR per tonne)

TARIC additional code

Reliance Industries Ltd.

Pearl Engineering Polymers Ltd.

Elque Polyester Ltd.

Futura Polymers Ltd.

All other Indian companies

6,3

31,3

55,9

84,6

84,6

A181

A182

A183

A184

A999

Producers in Malaysia

Duty (EUR per tonne)

TARIC additional code

MPI Polyester Industries

Hualon Corporation

All other Malaysian companies

0

19,9

19,9

A185

A186

A999

Producers in Taiwan

Duty (EUR per tonne)

TARIC additional code

Nan Ya Plastics Corp., Taipei

Far Eastern Textile Ltd., Taipei

Shinkong Synthetics Fibres Corp., Taipei

Tuntex Distinct Corp., Hsichih, Taipei County

All other Taiwanese companies

8,4

0

12

0

11,2

A187

A188

A189

A198

A999

Producers in Thailand

Duty (EUR per tonne)

TARIC additional code

Thai Shingkong Ltd.

All other Thai companies

49,6

49,6

A190

A999

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In cases where goods have been damaged before entry into free circulation and, therefore, the price
3.
actually paid or payable is apportioned for the determination of the customs value pursuant to Article 145
of Commission Regulation (EEC) No 2454/93 (1), the amount of anti-dumping duty, calculated on the basis
of the fixed amounts set out above, shall be reduced by a percentage which corresponds to the appor-
tioning of the price actually paid or payable.

4.

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

5.
subject to the provision of a security, equivalent to the amount of the provisional duty.

Article 2

Without prejudice to Article 30 of Regulation (EC) No 2026/97, the parties concerned may make known
their views in writing and apply to be heard orally by the Commission within 10 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
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 its publication in the Official Journal 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, 3 August 2000.

For the Commission

Pascal LAMY

Member of the Commission

(1) OJ L 253, 11.10.1993, p. 1.