Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of black colorformers originating in Japan
Date: 2000-09-27
Institutions: European Commission
Subjects: Japan, anti-dumping duty, import, originating product, pulp and paper industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 27.09.2000
COM(2000) 599 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of black colorformers originating in
Japan

(presented by the Commission)

1.

2.

3.

4.

5.

6.

7.

8.

EXPLANATORY MEMORANDUM

On 24 July 1999, two proceedings were initiated with regard to imports into the
Community of two black colorformers, respectively, One Dye Black 1 (ODB-1) and
One Dye Black 2 (ODB-2) originating in Japan.

During the investigations, indications were found that there were black colorformers
other than ODB-1 and ODB-2 which appeared to share the same basic chemical and
physical characteristics and appeared to be used for the same purpose, i.e. the coating
of paper to produce carbonless copy paper and/or thermal paper. Therefore, the
Commission published on 1 April 2000 a Notice on the extension/clarification of the
product scope of the proceedings and inviting comments from interested parties. In
view of the clarification of the product scope, no provisional anti-dumping measures
were considered.

On the basis of all the information received, notably after the publication of the
second Notice, it was definitively concluded that all black colorformers form one
product. Therefore both proceedings were merged and a single analysis was made for
the single product.

As regards dumping, no cooperation was obtained from Japanese exporting
producers and therefore dumping was examined on the basis of the facts available,
leading to a dumping margin of 49,8%.

As regards injury and causation, it was found that during the investigation period
(from 1 July 1998 to 30 June 1999), the Community industry suffered a significant
price depression and a serious deterioration of its profitability, in addition to a
decrease in sales and market share. This situation coincided with a significant
increase in the volume and market share of black colorformers originating in Japan.

As regards Community interest, no compelling reasons were found not to adopt
definitive measures in this case, in view of the fact that any negative impact on
importers/traders and users is unlikely to be significant. Moreover, the imposition of
measures is likely to restore effective competition in this market.

On these grounds, it is proposed to impose definitive anti-dumping duties on imports
of black colorformers originating in Japan of 18,9%, which corresponds to the injury
margin.

It is therefore proposed that the Council adopt the attached proposal for a Council
Regulation which should be published no later than 23 October 2000.

2

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of black colorformers originating in
Japan

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) N° 384/96 of 22 December 1995 on protection
against dumped imports from countries not members of the European Community1, as last
amended by Regulation (EC) N° 905/982 and in particular Article 9 thereof,

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

Whereas:

(1)

(2)

(3)

A. PROCEDURE

1. Initiation

the Commission announced by two notices (the “Notices of
On 24 July 1999,
the European Communities3 the
Initiation”) published in the Official Journal of
initiation of two anti-dumping proceedings with regard to imports into the Community
of, respectively, One Dye Black 1 ("ODB-1") and One Dye Black 2 ("ODB-2")
originating in Japan.

The proceedings were initiated following two complaints lodged in June 1999 by
CEFIC (European Chemical Industry Council) on behalf of Ciba Specialty Chemicals
PLC, representing the totality of the Community production of respectively ODB-1
and ODB-2, two black colorformers. The complaints contained evidence of dumping
of the said products and of material injury resulting therefrom, which was considered
sufficient to justify the initiation of the proceedings.

2. Investigation

The Commission officially advised the complainant Community producer and its
representative association in the Community,
the
importers, and the users known to be concerned and the representatives of the
exporting country concerned of the initiation of the proceedings. Interested parties

the producers,

the exporters,

1

2

3

OJ L 56, 6.3.1996, p.1.
OJ L 128, 30.4.1998, p.18.
OJ C 213, 24.7.1999, p.2 and p. 3.

3

(4)

(5)

(6)

(7)

(8)

(9)

were given the opportunity to make their views known in writing and to request a
hearing within the time limit set out in the Notices of Initiation.

One exporting producer in the country concerned, as well as the Community producer,
made their views known in writing. All parties who so requested within the set time
limit and who indicated that there were particular reasons why they should be heard
were granted the opportunity to be heard.

The Commission sent questionnaires to parties known to be concerned and to all other
parties that made themselves known within the time limits set out in the Notices of
Initiation. Replies were received from the sole Community producer, six users of
ODB-1 and/or ODB-2, a group of importers related to a Japanese exporter and two
companies located in Japan.

None of the exporting producers cooperated in the investigation. Therefore, and
pursuant
to Article 18(1) of Council Regulation (EC) No 384/96 (the "Basic
Regulation"), findings were made on the basis of the facts available. In the absence of
a proper reply and in accordance with Article 16(1) of the Basic Regulation, no
verification visits were carried out at the premises of any exporting producers or
related importers.

The Commission sought and verified all the information it deemed necessary for the
purpose of a determination of injury and Community interest. Verification visits were
carried out at the premises of the following companies:

(a) Community producer:

-

Ciba Specialty Chemicals PLC, Macclesfield (United Kingdom)

(b) Users in the Community:

-

-

-

Jujo Thermal Ltd, Eura (Finland)

Torraspapel SA, Barcelona (Spain)

Zanders Feinpapiere AG, Bergisch Gladbach (Germany)

The investigation of dumping and injury covered the period from 1 July 1998 to 30
June 1999 ("investigation period” or “IP”). The examination of trends relevant for the
determination of injury covered the period from 1 January 1996 to the end of the
investigation period (“period considered”)

3. Clarification/extension of the product scope

During the preliminary investigations it was found that there were black colorformers
other than ODB-1 and ODB-2 which appeared to share the same basic chemical and
physical characteristics and appeared to overlap in their use (namely coating paper for
use as carbonless copy paper ("carbonless paper") or paper for thermal
image
applications ("thermal paper")).

4

(10)

(11)

(12)

Therefore, after consulting the Anti-Dumping Committee, the Commission deemed it
necessary to publish on 1 April 2000, a Notice in the Official Journal of the European
Communities4 relating to the product scope of the anti-dumping proceedings, to cover
all black colorformers for use in paper coating applications ("black colorformers"), in
order to investigate this matter further.

The complainant Community producer and its representative association,
the
exporters, the producers, the importers, the users known to be concerned as well as the
the
representatives of
clarification/extension of the product scope of the proceedings. Interested parties were
given the opportunity to make their views known in writing and to request a hearing
within the time limit set out in this Notice.

exporting country were officially informed of

the

The Commission sent further questionnaires to all parties known to be concerned and
to all other parties who made themselves known within the time limit set out in the
Notice. Replies to these questionnaires were received from the sole Community
producer, one importer related to an exporter, three Japanese companies and six users
of black colorformers.

(13) At this stage again, none of the Japanese exporting producers cooperated in the
investigation. Consequently, pursuant
to Article 18(1) of the Basic Regulation,
findings were made on the basis of the facts available for Japan as a whole and no
verification visits were carried out at the premises of the exporting producers or
related importers in accordance with Article 16(1) of the Basic Regulation.

(14)

The Commission further sought and verified all the information it deemed necessary
including
for the purpose of a determination of injury and Community interest,
in the
carrying out a verification visit at
Community:

the premises of the following user

-

Papierfabrik August Koehler AG, Oberkirch (Germany).

(15) One interested party argued that the proceedings could not be extended to cover all
black colorformers originating in Japan because complaints were filed only in respect
of ODB-1 and ODB-2 without mentioning other colorformers although the
Community industry could not have been ignorant of their existence.

(16)

The definition of the product scope of an anti-dumping proceeding is not
the
prerogative of the complainant. Rather, the product has to be defined in accordance
with the applicable law, as embodied in the practice of the Commission and the
Council and confirmed by the case-law of the European Court of Justice. In the
present case complaints were lodged respectively for ODB-1 and ODB-2 originating
in Japan, providing prima facie evidence of dumping and resulting injury to the
Community industry. However,
the information gathered in the course of the
investigations, which were initiated on the basis of these complaints, showed that both
proceedings should be merged and the product scope of the resulting single proceeding
extended to cover all black colorformers for use in paper coating applications. This
was due to the fact that all these black colorformers appeared to share the same basic
physical and chemical characteristics and overlap in their use. Furthermore, the prima

4

OJ C 94, 1.4.2000, p. 5.

5

facie evidence on dumping and resulting injury contained in the original complaints
and relating to only two types of black colorformers was considered sufficiently
representative for all black colorformers,
in view of the significant share of the
Community market held by these two types. In terms of due process, the rights of the
parties concerned were respected since they were informed by means of a Notice
published in the Official Journal and had all the opportunities to make themselves
known and to provide comments or request hearings.

B. PRODUCT

1. General

(17) Black colorformers constitute a specific group of fluoran colorformers which, when
used to coat paper for the production of carbonless paper or thermal paper generate by
their own properties a black image on the paper without having to be mixed with other
colorformers.

(18) On the basis of the information submitted by all parties, different types of black
colorformers exist, such as Black 15, Black 100, Black 303, Black 305, Black 500, CF
51, ETAC, Fuji Black, ODB-1, ODB-2, ODB-7, PSD 150, PSD 184, PSD 300A, S-
205, TH 107. This list of product types is not exhaustive since new product types
appear on the market regularly. However, it should be noted that the main types
representing over 90% of total Community consumption in the IP are ODB-1, ODB-2,
Black 15 and S-205.

(19)

(20)

(21)

The investigation has shown that all black colorformers share the same basic chemical
characteristics, i.e. the same basic molecule (C26H16N2O3). The basic molecule is the
result of condensing a benzophenone keto type acid in sulphuric acid with a
substituted diphenylamine. The resulting phtalide product is then washed, isolated and
purified. Next to the basic molecule, different substituents are attached on the ring
system (R1 – R5). The colorforming reaction is conferred on the paper by the basic
chemical molecule, in a reaction where, the application of heat or pressure opens up
the ring in the basic molecule. This leaves a residual positive charge which is
delocalised around the ring system. The energy required to allow this delocalisation is
absorbed from incident visible radiation giving the compound its black colour. In this
respect, the nature of the colorforming reaction is unaffected by the substituents on the
ring system. These substituents only lead to a variety of minor differences and specific
properties of the final paper product (background whiteness, resistance to temperature
changes, image stability).

Furthermore, all black colorformers share the same basic physical characteristics, in
that they are a white or lightly coloured, free flowing powder.

Finally, all black colorformers have the same basic use. Black colorformers are used to
coat paper in order to produce carbonless paper and/or thermal paper. In order to coat
paper the black colorformers are mixed with other chemicals into a "recipe" which is
particular to each paper producer and varies according to each type of colorformer
used. The information provided by cooperating users shows that there is a large
interchangeability between the different types of black colorformers to produce either
carbonless paper and/or thermal paper. Furthermore, users have also switched black
colorformers within a short period of time to produce the same end paper product.

6

2. Product under consideration

(22)

The product under consideration is black colorformers originating in Japan. As
described above, all types of the product concerned share the same basic physical and
chemical characteristics and overlap in their use to coat paper to produce carbonless
paper and/or thermal paper. Consequently,
they are to be considered one single
product for the purpose of this investigation, i.e. the product under consideration.

(23) One interested party argued that ODB-1/ODB-2 and S-205 do not share the same basic
chemical characteristics. It was argued that the substituents R1 and R2 are different
between ODB-1/ODB-2 and S-205 and that this alters significantly the characteristics
of S-205 as compared to ODB-1/ODB-2. It should be noted that this party did not
specify which characteristics were meant.

(24)

The investigation has shown that S-205 and ODB-1/ODB-2 share the same basic
chemical characteristics, i.e. the same basic molecule (see recital 19) and generate
without having to be mixed with other colorformers a black image on the coated
paper. As to specific characteristics conferred by different substituents R1 and R2, it
should be noted that users have been found to produce the same paper product by
using indifferently ODB-1/ODB-2 or S-205, suggesting therefore that the different
characteristics conferred on the paper by the use of different
types of black
colorformers, if any, are generally minor. In addition, another interested party while
stating that each type of black colorformer contains different additional features did
not however dispute the fact that the basic chemical characteristics are the same.

(25) As to the interchangeability, the same interested party stated that ODB-1 is in general

not used for the production of thermal paper.

(26)

(27)

The investigation, however, revealed that at least two users in the Community use
ODB-1 for the production of thermal paper. The same user also stated that in the
production of carbonless paper, ODB-1, ODB-2 and S-205 are interchangeable.
Furthermore, one user switched from ODB-1 to ODB-2 in 1998 and then to Black 15
in the IP for the production of carbonless paper.

The same interested party also argued that thermal paper could be produced on the
basis of either ODB-2 or S-205. However, the characteristics and quality of the
finished product varied. It was further stated that for end customers, paper products
manufactured using S-205 were not interchangeable with paper manufactured with
other types of black colorformers, which, it was claimed were of lesser quality, less
resistant to ageing and providing for less stable printing.

(28) Given the fact that at least six users are producing thermal paper using types of black
colorformers other than S-205 and that within thermal paper production there are
standard products such as fax paper, this argument cannot be accepted. Furthermore,
one exporting producer and its related importer stated that if the price of ODB-2 were
to increase, a change from ODB-2 to S-205 would take place and that S-205 was
interchangeable with ODB-2.

(29)

Two interested parties argued that a change in black colorformer would require users
to make a change in the technology employed, in particular a change in the “recipe” or
formulation. Therefore, it was argued that it was not possible to immediately switch

7

types of black colorformer without significant technical and economic costs. It was
therefore argued that each type of black colorformer was one single product.

(30)

It should be noted that the notion of the same or a similar end use of the product
covered by the proceeding does not necessarily entail that every user should be able to
switch from the use of one type of the product in question to another without carrying
out certain adaptations. In this case it
is clear that the change of type of black
colorformer entails a change in the recipe. It should be noted, however, that the need
to change the recipe does not constitute an economic or technical deterrent to the
substitution, as evidenced by past switches from one type to another by users. In any
event, users themselves have indicated that the production line, production procedure
and know-how do not have to be changed substantially when switching types of black
colorformers.

(31)

In view of the above, it is concluded that all types of black colorformers originating in
Japan should be considered as one product, i.e. the product under consideration.

3. Like product

(32)

(33)

(34)

(35)

the product under consideration and the black colorformers
It was found that
manufactured and sold in the Community by the Community industry (as defined at
recital (61)) shared the same basic chemical and physical characteristics and the same
uses as those originating in Japan and exported to the Community. The same was
found to be the case for the black colorformers produced and sold on the domestic
market of Japan, which were alike to the product under consideration.

It was argued that since the Community industry only produces two types of black
colorformers, i.e. ODB-1 and ODB-2, the product under consideration should be
limited only to those types produced by the Community industry.

in anti-dumping proceedings,

It should firstly be noted that,
the product under
consideration and the like product are defined by reference to its basic physical,
chemical and/or technical characteristics and its basic use. Once the product under
consideration is defined, i.e. the product exported from Japan, it has to be examined
whether the product produced and sold domestically, and the product produced and
sold by the Community industry in the Community are like products to the product
under consideration. In this respect, the fact that a certain product type is not produced
in the Community is irrelevant.

Furthermore, a limitation of the product coverage and eventually of anti-dumping
measures to only the types produced by the Community industry in the present case,
would ignore the fact that the behaviour of exporters of non-Community produced
types have an influence on the Community industry because their respective products
are alike. Indeed, such a limitation could ultimately lead users to switch to such types
of colorformers not covered by the investigation, and would thus render any anti-
dumping measure inefficient. Users have quoted price differences between 5% and
15% as sufficient to motivate a switch of type of black colorformer.

(36)

is therefore concluded that

It
the black colorformers produced and sold by the
Community industry on the Community market and those sold on the domestic market
of Japan are like products to the product under consideration within the meaning of
Article 1(4) of the Basic Regulation.

8

(37)

In view of the conclusion that all black colorformers are one single product, the
original proceedings concerning respectively ODB-1 and ODB-2 are merged and it is
confirmed that
the product scope of the resulting proceeding covers all black
colorformers. A single analysis of dumping and resulting injury as well as Community
interest has therefore been undertaken.

C. DUMPING

1. Cooperation

(38)

The complaints identified three Japanese producers of ODB-1 and ODB-2. A fourth
company was identified in the preliminary investigations as exporting S-205. None of
the four companies cooperated in the investigation:

(39) Nippon Soda Co. Ltd declared, upon initiation and after extension/clarification of the

product scope, that it would not reply to the questionnaires.

(40) Hodogaya Chemical Co. Ltd ('Hodogaya') completed both questionnaires
questionnaire

for
producers/exporters
for
producers/exporters of black colorformers. The information submitted did however not
allow individual determinations in respect of this company. Hodogaya was given
disclosure of this issue and did not raise any comment.

and ODB-2

of ODB-1

and

the

(41) Yamamoto Chemicals Inc ('Yamamoto') did not reply to the main part of the
questionnaires intended for producers/exporters of ODB-1 and ODB-2. Replies were
only received for the part of the questionnaires labelled "questionnaire intended for
related companies involved in sales of the product concerned" from a group of trading
companies ("the Mitsui group")5. Indeed, Yamamoto declared that all its sales on the
Community market were handled by the Mitsui group and only claimed for an
individual determination in respect of export prices and injury margin. In response to
the questionnaire regarding black colorformers, Yamamoto only presented a
supplementary submission on injury and Community interest. In view of the above, no
individual determination of dumping could be reached for this company.

(42) Yamada Chemical Co., Ltd ('Yamada') and its related company Fukui Yamada
Chemical Co. Ltd ('Fukui Yamada') submitted materially incomplete replies to the
questionnaire for producers/exporters of black colorformers. The companies were duly
informed and given an opportunity to provide further explanations in accordance with
Article 18(4) of the Basic Regulation. The companies were informed that, in the
absence of a satisfactory response, the information submitted was insufficient to make
any individual determination. Notably, the corporate structure of these companies
could not be ascertained as the companies accepted to disclose the identity of one of
their shareholders only; no information was submitted on the production process and
cost of production; access to the audited accounts or other financial statements was
refused to the Commission on the ground of company business secrets. On 13 and 17
July 2000, more than two months after the deadline for replying to the questionnaire,
Yamada/Fukui Yamada submitted information on the costs of production of S-205 and

5

These answers were submitted by Mitsui & Co Ltd in Japan and its related importers (Mitsui & Co.
Deutschland GmbH, Mitsui & Co. UK PLC, Mitsui & Co. España S.A., Mitsui & Co. Scandinavia A.B.
(Sweden) and Mitsui & Co. France S.A.) ("the Mitsui group"). It was declared that Mitsui & Co Ltd
purchased from Yamamoto.

9

their financial statements for three financial years. These submissions, which were
made well beyond any prescribed time limit, could not change the legal assessment
that these companies were not cooperating in the investigation. The submissions were
equally not capable of being used as information available within the meaning of
Article 18 of the Basic Regulation as they were received at an advanced stage of the
investigation and could not reasonably be given due consideration.

(43) No other producer exporting the product concerned to the Community made itself

known within the relevant time limits.

(44) On 17 and 18 July 2000, a Japanese exporter, Nagase & Co., Ltd., made for the first
time two submissions. These submissions, made well beyond any prescribed time-
limit, could, however, not compensate for the initial non-cooperation of the company.
Neither could the cooperation of its related company in Germany, which made itself
known and cooperated in the investigation as an independent
importer. The
submissions of Nagase & Co. Ltd could equally not be used as information available
within the meaning of Article 18 of the Basic Regulation as they were received at an
advanced stage of
reasonably be given due
consideration.

the investigation and could not

(45)

(46)

(47)

In the absence of cooperation from the exporting producers, findings in respect of
dumping were made on the basis of the facts available for Japan as a whole pursuant to
Article 18(1) of the Basic Regulation. According to the information available, the vast
majority of imports of black colorformers originating in Japan consist of ODB-1,
ODB-2 and S-205. It was therefore concluded that any finding of dumping based on
these three product types would be reasonably representative for the imports of the
product concerned.

2. Normal value

In respect of ODB-1 and ODB-2, given the absence of any cooperation, the complaints
were the only source of information available. The complaints estimated the normal
values on the basis of domestic prices. The incomplete questionnaire responses did not
contain any information either on domestic sales or on costs of production.

In respect of S-205, the only information available was the questionnaire reply
submitted by Yamada/Fukui Yamada. These domestic sales were considered
representative because they accounted for more than 5% of the sales volume to the
Community. In the absence of information on the cost of production of S-205, this
latter was estimated on the basis of the information submitted in the complaints in
respect of ODB-1 and ODB-2. On this basis, the transactions reported by Yamada
appeared profitable. Accordingly, normal value for S-205 was established as the
weighted average price of all domestic sales to independent customers declared by
Yamada for the IP.

(48)

The export prices for the three product types were determined as follows:

3. Export price

3.1. ODB-1

(49)

The export price was determined on the basis of the information provided by the
Mitsui group and Eurostat.

10

(50) As far as information from the Mitsui group is concerned, it should be noted that all
companies belonging to the group were found to be related. Pursuant to Article 2(9) of
the Basic Regulation, prices of sales between them were disregarded for not being
reliable and use was made of the prices at which the imported ODB-1 was first resold
to an independent buyer. These prices were adjusted to take into account all costs
incurred between importation and resale, including taxes, customs duties, the selling,
general and administrative expenses of each related company, which intervened
between the importation and the resale to the independent customer and a 5 % profit
on turnover. In the absence of any cooperation from an independent importer in the
Community, the 5% profit corresponds to the profit margin considered as reasonable
in a previous case dealing with a chemical product6.

(51) As ODB-1 fell under a specific Taric code during the IP, the value and quantity of the
remaining sales on the Community market were established by deducting the quantity
and CIF values of the exports declared by Mitsui & Co Ltd (Japan) for the IP from the
respective totals as established by Eurostat statistics.

3.2. ODB-2

(52)

The export price was determined on the basis of the information provided by the
Mitsui group and in the complaint.

(53) As regards prices of

the ODB-2 exports declared by the Mitsui group,

the

methodology set out in recital (50) was followed.

(54)

For the remaining sales, Eurostat data was not a reliable source of information as the
Taric code under which imports of ODB-2 are declared also includes other chemicals
and ODB-2 represents only a fraction of the import volume declared under this
heading. This is confirmed by the fact
the average unit CIF value was
considerably lower compared to the average CIF export price estimated in the
complaint and to the data submitted by the companies of the Mitsui group. Therefore
the quantity and value of the remaining imports of ODB-2 were established by
deducting the quantity and CIF value of the exports declared by Mitsui & Co Ltd
(Japan) for the IP from the respective totals as estimated in the complaint since there
was no other information available.

that

3.3. S-205

(55)

Fukui Yamada declared to supply all products to Yamada, which in turn used a
Japanese independent trader to export S-205 to the Community. The export prices
submitted corresponded to the CIF prices invoiced by this trader to a related company
in the Community. These prices were consequently disregarded for not being reliable
and use was made of the purchase prices submitted by the first independent buyers in
the Community. These prices were adjusted to take into account all costs incurred
between importation and resale and the 5% profit margin on turnover.

6

See Commission Regulation (EEC) No 2172/93 of 30 July 1993 imposing provisional anti-dumping duties
on imports of ethanolamine originating in the United States of America, OJ L 195, 4.8.1993, p. 5 and
Council Regulation (EC) No 229/94 (OJ L 28, 2.2.1994, p. 40).

11

4. Comparison

(56)

For the purpose of a fair comparison between the normal values and the export prices
at an ex works level, due allowances in the form of adjustments were made for
differences that affected price comparability. These adjustments were made by
reference to Article 2(10) of the Basic Regulation in respect of commissions, transport,
insurance, handling, loading and ancillary costs using information submitted in the
complaints (for ODB-1 and ODB-2) and by Yamada (for S-205).

5. Dumping margin

(57) According to Article 2(11) of the Basic Regulation the weighted average normal
values were compared to the weighted average export prices for each of the three
product types.

(58)

Pursuant to Article 2(12) of the Basic Regulation, a weighted average of the dumping
margins per type was established and considered representative of the level of
dumping on all black colorformers originating in Japan.

(59)

Expressed as a percentage of the CIF Community frontier value of the imports, the
dumping margin so established is 49,8%.

D. COMMUNITY INDUSTRY

(60) Ciba Specialty Chemicals PLC was the sole Community producer of black

colorformers in the Community during the IP.

(61)

Therefore, this company constitutes the "Community industry" pursuant to Article 4(1)
of the Basic Regulation.

E. INJURY

1. Preliminary remarks

(62) As indicated above, the examination of trends relevant for the determination of injury
covered the period from 1 January 1996 to the end of the investigation period.

(63) One interested party argued that the time period chosen was unrepresentative and
the year when the

disproportionate and that
complainant started its production of black colorformers in the Community.

the analysis should start

in 1992,

(64)

(65)

Firstly, it should be noted that it is normal practice in anti-dumping proceedings to use
a time period of between three and five years to examine the evolution of the situation
of the Community industry.

Secondly, it should be noted that injury as well as dumping has to be ascertained for
the IP. The time period prior to the IP merely serves as an indicator of the evolution of
the situation of the Community industry to determine whether the situation during the
IP can be classified as injurious. In this respect, the finding of injury suffered by the
Community industry during the IP would have been reached regardless of the starting
point taken.

12

(66)

In view of the above, it is not considered justified to extend the period used for the
analysis of trends in the context of injury.

2. Community consumption

(67)

In the absence of any cooperation from exporting producers and in view of the
imprecise nature of Eurostat information on imports, Community consumption was
determined on the basis of the volume of sales reported by the Community industry on
the Community market, imports originating in Japan and in the USA as provided by
cooperating users and information provided by the Community industry in the
complaints.

(68) Between 1996 and 1998 consumption increased by 18% as a result of the increase in
the production of thermal paper. Between 1998 and the IP consumption decreased
slightly by 1%. This decrease is explained by the withdrawal of two Community users
from paper production.

3. Imports originating in Japan

3.1 Volume and market shares of the imports concerned

(69) Given the lack of cooperation from exporting producers and the imprecise nature of
Eurostat information on imports, these have been based on the information available,
i.e. the information provided by cooperating users and information given by the
Community industry in the complaints.

(70) On this basis, the volume of imports of the product under consideration has risen
continuously from (index) 100 in 1996 to 123 in 1997, 131 in 1998 and 141 in the IP,
i.e. an increase of over 40%. This increase is also reflected in the market share of the
product under consideration which went from 36,0% in 1996, to 41,7% in 1997, to
40,0% in 1998 and to 43,4% in the IP.

3.2. Prices of the imports concerned

a)

Evolution of the prices of the imports concerned

(71)

The average unit prices of all black colorformers imported from Japan, based on the
information provided by co-operating users and one importer, expressed in ECU-
EURO/kg. decreased by 19% over the period considered. Prices decreased from ECU
24,9 per kg in 1996 to ECU 22,1 per kg in 1997 and then to ECU 21,6 per kg in 1998
and further decreased to ECU/EUR 20,2 per kg in the IP.7 Prices of various types of
black colorformers have continuously decreased over the period considered albeit to a
different extent : average ODB-1 prices decreased by 13% over the period concerned
whereas average ODB-2 prices decreased by 19% and average S205 prices by 15%
over the same period.8

7

8

Prices between 1996 and 1998 do not include Black-15, since no user has reported imports of that type. In
any event, even if prices of Black-15 are excluded for the IP, the average price for the IP amounts to 20.28
EURO/kg.
No user has provided information on imports of Black 15 originating in Japan between 1996 and 1998, but
only for the IP. Therefore no price evolution could be established for this type.

13

b)

Price undercutting

(72)

The Community market for black colorformers is characterised by a reduced number
of suppliers and a limited number of users. In this market, the price setting takes place
via a system of price quotations whereby the users ask for prices from all suppliers and
further negotiations are based on the prices offered by the suppliers.

(73) Given the above, price undercutting has been examined on the basis of the price
negotiations between the suppliers and the Community users. In the absence of co-
operation from the Japanese exporting producers,
the price
undercutting has been based on the information provided by the Community industry
with reference to price negotiations representing around 50% of the total sales of the
Community industry. Where possible, this information has been verified by reference
to cooperating users.

the analyses of

(74) As

regards ODB-1, price negotiations have been examined for

transactions
representing around 45 % of the Community sales of ODB-1 in the IP. On that basis, it
was found that the price initially offered by the Community industry was subsequently
undercut by a Japanese offers in a range of 5% to 8% when comparing the initial offer
with the final price agreed.

(75) Regarding ODB-2, price negotiations have been examined for

transactions
representing around 70% of the Community sales of ODB-2 in the IP. The same
pattern was observed as regards this type of black colorformer, with undercutting
margins ranging between 1% to 5%.

(76)

This situation clearly reflects not only the extent to which Community industry's sales
prices have been undercut by the prices of the product under consideration within the
process of price quotations, but also the depressive effect of the dumped imports on
the sales prices of the Community industry, as it has been established that the low
prices of the quotations necessarily influence all prices negotiated in follow-up
transactions for the same customer.

(77)

In conclusion, the price pressure exerted by the Japanese offers and transactions on the
Community market has forced the Community industry to align its prices thereto. This
has caused a price depression of around 3 % to the Community industry between 1998
and the IP.

(78) One interested party argued that the methodology used to examine price undercutting
was erroneous. It alleged that
the initial bid in a commercial negotiation rarely
represents a commercial price level, rather such bid is often set too high since the party
making the bid knows that it will be reduced in the negotiation process.

(79) According to the information provided by the Community industry, the initial bids
quoted by the Community industry corresponded to the price level agreed with the
respective customers in the previous price negotiations. It should furthermore be noted
that this price was already one which yielded an insufficient return for the Community
industry.
the initial bid used to examine price
undercutting is not erroneous.

is therefore concluded that

It

14

4. Situation of the Community industry

4.1

General considerations

(80)

In accordance with Article 3(5) of the Basic Regulation, the examination of the impact
of the dumped imports on the Community industry included an evaluation of all
relevant economic factors and indices having a bearing on the state of the industry
including a decline of sales, profits, production, market share, productivity, return on
investments, capacity utilisation, factors affecting Community prices, cash flow,
inventories, employment, wages, growth, ability to raise capital or investments. It
should be noted that not any one or more of these factors necessarily give decisive
guidance.

4.2.

Production, capacity, capacity utilisation and inventories

(81)

(82)

Production increased by 19% between 1996 and 1997, coinciding with an increase in
consumption. It decreased by 2% between 1997 and 1998 and further decreased by
18% between 1998 and the IP. This decrease coincided with a small decrease in
consumption and a severe drop in sales in the same period.

Production capacity should be seen in the light of the fact that the same production
facilities are used to produce both black colorformers and colour colorformers.
Therefore, production capacity for black colorformers has been estimated by
deducting from the demonstrated capacity of that production line the production of
colour colorformers.

(83) Accordingly, the capacity utilisation rate evolved from 72% in 1996 to a peak of 79%
in 1997 before dropping to a level of 69% in 1998 which was maintained during the
IP.

(84) When analysing inventories, it should be noted that black colorformers are produced
to order and that therefore inventories are goods awaiting despatch to customers. In
this context, therefore, the evaluation of inventories does not appear to be relevant for
the examination of the economic situation of the Community industry. However, for
the sake of completeness the evolution of inventories is analysed below.

(85)

(86)

The Community industry's closing inventories decreased by 58 % between 1996 and
the IP, reaching a peak in 1997 and returning to the 1996 level in 1998. In relation to
the total production volume of the Community industry, closing inventories have
decreased by 58 % over the period considered as well, namely inventories represented
20,7 % of total production volume in 1996 and 8,7 % in the IP.

The decrease in inventories in the IP was due to the introduction of an inventory
reduction project. Furthermore,
three factors contributed to the decrease in the
inventory of finished goods: actual orders were better in line with sales forecasts;
milling of products created a bottleneck in 1999 which led to a build up of inventories
of semi-finished products (unpacked black colorformers) and therefore lower
inventories of finished goods and finally in June 1999 the USA sales organisation of
the Community industry started to build up inventories in the USA and therefore the
dispatches to the USA led to a reduction in Community inventories.

15

4.3. Sales volume, market share and growth

(87)

(88)

Sales of the Community industry to unrelated parties in the Community decreased by
5% over the period considered. Sales volume decreased by 2% between 1996 and
1997. Between 1997 and 1998 sales increased by 15%, in line with the evolution of
consumption. Sales decreased sharply between 1998 and the IP, whereas consumption
dropped only slightly (decrease of 1%).

The resulting market share of the Community industry decreased from 45,0% in 1996,
to 41,6% in 1997 then slightly increased to 43,1% in 1998 and decreased again to
36,5% in the IP. Therefore, despite a significant growth in the consumption of black
colorformers in the Community, the Community industry has not been able to benefit
from it. This overall decrease in market share for the Community industry is matched
by a similar increase of market share by the product under consideration. It
is
important
to note that despite a growth in the overall consumption of black
colorformers of 17 % over the period considered, the Community industry did not
benefit from increased sales. To the contrary, the Community industry lost sales
volume (5% decline) and market share over the same period.

4.4. Sales prices and factors affecting sales prices

(89) Unit prices of the product concerned sold by the Community industry on the
Community market decreased by 16% in total over the period considered. After a
decrease of 6% between 1996 and 1997 prices decreased by a further 7% between
1997 and 1998, followed by a further decrease of 3% between 1998 and the IP.

(90) Regarding factors affecting sales prices, cost of production has been examined. The
cost of manufacturing decreased by 8% between 1996 and the IP, mostly due to the
decrease in the price of raw materials which account for [between 60% and 75%]* of
the total cost of production. The total cost of production decreased by 7%.

(91) Regarding more specifically wages, according to the data available for Ciba Specialty
Chemicals PLC, wages rose by 26% over the period concerned. Taking into account
the 15% rise in the estimated employment in black colorformers, the raise in wages
amounted to 10% over the period concerned, i.e. a 2,8% yearly average increase in
wages and salaries. It should be noted, however, that the cost of labour accounts for a
small percentage of the total cost of production. The moderate increase in wages,
however, coincided with increased efficiencies of the Community industry in terms of
a reduction in the time necessary to complete a production cycle ("batch time") and
increased yields per batch.

(92)

It is therefore concluded that over the period considered, the prices of the Community
industry decreased well over the decrease in the cost (-7%). This severe price
depression (-16%) lead to important losses to the Community industry as described
below.

4.5. Profitability, cash flow and return on investments

(93)

Profitability of the Community industry in terms of return on net sales in the
Community market before any extraordinary items and taxes went from around break

*

Actual figures indexed for reasons of confidentiality

16

even in 1996, to [between -5% to -7%] in 1997, to [between –7% to -9%] in 1998 and
to [between –8% to - 10%] in the IP9.

(94) Between 1996 and 1997 the profitability of the Community industry deteriorated
going from around break even to a negative result. This coincided with a decrease in
the sales volume of the Community industry (-2%) and a sharp decrease in the sales
prices (-7%), whereas the costs of the Community industry remained stable. Between
1997 and 1998 the Community industry tried to regain volume of sales and market
share by lowering its prices (-7%) but, since its costs only decreased by 6%, this
decrease in the prices resulted in higher losses. Between 1998 and the IP the losses
increased since the sales prices decreased by 3%, whereas the costs only decreased by
1%.

(95) One interested party argued that the Community industry has not suffered material
injury since the total colorformer sector was profitable throughout the period and even
after the IP.

(96)

It should be noted that
the product scope in the present proceeding is black
colorformers and not colorformers in general. The investigation has showed that the
Community industry has suffered significant losses on the sales of black colorformer
in the Community in the IP. Therefore, the fact that the Community industry is
profitable on other products, i.e. colour colorformers is not an indication that it is not
suffering injury in the context of the present proceeding.

(97) As regards cash flow, this indicator could only be established for Ciba Specialty
Chemicals Inc., the Swiss parent company of Ciba Specialty Chemicals PLC, and that
only as from 1997 onwards, the year in which the parent company was founded.
However, it should be noted that black colorformers only represent around 0,4% of the
total turnover of the parent company. In view of the above, it is considered that this
factor would not provide guidance as to the specific situation of the Community
industry of black colorformers.

(98) As regards return on investments, this indicator was only available at the level of Ciba
Specialty Chemicals PLC, whereas black colorformers constitute only around 3,5% of
total turnover of Ciba Specialty Chemicals PLC. In view of the above, it is considered
that this factor would therefore not provide guidance as to the specific situation of the
Community industry of black colorformers.

4.6. Investments and Ability to Raise Capital

(99)

Investments made throughout the period considered dropped from 100 in 1996 to 71 in
the IP. They represented around 9 % of the Community industry's turnover throughout
the period considered.

(100) As regards the ability to raise capital, this indicator was only available for Ciba
Specialty Chemicals PLC. However, as stated above, since black colorformers only
constitute around 3,5% of the total turnover of Ciba Specialty Chemicals PLC, it is
considered that this factor would therefore not provide guidance as to the specific
situation of the Community industry of black colorformers.

9

Actual data is given in a range for reasons of confidentiality.

17

4.7. Employment and Productivity

(101) The Community industry's employment

related to the production of black
colorformers rose by 15 %, from 48 persons employed in 1996 to 55 employed in the
IP. It should be noted that since employees work both in the production of black
colorformer and colour colorformers, employment has been allocated on the basis of
the proportion that the production volume of black colorformers represents on the total
production volume of all colorformers.

(102) Productivity of the Community industry, measured as output per person employed,
decreased by 14% over the period considered. The figures on productivity largely
reflect the allocations made to determine the employment.

5. Conclusion on injury

(103) Between 1996 and the IP, the volume of imports of black colorformers originating in
Japan increased substantially (41%) at prices which continuously decreased over the
same period (-19%) and which significantly depressed the Community industry's
prices by undercutting the prices quoted by the Community industry in price
negotiations.

(104) Over the same period the situation of the Community industry deteriorated in terms of
production (-1%), sales (-5%) and market share (-8,5% percentage points). Despite an
important decrease in its overall costs (-7%), the sharp price depression (-16%) led to
severe losses. During the period considered, despite an increase in Community
consumption, i.e. by 17%, the Community industry's market share decreased sharply,
from 45,0% to 36,5%.

(105)

In particular, between 1996 and 1997 the Community industry's market share
decreased from 45,0% to 41,6%. It tried to remedy this situation by reducing its sales
prices in 1998 in order to maintain market share,
the Community industry
decreased its prices by 6% and it increased its market share (from 41,6% in 1997 to
43,1% in 1998) but at the expense of profitability, which decreased from [between
-5% and -7%] to [between -7% and -9%]. Between 1998 and the IP the Community
industry could only decrease its prices by (-3%) with the result that the Community
industry lost sales volume (-18%) and market share which dropped to 36,5%. Since
the prices of the Community industry decreased more than its costs, the Community
industry suffered increased losses.10

i.e.

(106)

In view of the above, it is concluded that in the IP the Community industry suffered
material injury within the meaning of Article 3(1) of the Basic Regulation in the form
of decreased production and sales, loss of market share and decreasing prices leading
to severe losses.

F. CAUSATION

1. Preliminary remarks

(107)

In accordance with Article 3 of the Basic Regulation, it was examined whether the
volume and prices of the dumped imports concerned were responsible for an impact

10

Actual data is given in a range for reasons of confidentiality.

18

on the Community industry to a degree which enables it to be classified as material
within the meaning of Article 3(6) of the Basic Regulation. In carrying out this
investigation, care was taken to ensure that known factors other than the dumped
imports which at
the same time are injuring the Community industry was not
attributed to the dumped imports concerned.

2. Effects of the dumped imports

(108) During the period considered, dumped imports of the product under consideration
increased significantly in terms of volume and market share. This coincided with the
deterioration of the situation of the Community industry which lost sales volume and
market share. In this respect, the market share lost by the Community industry has
been basically gained by the imports of the product under consideration.

(109)

(110)

It should be noted that in the market for black colorformers, competition is in the form
of prices. This is due to the fact that there are few market players and that the different
product types are highly interchangeable.

In this respect the investigation showed that, the Community industry was forced to
decrease its sales prices in order to maintain its market share. This is evidenced by the
findings that the prices of the product under consideration were undercutting the
Community industry's prices. Between 1996 and 1997 the Community industry's
prices decreased by 7% while prices of the product under consideration decreased by
10%. This coincided with a loss of market share by the Community industry and an
increase in market share of 5,7 percentage points by the product under consideration.
In an effort to regain market share, the Community industry decreased its prices by a
further 6% between 1997 and 1998 with the resulting increase in market share and a
slight loss of market share by the product under consideration. However, in view of
the losses incurred, between 1998 and the IP the Community industry reduced its
prices only by a further 3% whereas Japanese exporters decreased their prices by 5%.
Thus, the Community industry lost market share while the product under consideration
gained significant market share. The combined effect of depressed prices and a
decrease in sales volumes and thus a decrease in the production volume negatively
affected the profitability of the Community industry.

3.1.Other imports

3. Impact of other factors

(111)

Imports from other third countries amounted to slightly over 20% of Community
consumption in the IP.

(112) Besides Japan, exports of black colorformers to the Community basically take place
from the USA. There is one indigenous USA producer of black colorformers and two
other producers which are related to Japanese exporting producers.

(113)

Imports of black colorformers originating in the USA, based on the information
provided by cooperating users and estimates by the Community industry, went from
an index 100 in 1996 to 93 in 1997. In 1998 imports from the USA increased to 105
and further increased to 124 in the IP. The market share of these imports went from
19,0% in 1996, to 16,7% in 1997, to 16,9% in 1998 and to 20,1% in the IP.

19

(114) As far as prices are concerned, it should be noted that there is no information available
on the 1996 price level, but from 1997 onwards the price level has decreased
substantially from 100 in 1997 to 82 in 1998 and to 76 in the IP.

(115)

(116)

It should be noted that the price level of import of black colorformers originating in
the USA are, with the exception of 1997, below those of the imports originating in
Japan.

In view of the low price level of the imports originating in the USA, it has been found
that the imports of black colorformers originating in the USA may have contributed to
the injury suffered by the Community industry in the IP. However, despite the low
level of the prices of USA imports, the market share of the imports originating in the
USA has remained stable and can therefore not be the cause of the loss of market share
by the Community industry.

3.2. Evolution of the cost of production of the Community industry

(117)

It has been examined whether the deterioration of the situation of the Community
industry, namely in terms of profitability, has been materially caused by an increase in
its cost of production.

(118) As already explained above, the cost of production of the Community industry has
decreased by (-7%) over the period considered, mostly due to a decrease in the cost of
raw materials.

(119)

It is therefore concluded that the deterioration of the situation of the Community
industry over the period considered cannot be due to any increase in its cost of
production.

4. Conclusion on causation

(120) The above findings clearly indicate the existence of a causal link between the dumped
imports and the material injury found. This is proven, in particular, by the loss of
market share of the Community industry, which was almost entirely gained by
Japanese imports, combined with the deterioration of the prices and the profitability of
the Community industry. This coincided with the increase in the volume of imports
originating in Japan at prices which undercut and significantly depressed the
Community industry's prices.

(121) Any other factors, in particular imports originating in the USA, may have contributed
to the injurious situation of the Community industry, but they are not such as to break
the link between the dumped imports from Japan and the injury suffered by the
Community industry, in particular in view of the market share gained by Japanese low
priced imports.

(122)

It is therefore concluded that the dumped imports originating in Japan have caused
material injury to the Community industry within the meaning of Article 3(6) of the
Basic Regulation.

20

G. COMMUNITY INTEREST

1. Preliminary remarks

(123) According to Article 21 of the Basic Regulation and on the basis of all the evidence
it was examined whether, despite the injurious effect of the dumped
submitted,
imports, compelling reasons existed against the imposition of anti-dumping measures
in this case. This determination was based on an appreciation of all the various
interests taken as a whole.

(124)

In order to determine whether or not the imposition of measures was against the
Community interest, information was requested from all interested parties, including
the domestic industry, importers/traders and users.

2. Interest of the Community industry

2.1. Viability of the Community industry

(125) The investigation has shown that the Community industry's global profitability for all
colorformers produced in the same production facilities where black colorformers are
produced has been positive during the period considered. The negative situation of the
Community industry's black colorformer business is therefore attributable to the unfair
trading practices by Japanese exporting producers which have had an injurious effect
on the Community industry.

(126)

In line with the development observed during the period considered, the Community
market for black colorformers is expected to continue to grow in the next years.
Although the production of carbonless paper will probably decline, this decline will be
largely compensated by the increase in thermal paper production. In this respect, the
investments made by the Community industry throughout the period and its constant
efforts in R&D (increase by 44% over the period considered) shows that
the
Community industry is not ready to abandon this market and that if fair market
conditions are restored, the Community industry could benefit from the expected
growth in this market.

(127) Finally, it should be noted that the Community industry has considerably increased
efficiency. Significant efforts have been made by the Community industry in the form
of reductions in batch time and increased yields per batch, which have contributed to a
reduction of costs.

2.2. Likely effects of the imposition of measures

(128) As to the likely effects of the imposition of an anti-dumping measure on the
Community industry, these can generally result in an increase in the volumes sold on
the Community market by the Community industry and/or they can result
in an
increase in the level of the prices this industry can obtain.

(129) As far as an increase in the prices in the Community market is concerned, it is likely
that the imposition of an anti-dumping measures on the product under consideration
will have the effect of increasing its prices and consequently the price level in the
Community.

21

(130) Since the most severe injurious factor has been the price depression resulting in
financial losses, it is expected that the Community industry will be likely to benefit
from the measures in the form of an increase in its prices.

(131) The imposition of measures is also likely to result in a moderate increase in the sales
volume. In this respect, the increase in its volume of sales in the Community and thus
its production, will allow the Community industry to decrease its unit costs, thus
improving profitability.

(132)

It is therefore concluded that the imposition of anti-dumping measures will allow the
Community industry both to increase its prices and its volume of sales, thus improving
its financial situation.

2.3. Likely effects of the non-imposition of measures on the Community industry

(133) Should measures not be imposed, it is likely that the negative trends as regards prices,

profitability and market share will continue, if not aggravate further.

(134)

In the absence of an improvement of the price level in the Community, it is not
expected that
the Community industry would regain profitability through
rationalisation, given the efforts already undertaken in increasing efficiency.
Furthermore the current level of financial losses does not allow this industry to remain
operational. It is therefore expected that, should the price level remain stable or
continue to decrease, the Community industry could ultimately be forced to withdraw
from this market, with the consequent loss of investments, know-how and employment
and with the result that the number of suppliers in the Community market will be
substantially reduced, with negative effects for competition in the Community. Should
the Community industry withdraw from this market, it is unlikely that it will re-enter
it. Firstly, the Community industry would have lost credibility with its customers, with
whom it closely co-operates in R&D. Secondly, between two to three years are
required before a production plant is commissioned and an additional year is required
before the required stability per batch is attained. Finally, skilled labour as well as
R&D acquired through the years would be lost.

3.4. Conclusion

(135)

In view of the above, it is concluded that the imposition of an anti-dumping measure
would benefit the Community industry in terms of an increase in its prices and a
certain increase in the sales and production volume and therefore an improved
financial situation. In turn, the non-imposition of measures could result in the medium
term in the Community industry's withdrawal from this market.

3. Interest of importers/traders

(136) Three out of the four importers/traders concerned, representing around 60% of the
total import volume of the product under consideration, did not respond to the
Commission’s questionnaire but submitted general information.

(137) One of them argued that the imposition of an anti-dumping duty would result in the
possible elimination of the product under consideration from the Community market
without, however, substantiating this claim nor any effects on this company's
operations.

22

(138)

It should be noted that, although the Community industry has a significant spare
capacity, this capacity is not sufficient to supply the entirety of the demand in the
Community market. Therefore imports are necessary to fulfil the demand. In view of
the above, it is not expected that the imposition of measures will result in the total
exclusion of the product under consideration from the Community market, but rather
that those imports will be made at fair prices.

(139) On the basis of the information provided by the sole cooperating importer/trader, it has
been found that importers/traders generally trade also in products other than black
colorformer, the latter being of a proportion [between 8 and 12%]11. Since the main
effect of the anti-dumping measures is expected to be principally a price increase and
only a certain increase in the sales volume by the Community industry, it is unlikely
that importers/traders will be negatively affected in the form of a significant reduction
in the volume of sales.

(140)

the imposition of an anti-dumping measure on imports of black
In conclusion,
colorformers originating in Japan is unlikely to significantly affect the economic
situation of importers/traders.

4.1. Preliminary remarks on the structure of the user industry

4. Interest of users

(141) Black colorformers are used as coating in the production of carbonless paper and
thermal paper. The black colorformers are mixed with other chemicals in a "recipe"
and this is then applied on the base paper.

(142) According to the information available there are fifteen users in the Community which
are producers of either carbonless paper and/or thermal paper, out of which eight
cooperated in the proceeding. Two of these users produce both types of paper, three
are active only in carbonless paper and three are active only in thermal paper. In terms
of company size, the coating paper industry is not homogeneous and is composed of
large companies and medium size companies. Furthermore, there are companies that
are active only in the coated paper business as well as companies that produce other
types of paper (non coated). Finally, it should be noted that most companies produce
the base paper themselves, while one cooperating user purchases the base paper which
it then coats.

(143) Around 40% of total Community consumption of black colorformers is used as
coating for the production of carbonless paper. Community production of this type of
paper amounted to around 1,000 Ktonnes in 1998.

(144) Five cooperating users are active in this sector. The most

important producer
represents over 30% of Community production. The second and third biggest company
together have a share of about 25% of the Community production and there are two
more companies which represent around 10% of Community production each.

(145)

Import penetration of carbonless paper is very low (between 1 and 2%). This sector is
reported to be declining due to the introduction of new technologies such as electronic

11

Actual data is given in a range for reasons of confidentiality.

23

mail and ink-jet and laser printers, which minimise the use of multi-copy forms, which
is the most important application of carbonless paper.

(146) Around 60% of total Community consumption of black colorformers is used as
coating for the production of thermal paper. Community production of this type of
paper amounted to around 200,000 tonnes in the IP.

(147) There are five cooperating users who are active in this sector. The most important
holds [between 35 and 45%]12. The second and third biggest companies are about one
third of the size of the biggest and the rest of the market is divided between about 5
companies.

(148)

Import penetration is very low, less than 7%. This sector has been reported to be
growing by 4% to 5% per annum due to the use of thermal paper in ticketing and
labelling applications.

4.2. Data gathered from co-operating parties

(149) The cooperating companies represent a turnover of around 2 000 Mio EURO out of
which coated papers accounted for half. Total employment of the cooperating users
was around 10,000 in the IP.

(150) As regards profitability, the weighted average profitability for thermal paper producers
in the IP amounted to [between 5% and 7%]13, whereas the weighted average
profitability for carbonless paper producers in the IP amounted to [between 0,5% and
2%] in the IP.

(151)

In the IP, cooperating users reported purchases from importers/traders representing
77% of the total volume of imports of the product under consideration. They have also
purchased around 72% of black colorformers produced by the Community industry.

(152) The investigation has shown that black colorformers represent on average 1,1% of the
total cost of production of carbonless paper producers. For thermal paper producers,
black colorformers represent on average 7,9% of the total cost of production. For the
total user industry the weighted average amounts to 4,2%.

4.3. Impact in terms of costs of the anti-dumping measures

(153) Given the above, the imposition of an anti-dumping duty at the level considered would
result in a maximum hypothetical increase in the cost of production of carbonless
paper producers of 0,21%. For thermal paper producers the maximum hypothetical
increase in cost of production would amount to 1,49%.

(154) However, this is a maximum hypothetical impact of the measure if the whole impact
would be passed on to the user. It does not take into account that users have a
substantial buying power, that alternative sources of supply exist (USA) which are not
subject to the measures and that although a certain price increase is expected, it is
unlikely that
this will be of the same amount of the duty proposed, since the
Community industry will also benefit from a moderate increase in its volume of sales.

12

13

Actual data is given in a range for reasons of confidentiality.
Actual data is given in a range for reasons of confidentiality.

24

4.4. User arguments on the imposition of anti-dumping measures

a)

Impossibility to suffer increases in the cost of black colorformers

(155) Given the fierce competition amongst paper producers and the actual low level of
prices for their final product, some users claimed that the prices of black colorformers
could not be increased.

(156) The investigation showed that black colorformers are but a small part of the total cost
of production of paper producers, the most important factor affecting cost of paper
producers being paper pulp prices which represents 50% or more of the production
costs for coated paper and whose prices are very volatile. The monthly evolution of
paper pulp prices between 1996 and the end of the IP shows that paper pulp prices can
fluctuate up to 28% on a monthly basis.

(157) Given the fact that pulp can represent 50% or more of the production costs for coated
paper, any fluctuation in the price of pulp has a profound impact on the overall cost of
production for both carbonless paper and thermal paper.

(158)

In this respect, information provided by cooperating users shows that the fluctuation in
the prices of the main raw material are reflected on the prices of the coated paper. The
information available showed that price fluctuations of even 12% could be passed on
to customers to a large extent.

(159)

It is therefore concluded that moderate price increases which could result from the
imposition of the anti-dumping measures proposed are not likely to endanger the
economic activities of users concerned.

b)

Limitation of the sources of supply

(160) One user has claimed that the imposition of anti-dumping duties would limit sources
of supply available to Community users thus eliminating or reducing competition in
the Community.

(161) The investigation has shown that the most likely effect of the imposition of anti-
dumping measures will be a moderate rise in the price level of black colorformers in
the Community, rather than the total exclusion of the Japanese imports from the
Community market, notably in view of the fact that the Community industry will not
be able to supply the entirety of the Community market. Furthermore, the USA is an
alternative source of supply to the Community industry and to Japan.

(162)

It is therefore concluded that the imposition of anti-dumping measures is not likely to
result in the reduction of the sources of supply available to Community users. On the
contrary, the non imposition of anti-dumping measures could lead in the medium term
to the disappearance of the sole Community producer of black colorformers, namely in
view of the significant losses incurred as a result of the dumping of the product under
consideration, which would reduce sources of supply in the Community.

25

c)

Loss of competitiveness for exports outside the Community

(163) One user has claimed that imposition of anti-dumping duties would jeopardise its
exports outside the Community given the increase in its costs compared to its
competitors located outside the Community.

(164) Firstly, it has been found that due to the fierce competition on the Community market
of black colorformers, the price in the Community is substantially lower than the one
of the other main paper producing markets, i.e. USA and Japan. As a result carbonless
and thermal paper producers outside the Community source black colorformers at
prices which can be even 20% higher than those paid by Community users. Secondly,
it should be noted that anti-dumping duties are either not due when the product under
consideration is imported under the inward processing regime or are reimbursed when
it is re-exported as such or incorporated into another product.

(165)

In view of the above, it is not expected that the imposition of an anti-dumping duty
will result in a loss of competitiveness of Community users on export markets.

5. Consequences for competition in the Community market

(166) According to Article 21(1) of the Basic Regulation, the need to eliminate the trade
distorting effects of injurious dumping and to restore effective competition in the
Community have been given special consideration.

there are the three main producing countries world-wide:

(167) As regards the structure of the world market for black colorformers, it has been found
that
the European
Community, where Ciba is the sole producer, Japan, where four known producers
manufacture black colorformers and the USA, where three known producers
manufacture the product concerned: two of them are subsidiaries of the main two
Japanese exporting producers and one independent producer.

(168)

In the Community, Ciba produces both black and colour colorformers. Its market share
amounted to 36,5 % in the IP, whereas that of the imports of the product under
consideration amounted to 43,4 % and that of imports originating in the USA
amounted to 20,1%. It should be noted that an estimated 15% of the imports
originating in the USA are produced by the USA subsidiaries of the main two
Japanese exporting producers. The Community, which is the world's largest market for
the total estimated world consumption of black
black colorformers (38% of
colorformers)
total
is
consumption).

largely open to import penetration (around 64 % of

(169)

In Japan, two producers, who are the main exporters to the Community market, hold
over 70% of production capacity. In Japan, the market for black colorformers is
largely closed to Community exports since carbonless copy paper is not produced with
black colorformers but with colour colorformers and ODB-2 cannot be exported by the
Community industry due to patent restrictions. As a result there are no imports of
black colorformers in Japan.

(170)

In the USA, the subsidiaries of the two main Japanese producers have the largest
production capacity (over 50%). The USA market is characterised by its high level of
customs duty applicable to imports of black colorformers (11,6%). Furthermore, in the
USA, through the acquisition of a local producer, the subsidiary of a Japanese exporter

26

is bound by a long term supply contract with the biggest USA user which represents
between 40% and 50% of the market for black colorformers in the USA. As a result
import penetration in the USA amounts to only 17%.

(171)

In conclusion, the Community is the market with the highest import penetration and
where prices are the lowest in the world. According to the information supplied by
interested parties prices in the USA and Japan have been reported to be over 20%
higher than in the Community in the IP.

(172) Regarding the competition situation in the Community market, the investigation has
shown that during the period considered the Community industry has lost significant
market share and has suffered increasing losses as a result of the dumped imports of
the product under consideration. This loss of market share has been basically gained
by the product under consideration through unfair trade practices. This is all the more
serious in view of the share of the Community market held by Japanese exporting
producers whether through their exports originating in the Japan or those originating in
the USA.

(173) The adoption of anti-dumping measures is likely to ensure that the Community
industry remains in this market, thus contributing to fostering competition. On the
other hand, it is not expected that the imposition of anti-dumping measures forecloses
the Community market to imports of the product under consideration, in view of the
limited capacity of the Community industry and the purchasing power of users.

(174)

It is not unlikely that without anti-dumping measures, the Community industry would
withdraw from this market
thus reducing competition in the Community. As
mentioned above at recital (134), should this withdrawal take place, it is unlikely that
the Community industry would re-enter this market, in view of the high entry costs in
this market.

(175)

It is therefore concluded that the imposition of anti-dumping measures is likely to
restore effective competition by establishing a level playing filed and ensuring equal
competitive opportunities for all economic operators.

6. Conclusion on Community interest

(176) As regards the Community industry it was found that the imposition of an anti-
dumping duty would have a beneficial effect on its situation in the form of an expected
increase in its prices and restored profitability. The non-imposition of measures is
likely to lead to the closure of the Community industry’s activities in the medium term
considering its negative profitability.

(177) As regards importers/traders, the imposition of duties is unlikely to have a significant
negative effect on them given the limited impact of black colorformers on their overall
trading activities.

(178) As regards users, the imposition of an anti-dumping duty on the product under
consideration would only marginally affect their situation in view of the low impact of
black colorformers on their overall costs, the possibility to pass on fluctuations in the
raw materials to the prices of the paper products and the existence of an alternative
source of supply, i.e. the USA. The imposition of anti-dumping measures is also

27

considered to foster enhanced competition in the Community market for black
colorformers by restoring fair trade.

(179)

In view of the above, the Commission has concluded that, in these circumstances no
compelling reasons exist on grounds of Community interest not to adopt anti-dumping
measures in the present case.

G. ANTI-DUMPING MEASURES

(180) For the purpose of establishing the level of the definitive duty, account was taken of
the level of dumping found and the amount of duty necessary to eliminate the injury
suffered by the Community industry.

1. Injury elimination level

(181)

It was considered that the amount of duty necessary to remove the effects of injurious
dumping should allow the Community industry to cover its cost of production and
obtain a reasonable profit on sales. In this respect it was found that a profit margin of
7% on turnover could be considered to be an appropriate basis, due regard being given
to a rate of return which the Community industry could reasonably expect in the
absence of injurious dumping. This rate has been established by reference to the profit
margin publicly available for a number of European companies in the Specialty
Chemical sector, as defined in a report by an independent party.

(182) Yamamoto argued that the information submitted by the Mitsui group was sufficient to
allow an individual determination with respect to the injury margin. The information
provided by the Mitsui group included general information on their companies, their
purchase prices and resales on the Community market. Yamamoto argued that this was
sufficient to establish an individual export price and an individual injury margin in its
respect as all its sales to the Community were handled by the Mitsui group. Pursuant
to Article 18(4) of the Basic Regulation, Yamamoto and the above mentioned
companies were duly informed that the information submitted was insufficient and
given an opportunity to provide further explanations. Yamamoto and the Mitsui group
provided corrections to deficiencies noted in the replies of the Mitsui group and
declarations stating the relation between Yamamoto and Mitsui & Co. Ltd ("Mitsui
(Japan)"), as well as the role of Mitsui (Japan) as sole exporter of Yamamoto’s
products. However, Yamamoto refused to reply to the main body of the questionnaires
requesting information on the corporate structure of the exporting producer,
its
its domestic sales and costs of
production,
production.

its export sales to the Community,

(183)

It is considered that the non-cooperation of the producer made it impossible to carry
out any individual determination in its respect. Thus, if it was possible to verify that
the companies of the Mitsui group had reported completely and accurately their sales
of black colorformers on the Community market, the absence of information notably
on production, corporate structure and sales made it impossible to determine whether
the sales reported by the Mitsui group represented all the sales of Yamamoto to the
Community. Black colorformers produced by Yamamoto in Japan could be exported
to the Community via other channels whether direct or through related parties. Other
producers and/or traders could be related to Yamamoto and exporting Japanese black
colorformers to the Community, which would require the determination of a single
export price and individual injury margin for the group. The lack of data relevant to

28

make an individual determination applies therefore not only to the dumping margin
but equally to the injury margin.

(184)

In view of the above, Yamamoto is considered as a non-cooperating exporting
producer for the purpose of the present anti-dumping proceeding and therefore, no
individual injury margin determination has been carried out for this company.

(185) Accordingly, injury elimination levels were determined on the basis of ODB-1 and
ODB-2 respectively by comparing the cost of production plus a reasonable profit
margin for each of these types of black colorformer produced by the Community
industry with the selling price of the same types of the product under consideration at
user level. The injury margin, i.e. this difference expressed as a percentage of the CIF
value of the imports concerned, was 18,9% on average.

2. Form and level of the definitive anti-dumping measures

(186) Since the injury margin was found to be lower than the dumping margin, the definitive
duty to be imposed should correspond to the injury margin established, in conformity
with Article 9(4) of the Basic Regulation.

(187) Based on the determination of dumping and the injury resulting therefrom, a definitive
ad valorem duty of 18,9% should be imposed on imports of black colorformers
originating in Japan,

HAS ADOPTED THIS REGULATION:

Article 1

1. A definitive anti-dumping duty is hereby imposed on imports of black colorformers, falling
within CN code ex 2932 29 80 (TARIC code see annex) and originating in Japan.

2. For the purpose of the present proceeding, a black colorformer is a chemical colorformer
which, when used to coat paper for the production of carbonless copy paper or thermal paper
generates by its own properties a black image on the paper without having to be mixed with
other colorformers and has the following fluoran structure,

R1

N

R2

R5

R3

R4

O

O

O

R1 and R2 may be identical or different and must be chosen from substituted or unsubstituted
alkyl or aryl groups. They may also form part of a ring system. R3 must be chosen from
hydrogen, substituted or unsubstituted alkyl, aryl, alkoxy groups or halogens. R3 is typically a
methyl or chloro group. R4 must be chosen from substituted or unsubstituted monoarylamino
groups. If R3 is hydrogen then R4 must be a substituted monoarylamino group. R1, R2 and
R4 may not be hydrogen. R5 is hydrogen or halogen, typically hydrogen. A list of identified
black colorformers is provided in the annex.

29

2. For the product referred to in paragraph 1, the rate of anti-dumping duty applicable to the
net free-at-Community-frontier price, before duty, shall be 18,9%.

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

Article 2

This Regulation shall enter into force on the day following that of 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

30

Commercial
description

Chemical Abstract
Registry Number
(CAS No)

Annex

Chemical Description

TARIC codes

Black 15

36431-22-8

3-(diethylamino)-6-methyl-7-(2,4-dimethylphenylamino) fluoran

2932 29 80 35

Black 100

68134-61-2

3-(diethylamino)-7-(3-trifluoromethylphenylamino) fluoran

2932 29 80 60

Black 303

92814-52-3

3-(N-ethyl-N-isopentylamino)-7-(2-chlorophenylamino) fluoran

2932 29 80 60

Black 305

129437-78-5

3-(dipentylamino)-6-methyl-7-anilinofluoran

2932 29 80 60

Black 500

93071-94-4

3-[N-ethyl N-(3-ethoxypropyl)amino]-6-methyl-7-anilinofluoran

2932 29 80 60

102232-11-1

3-(N-tetrahydrofurfuryl-N-ethylamino)-6-methyl-7-anilinofluoran

2932 29 80 60

CF-51

ETAC

59129-79-2

3-(N-ethyl-N-p-tolylamino)-6-methyl-7-anilinofluoran

Fuji Black

85443-45-4

3-(diethylamino)-6-chloro-7-anilinofluoran

ODB

29512-49-0

3-(diethylamino)-6-methyl-7-anilinofluoran

ODB-2

89331-94-2

3-(dibutylamino)-6-methyl-7-anilinofluoran

ODB-7

151019-95-3

3-(diethylamino)-6-methyl-7-(3-methylphenylamino) fluoran

PSD 150

55250-84-5

3-(N-methyl-N-cyclohexylamino)-6-methyl-7-anilinofluoran

PSD 300A

92409-09-1

3-(N-methyl-N-propylamino)-6-methyl-7-anilinofluoran

PSD 184

95235-29-3

3-(N-ethyl-N-isobutylamino)-6-methyl-7-anilinofluoran

31

2932 29 80 40

2932 29 80 60

2932 29 80 60

2932 29 80 60

2932 29 80 60

2932 29 80 50

2932 29 80 30

2932 29 80 45

S 205

70516-41-5

3-(N-ethyl-N-isopentylamino)-6-methyl-7-anilinofluoran

TH 107

82137-81-3

3-(dibutylamino)-7-(2-chlorophenylamino) fluoran

black
Other
colorformers

2932 29 80 10

2932 29 80 25

2932 29 80 60

32