Proposal for a Council Regulation imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of styrene-butadiene-styrene thermoplastic rubbers originating in Taiwan
Date: 2000-09-11
Institutions: European Commission
Subjects: Taiwan, anti-dumping duty, competition law, import policy, rubber industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 11.09.2000
COM(2000) 544 final

Proposal for a

COUNCIL REGULATION

imposing a definitive countervailing duty and definitively collecting the provisional
countervailing duty imposed on imports of styrene-butadiene-styrene thermoplastic
rubbers originating in Taiwan

(presented by the Commission)

1.

2.

3.

4.

EXPLANATORY MEMORANDUM

On 26 August 1999, the Commission opened an anti-subsidy proceeding concerning
imports of styrene-butadiene-styrene thermoplastic rubbers (SBS) originating in
Taiwan.

On 24 May 2000, the Commission, by Regulation (EC) No 1092/2000, imposed a
provisional countervailing duty on imports of SBS originating in that country.

The attached proposal for a Council Regulation is based on the definitive findings on
subsidy, injury, causation and Community interest, which confirmed the necessity to
impose definitive countervailing measures.

is,

therefore, proposed that

It
the attached proposal for a
the Council adopt
Regulation, which should be published in the Official Journal of the European
Communities not later than 25 September 2000.

2

Proposal for a

COUNCIL REGULATION

imposing a definitive countervailing duty and definitively collecting the provisional
countervailing duty imposed on imports of styrene-butadiene-styrene thermoplastic
rubbers originating in Taiwan

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection
against subsidised imports from countries not members of the European Community1, and in
particular Articles 14 and 15 thereof,

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

Whereas:

A.

PROVISIONAL MEASURES

(1)

(2)

(3)

By Commission Regulation (EC) No 1092/20002 (hereinafter referred to as "the
provisional duty Regulation") provisional countervailing duties were imposed on
imports into the Community of styrene-butadiene-styrene thermoplastic rubber
(hereinafter referred to as "SBS") falling within CN codes ex 4002 19 00 and ex 4002
99 and originating in Taiwan.

As a result of a parallel anti-dumping investigation, provisional anti-dumping duties
were imposed under Commission Regulation (EC) No 1091/20003 on imports into the
Community of SBS originating in Taiwan.

B.

SUBSEQUENT PROCEDURE

Subsequent to the disclosure of the essential facts and considerations on the basis of
which it was decided to impose provisional measures, several
interested parties
submitted comments in writing. In accordance with the provisions of Article 11(5) of
Council Regulation (EC) No 2026/97 (hereinafter
referred to as the ‘basic
interested parties who requested a hearing were granted an
Regulation’), all
opportunity to be heard by the Commission.

1

2

3

OJ L 288, 21.10.1997, p.1.
OJ L 124, 25.5.2000, p. 26.
OJ L 124, 25.5.2000, p. 12

3

(4)

(5)

(6)

(7)

(8)

(9)

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

All parties were informed of the essential facts and considerations on the basis of
which it is intended to recommend the imposition of definitive countervailing duties
on imports of SBS originating in Taiwan and the definitive collection of amounts
secured by way of provisional duties on these imports.

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

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

Having reviewed the provisional findings on the basis of the information gathered
since then,
in the provisional
Regulation should be hereby confirmed.

the main findings as set out

is concluded that

it

C.

PRODUCT CONCERNED AND LIKE PRODUCT

The product concerned is styrene-butadiene-styrene thermoplastic rubber, which is
currently classifiable within CN codes ex 4002 19 00 and ex 4002 99.

One Community importer claimed that SBS imported from Taiwan has a different
fluidity and resistance than SBS produced in the Community. However,
the
Commission investigation revealed that producers in Taiwan produce different types
of SBS with exactly the same composition as those types produced in the Community.
The investigation also showed that, although the quality of imports of SBS from
Taiwan may have been lower for one company during the years 1995 and 1996 when
this company started its production of SBS, the quality quickly attained a level
the
comparable to the quality of SBS produced in the Community. Finally,
investigation showed that Community users do not make any quality differentiation
between SBS from Taiwan and from the Community. The Commission concluded that
SBS imported from Taiwan and SBS produced in the Community share the same
characteristics and the same level of quality.

(10) Another Community importer claimed that dry and oil-extended SBS should be
considered as two different products, arguing that dry and oil-extended SBS are used
by different industries. However, different producers and users of SBS confirmed to
the Commission that many Community users, especially in the footwear industry, do
not differentiate dry and oil-extended SBS. It is therefore concluded that the markets
of dry and oil-extended SBS cannot be distinguished.

(11)

The same company also argued that dry and oil-extended SBS are close to other types
of products, such as SIS, which are also produced by the Community producers of
SBS. The company claimed that there is no justification for distinguishing SBS from
these other products. However, the investigation showed that dry and oil-extended
SBS have exactly the same physical composition of butadiene and styrene, the only
difference being the addition of oil at the end of the production process. This physical
composition clearly distinguishes SBS from other products such as SIS (styrene-
isoprene-styrene). It is therefore concluded that dry and oil-extended SBS should be

4

considered as one distinct product for the purpose of this investigation within the
meaning of Article 1(4) of the basic Regulation.

(12) As no other arguments were presented, the findings set out in recitals 15 to 18 of the

provisional duty Regulation are hereby confirmed.

D.

SUBSIDIES

(13)

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

I.

GENERAL ISSUES

1.

Calculation of prevailing commercial interest rate

(14)

(15)

(16)

(17)

It had been provisionally decided to apply a general interest rate of 9% for the purpose
of this investigation. This rate was determined on the basis of the information obtained
during the investigation which was considered appropriate for this purpose. The
Government of Taiwan (GOT) challenged the reliability of this rate.

In view of this claim, the generally applicable interest rate has been recalculated by the
Commission. The relevant benchmark interest rate is set at 7.99% and has been
obtained by taking the average commercial
rates charged during the
investigation period by 8 major domestic banks in Taiwan. These interest rates are
publicly available and are part of the monthly financial statistics published by the
Economic Research Department of the Central Bank of the Republic of China.

interest

2.

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

The GOT argued that the methodology whereby interest is added to the face value of
the subsidy cannot be applied to the alleged subsidisation amounts on tax credits since
the tax credits, which the companies have claimed, are only utilised in the annual tax
return which is made by 31st March of the following year. The GOT claimed therefore
that no benefit is conferred on them until this date.

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

II.

INDIVIDUAL SCHEMES

1.

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

(18)

These schemes were described in recitals 32 to 41 of the provisional duty Regulation.
They are based on Article 21(1) of the Statute for Upgrading Industries (hereinafter
referred to as SUI).

5

(19)

The GOT claimed that these loans are generally available to almost all Taiwanese
companies and therefore they are not specific and are accordingly not countervailable.
It is claimed that eligibility is not limited to certain enterprises; that eligibility for the
programme is objective.

(20) As regards these claims, it was verified that the Taiwanese authorities limit access to
“investment in important enterprises or projects relating to industrial upgrading or
improvement of industrial structure” which are “in line with the government industrial
policy for assisting the sound development of industries” (Article 21 of the SUI). The
provisions of this Article cannot be considered objective since the criteria are not
neutral, economic in nature and horizontal in application because it
is known in
advance that certain enterprises are more likely than others to be in a position to
benefit from these loans just by reason of the type of business sector they are in.
Therefore, benefits from this scheme will inevitably be more relevant to some sectors
than to others. Thus, the above claim is rejected.

(21)

(22)

(23)

(24)

(25)

In conclusion, this scheme is considered specific because it
is limited to certain
enterprises within the meaning of Article 3(2)(a) of the Basic Regulation. The
provisional findings as described in recital 37 of the provisional duty Regulation are
therefore confirmed.

Calculation of the subsidy amount

The benefits to the exporting producers have been calculated as explained in recitals
38 to 40 of the provisional duty Regulation.

The benefits obtained by the two companies in the provisional duty Regulation were
0.07%. This is now reduced to 0.06% for Chi Mei due to the change in the interest rate
applied.

2.

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

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

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

(26)

The GOT also claimed that this scheme, which is described in recitals 44 to 54 of the
provisional duty Regulation, is treated as a regular part of the domestic Customs
schedule and even if the Customs programme were a subsidy, it is not countervailable
under Article 3(2)(a) of the basic Regulation.

6

(27)

(28)

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

The provisions of the Additional Notes of the Customs Code, are considered not to be
economic in nature and horizontal in application of Article 3(2)(b) of the basic
Regulation since the use of this scheme is limited only to certain enterprises. In order
to benefit
from this scheme, enterprises must be incorporated and qualified
manufacturers or technical service industries, who will use this scheme to import
machinery, equipment and instruments for prevention of air pollution, water
contamination, noise or vibration, or for environmental inspection and test or wastage
disposal, research and experiment or for examination and analysis under the headings
of the specific Chapters of the Customs Code.

(29)

The above claims are rejected and the provisional findings, as described in recital 52
of the provisional duty Regulation, confirmed.

Calculation of the subsidy amount

(30)

(31)

(32)

(33)

(34)

(35)

(36)

The benefits to the exporting producers have been calculated as explained in recital 53
of the provisional duty Regulation.

The benefits obtained by the two exporting companies were 0.05% to 0.04%
respectively.

3.

Import duty exemption: imports of raw material

This alleged countervailable subsidy scheme, which is described in recitals 55 to 60 of
the provisional duty Regulation has as its legal basis Additional note 6 of Chapter 29
of the Customs Code.

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

The GOT claimed that this scheme is treated as a regular part of the domestic Customs
schedule and even if the Customs programme were a subsidy, it is not countervailable
under Article 3(2)(a) of the basic Regulation.

It was claimed that such import duty exemptions for imports of raw materials not
produced or sufficiently available on the local market are not in fact limited to certain
enterprises, because the criteria for allowing such exemptions are objective and
neutral.

This scheme is explicitly limited to given manufacturers, which are subject to the
factory administration rules, for the importation of specifically listed raw materials, in
this case chemicals, which are exclusively used in the manufacturing of plastics,

7

artificial fibre, rubber and petrochemical intermediates by chemical reaction, and
provided that, in addition, such chemicals are not yet produced or sufficiently supplied
in Taiwan. As a result, the Commission finds that this scheme is explicitly limited to
certain enterprises which comply with the conditions contained in the provisions of the
specific Additional Note of the Customs Code. Such conditions are not considered to
be neutral or economic in nature and horizontal in application.

(37) One exporter pointed out that it would appear that all calculations have been made on
the company level, except for the import duty exemption for raw materials; the
company therefore argued that the level of subsidy also should be calculated at the
company level.

(38)

(39)

In reply to this argument it should be clear that if the benefit of a subsidy is limited to
a particular product, the denominator for allocation of subsidy amount should reflect
only sales (or exports) of that product. If this is not the case, the denominator should
be the recipient's total sales (or exports).

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

(40)

The provisional findings as described in recital 60 of the provisional duty Regulation
are therefore confirmed.

Calculation of the amount of the subsidy

(41)

(42)

The benefits to the exporting producers have been calculated as explained in recital 62
of the provisional duty Regulation.

The benefits obtained by the two exporting companies concerned range from 0.61% to
0.97%.

4.

Tax credits and tax exemptions

(43)

Since no comments were received regarding these schemes, the conclusions of recitals
22 to 31 of the provisional duty Regulation are hereby confirmed.

5.

Amount of countervailable subsidies

8

(44)

The following domestic subsidy rates
established:

for

the co-operating companies were

Chi Mei
Corporation

Lee Chang Yung
Chemical Industry
Corporation

Tax credits and tax exemptions

Loans at preferential
rates

interest

Import duty exemption

Total amount of subsidy

0,42%

0,06%

1,02%

1,50%

0,32%

0,07%

0,65%

1,04%

E.

INJURY

1.

Definition of the Community industry

(45)

Since no comments were received regarding the definition of the Community industry,
the conclusions of recital 67 of the provisional duty Regulation are hereby confirmed.

2.

Consumption in the Community

(46)

Since no comments were received on consumption in the Community, its assessment
as indicated in recital 68 of the provisional duty Regulation is hereby confirmed.

3.

a)

Imports of SBS from Taiwan to the Community

Volume of imports, market share, and average import price

(47)

Since no comments were received concerning the volume of imports from Taiwan in
the Community, the market share, and the average price of imports, the assessments
indicated in recitals 69 to 72 of the provisional duty Regulation are hereby confirmed.

b)

Price undercutting

(48)

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

(49) As mentioned in recital 9 above, some comments were received concerning the
comparability of different product types but it was found that SBS imported from
Taiwan and SBS produced in the Community share the same characteristics.

(50)

These comments did not affect the conclusions of the provisional Regulation, which
led to an average price-undercutting margin, expressed as a percentage of the
Community industry's average selling prices, of 12,3%.

9

4.

Economic situation of the Community industry

(51) One Community importer pointed out that stocks and profitability have not been
calculated for 1995. As stated in recitals 81 and 82 of the provisional duty Regulation,
the exact figures of stocks and profitability could not be obtained accurately because
of changes of accounting systems in one company and changes of structure in an other
company. In any event, the investigation showed that the profitability was higher in
1995 than in 1996. This reinforces the injury determination.

(52)

Since no other comments were received regarding the figures for production, capacity,
sales volume, sales price, market share, stocks, profitability,
investments and
employment of the Community industry, the conclusions of recitals 76 to 84 of the
provisional duty Regulation are hereby confirmed.

(53) On the basis of the above it was concluded that the Community industry is suffering

material injury as set out in recital 90 of the provisional duty Regulation.

F.

CAUSATION

1.

Effect of the subsidised imports

(54)

The Government of Taiwan (GOT) and one Community importer claimed that the
high level of market share of the Community industry (89% during the investigation
period) showed that the Community industry could not suffer injury caused by imports
from Taiwan, with a much smaller market share (6,1%). In the present case it has been
determined that the imports from Taiwan, with a strong pressure on prices on a
competitive and transparent market (12,3% undercutting during the investigation
period), represented a considerable pressure on the Community industry. In order to
maintain its market share, the Community industry had to follow the downward price
trend (-47% price reduction from 1995 to the investigation period). As a result, the
Community industry suffered heavy losses (profitability shifted from +14,9% to -9,8%
from 1996 to the investigation period). Finally, it is considered that the high market
share of the overall Community industry did not protect it from the unfair subsidized
competition of Taiwan, and that the price pressure due to Taiwanese imports is a
major cause of the injury suffered by this industry.

2.

Other factors

(55)

The GOT claimed that the increased investments made by Community producers has
created a stronger competition amongst those producers and resulted in injury caused
by such competitive forces. However, the investigation revealed that investments, as
stated in recital 83 of the provisional duty Regulation, have fluctuated since 1995 and
do not show a upward trend as claimed by the GOT. The investments remained at a
rather low level, which would correspond to normal upgrading of machinery. The
most important investments were made by the producers prior to 1995 at the time they
were establishing their production units.

(56)

The GOT also claimed that the injury suffered by the Community industry could be
caused by an increase in the prices of raw materials. However, the prices of raw
materials, as stated in recital 108 of the provisional duty Regulation, have been
fluctuating since 1995 and do not show any particular trend. It is more likely that their

10

variation is cyclical, and therefore they cannot reasonably explain the constant
depreciation of SBS prices since 1995.

(57) One Community importer argued that the injury suffered by the Community industry
could be caused by an increase of costs of production and selling and general
administration costs. However,
the investigation revealed that, while these costs
remained roughly at the same level over the period 1995-1999, the Community
producers sales value decreased dramatically (by 39%), due to the price decrease.

3.

Conclusion

(58) Given that no other arguments were received regarding the cause of the injury suffered
by the Community industry, the conclusion that imports of SBS from Taiwan have
caused injury to the Community industry, as stated in recitals 110 and 111 of the
provisional duty Regulation, is hereby confirmed.

G.

COMMUNITY INTEREST

1.

Interest of the Community industry

(59)

Since no comments were received regarding the interest of the Community industry,
the conclusions of recitals 113 to 117 of the provisional duty Regulation are hereby
confirmed.

2.

Impact on users

(60)

two
Following the adoption of the Regulation imposing provisional measures,
Community importers expressed concerns about the impact of measures on their
customers. It should be noted that one of these companies imported from a Taiwanese
producer which did not co-operate in this proceeding, and this importer was subject to
if
a provisional cumulated subsidy and dumping duty rate of 28,2%. However,
definitive measures are imposed, all importers will have the option to purchase SBS
from Community producers, from one of the co-operating producers in Taiwan, or
from another source not subject to measures.

(61) As a result,

it

is estimated that the average price increase caused by definitive
measures should be 1,1%. It was confirmed during the investigation that such an
increase in prices would be likely to have a limited impact on users. The impact of
duties on several typical users was examined, where SBS accounted for 40% of their
cost of production. It was found that the imposition of measures would bring down the
profitability by 0.3% in average for that part of their business relating to SBS.

(62)

(63)

Furthermore, as most Community users purchase the main part of their SBS from
Community producers, they would not experience any price increase for the greater
part of their purchases.

Finally, since no further evidence was provided by the Community importers, and
since the Community users did not make any comments, the conclusion of recital 123
of the provisional duty Regulation is hereby confirmed.

11

3.

Conclusion

(64)

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

H.

DEFINITIVE COURSE OF ACTION

(65)

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

1.

Injury elimination level

(66) As explained in recital 127 of the provisional duty Regulation, a non-injurious level of
prices was determined by adding to the sales price of the Community industry its
average actual loss and by further adding a profit margin of 8% which would cover the
Community industry's cost of production and allow a reasonable profit to be obtained
in the absence of subsidised imports from the country concerned.

2.

Form and level of the duty

(67)

(68)

(69)

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

In accordance with Article 15(1) of the Basic Regulation the countervailing duty rate
should correspond to the subsidy margin, unless the injury margin is lower.

This led to the following countervailing duty rates for the co-operating producers in
Taiwan:

–

–

Chi Mei Corporation

1,5%

Lee Chang Yung Chemical Industry Corporation

1,0%

(70) As explained in recital 129 of the provisional duty Regulation, the co-operating
exporting companies accounted for less than30 % of the SBS imported into the
European Community during the period of investigation and originating in Taiwan.

(71)

The investigation has revealed the existence of countervailable subsidies which are
available to the non-co-operating exporters. It is considered that the absence of co-
operation is the result of the use and benefit by those producers of the countervailable
subsidies at a level above the de-minimis level. In accordance with the provisions of
Article 28 of the basic Regulation and based on the information contained in the

12

complaint and the findings of the investigation, and in order to avoid rewarding non-
co-operation, it is considered appropriate to establish a residual level of countervailing
duty at 8,2%.

I.

COLLECTION OF THE PROVISIONAL DUTY

(72)

In view of the amount of the countervailable subsidies found for the exporting
producers, and in light of the seriousness of the injury caused to the Community
industry, it is considered necessary that the amounts secured by way of provisional
countervailing duty under Regulation (EC) No 1092/2000 be definitively collected to
the extent of the amount of definitive duties imposed,

HAS ADOPTED THIS REGULATION:

Article 1

1.

2.

A definitive countervailing duty is hereby imposed on imports of styrene-butadiene-
styrene thermoplastic rubbers, falling within CN codes ex 4002 19 00 and ex 4002 99
(TARIC codes: 4002 19 00 10, 4002 99 10 10 and 4002 99 90 91) and originating in
Taiwan.

the definitive countervailing duty applicable to the net,

free-at
The rate of
Community frontier price, before duty, for products produced by the following
companies, shall be as follows:

Company

Rate of duty

TARIC additional
code

Chi Mei Corporation, Tainan,
Taiwan

Lee Chang Yung Chemical
Industry Corporation, Taipei,
Taiwan

1.5 %

1.0 %

A127

A128

All
companies

other

Taiwanese

8.2 %

A999

3.

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

Article 2

The amounts secured by way of the provisional countervailing duties on imports originating
in Taiwan under Regulation (EC) No 1092/2000 shall be collected at the rate of the duty
definitively imposed. Amounts secured in excess of the definitive rate of countervailing duties
shall be released.

13

Article 3

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

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

Done at Brussels,

For the Council
The President

14