Proposal for a Council Regulation amending Council Regulation (EC) No 5/96 imposing definitive anti-dumping duties on imports of microwave ovens originating in the People's Republic of China, the Republic of Korea, Malaysia and Thailand
Date: 2000-09-06
Institutions: European Commission
Subjects: South Korea, anti-dumping duty, furnace, import, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 06.09.2000
COM(2000) 498 final

Proposal for a

COUNCIL REGULATION

amending Council Regulation (EC) No 5/96 imposing definitive anti-dumping duties on
imports of microwave ovens originating in the People's Republic of China, the Republic
of Korea, Malaysia and Thailand

(presented by the Commission)

1

2.

3.

4.

5.

6.

EXPLANATORY MEMORANDUM

The present interim review investigation concerning microwave ovens originating in
the Republic of Korea was initiated under Article 11(3) of the Basic Anti-dumping
Regulation following a request by a Korean producing exporter, LG Electronics Inc.

The request was limited in scope to an examination of whether the continued
imposition of the duty at its current level was necessary to offset dumping for the
company concerned (accordingly, no injury or Community interest investigation was
carried out).

Following publication of the Notice announcing initiation of the review in the
Official Journal, a second Korean exporting producer, Daewoo Electronics Co. Ltd,
made a satisfactory request to be admitted to the review proceeding.

It was found that neither company was dumping in the review investigation period
(April 1998 to March 1999).

In conjunction with findings concerning the likelihood of recurrence of dumping
(based on production and capacity in Korea, profitability and dumping on non-EU
markets and production in the Community of the two companies concerned), it is
proposed to reduce the anti-dumping duties currently in force against both companies
to the dumping margin found for each of them during the current investigation
period, namely 0,0%.

The dumping margins currently in force for all other Korean exporters, ranging from
3,3% to 24,4%, remain unchanged.

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Proposal for a

COUNCIL REGULATION

amending Council Regulation (EC) No 5/96 imposing definitive anti-dumping duties on
imports of microwave ovens originating in the People's Republic of China, the Republic
of Korea, Malaysia and Thailand

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection
against dumped imports from countries not members of the European Community1, and in
particular Article 11 (3) thereof,

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

Whereas:

1.

(1)

(2)

2.

(3)

1

2

3

4

5

A. PROCEDURE

Previous procedure

Following an investigation initiated in December 1993 (the "original investigation")
under Article 7 of Council Regulation (EC) No 2423/19882, the Council imposed
definitive anti-dumping duties in January 1996 (Regulation (EC) No 5/963) on imports
of microwave ovens ("MWOs") originating, inter alia, in the Republic of Korea. The
duties applied to all Korean exporting producers and ranged from 3.3% to 24.4%.

In December 1996, the Commission initiated an investigation into whether these duties
had been absorbed by the exporting producers4. This review was terminated, however,
in March 1998 without changing the anti-dumping measures in force (Commission
Decision 98/225/EC5).

Request for a review

A request for a partial interim review of the anti-dumping duty in force against it was
made in February 1999 by the Korean exporting producer, LG Electronics Inc. The
request was limited in scope to an examination of whether the continued imposition of

OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation (EC) No 905/98 (OJ L 128,
30.4.1998, p. 18).
OJ L 209, 2.8.1988, p.1
OJ L 2, 4.1.1996, p.1
OJ C19, 18.1.1997, p.3
OJ L 85, 20.3.1998, p.29

3

(4)

3.

(5)

(6)

(7)

(8)

(9)

the duty at
concerned.

its current

level was necessary to offset dumping for the company

The company alleged that the circumstances had changed significantly in its particular
case subsequent to the imposition of the original measure due to, inter alia, reductions
in its manufacturing costs leading to lower normal values and that this had led to a
situation where the duty was no longer necessary to offset dumping. The company also
claimed that the lower costs were the result of structural changes of a lasting nature
and that there would be no likelihood of dumping recurring in the future.

Investigation

Having determined, after consulting the Advisory Committee, that the evidence was
sufficient, the Commission initiated a partial interim review6 ("the review"), pursuant
to Article 11 (3) of Regulation (EC) No 384/96 (the "Basic Regulation").

This notice also allowed other exporting producers in Korea to request a review of
their rates of anti-dumping duty, provided that they could submit within the deadline
specified therein, sufficient evidence that
the continued imposition of the duty
imposed against them at the current level was no longer necessary to offset dumping.

Only one Korean exporting producer, Daewoo Electronics Co. Ltd, made such a
request within the deadline and submitted the prima facie evidence required.
Accordingly, this company was admitted to the review.

The Commission also officially advised the representative association of the producers
in the Community of the initiation of the review and the representatives of the
exporting country. All parties directly concerned were given the opportunity to make
their views known in writing and to request a hearing within the time limit set in the
notice of initiation.

In order to obtain the information deemed necessary for its investigation and for the
purposes of a determination of the likelihood of the continuation or recurrence of
dumping, the Commission sent questionnaires to the two Korean exporting producers
concerned and, where appropriate, to their subsidiaries in the Community.

(10) Visits to verify the replies to the questionnaires were carried out at the premises of the

following companies:

Producers in the Republic of Korea:

- LG Electronics Inc, Seoul (“LGE”)

- Daewoo Electronics Co. Ltd, Seoul (“DWE”)

Importers in the Community:

- Daewoo Electronics Benelux b.v, Dordrecht, Netherlands

- Daewoo Electronics S.A, Paris, France

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OJ C167, 15.6.1999, p.5

4

- Daewoo Electronics Sales UK Ltd, Wokingham, UK

(11)

The investigation concerning whether dumping had continued following the
imposition of the definitive duties in the original
investigation was based on
information pertaining to the period from 1 April 1998 to 31 March 1999 (the "review
investigation period”).

B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT

1.

Product under consideration

(12)

The product under consideration in this review is the same as in the two previous
investigations, namely microwave ovens ("MWOs"), currently classifiable under CN
code 8516 50 00.

2.

Like product

(13) As in the two previous investigations, it was established that MWOs produced in
Korea and sold domestically had sufficiently similar characteristics and functions to
those exported to the Community for them to be considered as like products within the
meaning of Article 1 (4) of the Basic Regulation.

1.

Preliminary remark

C.

DUMPING

(14)

(15)

The purpose of the review is to determine whether or not the continued imposition of
the anti-dumping duties against each exporting producer is necessary to offset
dumping (cf. Article 11 (3) of the Basic Regulation).

This is done by determining whether either company had continued to dump after the
adoption of the anti-dumping measures in the original investigation and whether there
would be a likelihood of the dumping continuing or recurring if the anti-dumping
duties were to be removed or varied.

(16) Accordingly, an examination was first made as to whether the two Korean exporting

producers were dumping during the review investigation period.

2.

Normal value

(17)

In order to establish normal value, it was first determined whether the total domestic
sales of MWOs of each exporting producer concerned were representative in terms of
volume (i.e. whether they accounted for 5% or more of the total sales volume of
MWOs exported by each producer to the Community - cf. Article 2 (2) of the Basic
Regulation). In this regard, it was found that both exporting producers had sold
substantially more MWOs in Korea than to the Community.

(18)

It was then determined whether the total domestic sales of each MWO model which
was identical or equivalent to the model exported to the Community, constituted 5% or
more of the export sales volume of that model.

(19) As one exporting producer was found to have made sufficient domestic sales of
models equivalent to those exported to meet the 5% test, it was then established

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whether these sales had also been made in the ordinary course of trade (cf. Article 2
(4) of the Basic Regulation). It was found that the volume of domestic sales above unit
production cost represented at least 80% of the sales of each model, therefore normal
value was established on the basis of the weighted average price actually paid for all
domestic sales of the model concerned.

The other exporting producer was found to have made no domestic sales of models
which were identical or equivalent to those models exported to the Community.
Consideration was therefore given to establishing normal value for this company on
the domestic selling prices of the other cooperating producer in Korea (cf. Article 2 (1)
of the Basic Regulation). However, given the often significant differences in the
physical and technical characteristics of the MWOs of the two exporting producers
and the need to make substantial adjustments to prices to take account of such
differences, this approach was considered to be neither reasonable nor practical.

Instead, normal value was constructed on the basis of the cost of manufacturing
incurred by the second producer for each of the exported models in question, plus a
reasonable amount for selling, general and administrative costs ("SG&A costs") and
profit (cf. Articles 2 (3), 2 (5) and 2 (6) of the Basic Regulation).

The SG&A costs added to the cost of manufacturing of the exported models concerned
were based on such costs incurred by the exporting producer with regard to all its sales
of MWOs on the Korean market which, as mentioned above, were found to be
representative for this purpose.

(20)

(21)

(22)

(23) As concerns the profit margin used, this was calculated on the basis of the weighted
average profit margin of the company for those MWO models sold in Korea in the
ordinary course of trade in sufficient quantities.

3.

Export price

(24)

importers in the
In cases where export sales were made directly to independent
Community, export prices were determined on the basis of the prices paid or payable
by these unrelated importers (cf. Article 2 (8) of the Basic Regulation).

(25) However, where exports were made to importers in the Community which were
related to the exporting producer in Korea,
the prices charged were considered
unreliable (cf. Article 2 (9) of the Basic Regulation). Instead, export prices were
constructed on the basis of the price at which the product was resold by the related
importer to an independent buyer, adjusted for all costs incurred between importation
and resale (including customs duties and anti-dumping duties paid), and a reasonable
margin for profit.

(26)

In the absence of any new information that profitability in this business sector had
changed, where export prices were constructed, it was considered reasonable to retain
the profit margin of 5% used in the two previous investigations.

4.

Comparison

(27)

For the purpose of ensuring a fair comparison, and in accordance with Article 2 (10) of
the Basic Regulation, adjustments were made as appropriate for each exporting
producer to allow for differences claimed in respect of physical characteristics, import
charges, discounts, rebates, level of trade, transport and other related costs, packing,

6

credit and after-sales costs, commissions and currency conversions costs, which were
found to affect prices and price comparability.

(28)

The ex-factory normal values established by model for each company were compared
at ex-factory level to the export prices established by model of each company on a
weighted average to weighted average basis (cf. Article 2 (11) of the Basic
Regulation).

5.

Dumping margin

(29)

The comparison between the normal values and the export prices, expressed as a
percentage of the CIF, free-at Community-frontier price, showed the following
dumping margins:

- LG Electronics Inc 0,0%

- Daewoo Electronics Co. Ltd

0,0%

D. LIKELIHOOD OF RECURRENCE OF DUMPING

1.

Introductory remark

(30) Although it was established that neither exporting producer involved in the review
investigation was dumping during the review investigation period, as mentioned
previously, a reasoned forecast also had to be made as to whether dumping would
recur if the anti-dumping duties imposed against either of these companies were to be
removed or varied.

(31)

In this regard, the question of spare production capacity in Korea was addressed, as
well as the MWO sales trends of the two companies in Korea, the Community and
export markets other than the Community. In addition, an examination of whether
such sales to non-Community markets were non-profitable or dumped was carried out,
together with an analysis of the possible incentives for the two exporting producers to
dump again on the Community market.

2.

Capacity utilisation

(32) Analysis of data provided, together with information received and verified during the
the MWO production facilities in Korea of the two
on-spot visits, showed that
exporting producers concerned were operating almost to their maximum installed
capacities, with little scope for extra production.

3.

Sales

(a) Volume

(33)

The investigation also established that between 1997 and the review investigation
period, LGE and DWE both suffered declining sales volumes in Korea, apparently due
to oversupply and falling demand on that market.

(34) As concerns exports, LGE reduced its sales volumes to the Community following the
imposition of the provisional and definitive anti-dumping measures. The company
therefore needed to find alternative markets for its Korean-made MWOs and in this

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regard it was successful, as its export sales volumes to countries outside the
Community increased almost to the same levels as those previously achieved in Korea
and the Community.

(35) With regard to DWE, it was noticeable that the company's exports to non-Community
markets declined slightly between 1997 and the review investigation period, however,
unlike LGE, it increased its exports to the Community following the imposition of
provisional anti-dumping duties to a point where such sales almost entirely offset the
company's reduced sales volumes in Korea and export markets outside the
Community.

(b) Prices

(36)

(37)

(38)

In order to assess if there would be any incentive for the companies to switch their
exports from non-Community countries to the Community at dumped prices if the
anti-dumping duties were to be removed or varied, a price analysis was also made in
respect of a representative sample of MWO models manufactured in Korea and
exported by each company to such markets.

For almost all the models selected it was established that the average sales price to
independent customers in countries outside the Community was above the cost of
production of the particular model concerned. Taken overall,
the level of profit
achieved on these MWO models was found to be significant.

In addition, using the general methodology outlined above concerning whether or not
exports to the Community were dumped in the review investigation period, an
examination was also carried out as to whether sales to non-Community destinations
were at dumped levels. Significantly, such an analysis also failed to show the presence
of dumping on these other markets by either of the two companies concerned.

4.

Conclusion concerning likelihood of recurrence of dumping

(a) LG Electronics Inc

(39) With regard to its reasons for requesting the review, LGE has not hidden the fact that
it would export higher quantities of MWOs to the Community if the current anti-
dumping duty were to be reduced. The question, therefore, which has had to be
addressed is whether such increased exports would continue to be at non-dumped
levels.

(40)

(41)

In making such an assessment, it
is necessary to take into account whether the
company will make use of its limited spare production capacity in Korea to source
such sales and/or divert production and sales of MWOs currently exported to non-
Community countries.

In this regard, the investigation showed that LGE's Korean factory is now geared
towards producing so called "high-end models", which are more sophisticated and
contain more technical features than cheaper, higher volume "low-end" MWOs (which
it also used to produce in Korea in the original investigation period). An examination
of the dumping calculations in the original investigation was carried out within the
framework of the current investigation revealed that LGE's high-end MWO models
with high export prices tended either not
to be dumped when exported to the
Community, or dumped at much lower levels than the low-end models.

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(42)

(43)

This trend continued into the review investigation period where the findings of the
investigation , as determined above, showed that the high-end MWO models produced
by LGE were not being sold on the Community market at dumped price levels.

In addition, if the company were to increase production in Korea, it is considered that
further economies of scale could be achieved, leading to lower unit production costs,
with even less likelihood of dumping recurring in the future.

(44) With regard to whether LGE has any incentive to switch exports of Korean-made
MWOs from other third countries to the Community if the anti-dumping duty were
removed or varied, it should be recalled that such exports to these countries were both
profitable, and at non-dumped levels. Although the possibility exists that the company
might divert such MWOs to the Community, in order for them to be dumped, LGE
would have to reduce their prices significantly and, therefore, their profits, a course of
action for which there seems little economic justification.

(45)

In addition, the fact that LGE is a major producer of MWOs in the Community must
also be taken into account when assessing the likelihood of the company dumping
again in the Community. Given that
its production in the Community currently
accounts for between 10-20% of all MWOs sold in the Community with EU origin, it
is considered that LGE will be less inclined in the future to destabilise prevailing
prices or otherwise cause injury to the Community market, in which it is now a major
player, by exporting from Korea at low prices.

(46)

In view of all the above, it is therefore considered unlikely that the company's future
exports to the Community would be at dumped prices.

(b) Daewoo Electronics Co. Ltd

(47) As with LGE, the question which the Commission has had to consider is whether
DWE's sales volumes of MWOs at current, or even increased levels, would continue to
be at non-dumped price levels if the current anti-dumping duty were to be removed or
varied.

(48)

Significantly, the investigation showed that the company expanded its export sales to
the Community at profitable, non-dumped price levels, at a time when it had an anti-
dumping duty in force against it. In addition, it maintained high capacity utilisation in
Korea and also made profitable, non-dumped export sales on non-EU markets.

(49) As also concerns the question of whether or not there would be a likelihood of
recurrence of dumping by DWE in the future if the anti-dumping duty currently in
force against it were to be removed or varied, this company is also among the largest
producers of MWOs in the Community with production and sales volume levels in the
Community of MWOs with EU origin of a similar magnitude to LGE.

(50)

In conjunction with the apparent lack of economic incentives to revert to its previous
dumping practises, it is considered that DWE will, like LGE, be less inclined in the
future to dump from its Korean operation and destabilise or otherwise cause injury to
the Community market, in which it has a major economic presence.

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E.

INJURY AND COMMUNITY INTEREST

(51) Given that the original request for a review by LGE (and subsequent application to
participate in the review by DWE) in the current investigation was limited to an
examination and possible revision of the dumping margin applicable to each company
under Article 11 (3) of the Basic Regulation, it was not necessary to carry out an
examination of injury or Community interest.

F.

CONCLUSION

(52) On the basis of the above facts and considerations, and in view of the information
available at the present time, it is considered reasonable to conclude that dumping by
LG Electronics Inc or Daewoo Electronics Co. Ltd is unlikely to recur if the anti-
dumping duties currently imposed against the two companies were to be reduced to
the level of the dumping margins established for each of them in the present review,
namely 0,0%. In any event, the two exporting producers may,
in the future, be
subjected to further review, if such a course of action is considered necessary.

(53) All parties concerned were informed of the essential facts and considerations on the
basis of which the modification to the existing duties for the two exporting producers
would be based. No submissions were made, however, by any of these parties.

(54)

This review does not affect the date on which Regulation (EC) 5/96 will expire (cf.
Article 11 (2) of the Basic Regulation), nor the rights of importers to request
reimbursement of anti-dumping duties collected (cf. Article 11 (8) of the Basic
Regulation),

HAS ADOPTED THIS REGULATION:

The table in Article 1 (2) of Regulation (EC) No 5/96 shall, with regard to the Republic of
Korea, be replaced by the following:

Article 1

Country

Products manufactured by

Republic of Korea

- Daewoo Electronics Co. Ltd

- LG Electronics Inc.

- Korea Nishin Co. Ltd

- Samsung Electronics Co., Ltd

- other companies

Rate of
duty
(%)

0,0

0,0

24,4

3,3

24,4

Taric additional code

8829

8830

8831

8832

8833

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

Article 2

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

Done at Brussels,

For the Council
The President

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