Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of internal gear hubs for bicycles originating in Japan
Date: 2001-10-02
Institutions: European Commission
Subjects: Japan, anti-dumping duty, import, originating product, spare part, two-wheeled vehicle

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 2.10.2001
COM(2001) 558 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of internal gear hubs for bicycles
originating in Japan

(presented by the Commission)

EXPLANATORY MEMORANDUM

On  27  July  2000  an  anti-dumping  proceeding  was  initiated  with  regard  to  imports  into  the
Community of internal gear hubs originating in Japan.

No  provisional  anti-dumping  measures  were  imposed  since  some  elements  concerning  the
investigation  on  injury,  causation  and  the  situation  of  the  Community  industry  had  to  be
investigated further.

The  attached  proposal  for  a  Council  Regulation  imposing  a  definitive  anti-dumping  duty  is
based on the definitive findings on dumping, injury, causation and Community interest.

The dumping margin found amounted to 36,6%.

Regarding injury and causation, it was found that the main negative development took place
between  1998  and  the  investigation  period  (2000),  the  situation  of  the  Community  industry
deteriorated in terms of production (-4%) sales volume (-13%), sales prices (-7%), and market
share  (-7  percentage  points).  Despite  restructuring  efforts  of  the  Community  industry,
profitability worsened and remained negative in parallel with sales price pressure faced by the
Community industry on its domestic market.

On  these  grounds  it  is  proposed  to  impose  a  definitive  anti-dumping  duty  on  imports  of
internal gear hubs originating in Japan of 11,3%, corresponding to the injury margin.

It is therefore proposed that the Council adopt the attached proposal for a Council Regulation
which should be published in the Official Journal no later than 26 October 2001.

2

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of internal gear hubs for bicycles
originating in Japan

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having  regard  to  Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection
against  dumped  imports  from  countries  not  members  of  the  European  Community1  and  in
particular Article 9 thereof,

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

Whereas:

1.

(1)

(2)

(3)

2.

(4)

1

2

A. PROCEDURE

Initiation

On  27  July  2000,  the  Commission  announced  by  a  notice  ("Notice  of  Initiation")
published  in  the  Official  Journal  of  the  European  Communities2  the  initiation  of  an
anti-dumping proceeding with regard to imports into the Community of internal gear
hubs ("IGH") originating in Japan.

The  proceeding  was  initiated  as  a  result  of  a  complaint  lodged  on  6  July  2000  by
SRAM  Deutschland  GmbH,  representing  a  major  proportion  of  the  Community
production of IGH.

The  complaint  contained  evidence  of  dumping  of  the  said  product  and  of  material
injury resulting therefrom, which was considered sufficient to justify the opening of an
anti-dumping proceeding.

Investigation

The  Commission  officially  advised  the  exporting  producers,  importers  and  users
known  to  be  concerned,  the  representatives  of  the  exporting  country  concerned,  the
complainant and another Community producer about the initiation of the proceeding.
Interested parties were given an opportunity to make their views known in writing and
to request a hearing within the time limit set out in the Notice of Initiation.

OJ No L 56, 6.3.1996, p. 1, as last amended by Council Regulation (EC) No 2238/2000, OJ No L 257,
11.10.2000, p. 2.
OJ No C 214, 27.07.2000, p.4.

3

                                                
(5)

(6)

(7)

(8)

A number of parties made their views known in writing. All parties who so requested
within the above time limit and who demonstrated that there  were  particular reasons
why they should be heard were granted the opportunity to be heard.

The  Commission sent questionnaires  to  all  parties  known  to  be  concerned  and  to  all
other  companies  which  made  themselves  known  within  the  deadline  set  out  in  the
Notice  of  Initiation.  Meaningful  replies  were  received  from  the  complaining
Community  producer,  eight  unrelated  importers  in  the  Community,  35  users  and  the
exporting producer in Japan.

Detailed  information  on  product  comparability  for  types  of  IGH  sold  on  the
Community market was requested in an additional questionnaire sent to 58 parties (the
Community  industry,  the  exporting  producer,  two  related  importers,  nine  unrelated
importers  and  45  users).  49  meaningful  replies  were  received.  Reactions  were  also
received  from  137  parties,  mainly  bicycle  producers,  retailers,  consumer  and  user
associations.

The  Commission  sought  and  verified  all  the  information  deemed  necessary  for  the
purposes of a determination of dumping, injury and Community interest including the
carrying out of verification visits at the premises of the following companies:

A. Community producer

– 

SRAM Deutschland GmbH, Schweinfurt, Germany

B. Exporting producer in Japan

– 

Shimano Inc., Sakai, Japan

C. Related importers in the Community

– 

– 

Shimano Europa GmbH (Dutch Branch), Nunspeet, The Netherlands

Shimano Benelux B.V., Nunspeet, The Netherlands

D. Unrelated importers in the Community

– 

Paul Lange & Co, Stuttgart, Germany

(9)

On-the-spot visits were also carried out at the premises of  the following  Community
users:

– 

– 

– 

– 

– 

– 

Batavus B.V., Heerenveen, The Netherlands

Biria GmbH, Edingen-Neckarhausen, Germany

Epple Zweidrad GmbH, Memmingen, Germany

Helkama, Hanko, Finland

Koninklijke Gazelle B.V., Dieren, The Netherlands

Tunturi, Turku, Finland

4

(10)

The  investigation  of  dumping  and  injury  covered  the  period  from  1  July  1999  to
30 June 2000 (“the investigation period” or “IP”). With respect to the trends relevant
for  the  injury  assessment,  data  covering  the  period  from  1  January  1996  to  30  June
2000 (“the period considered”) was analysed, whereas the period used for the findings
on undercutting and underselling is the aforementioned IP.

3.

Provisional measures

(11) Given the need to further examine certain aspects of injury, causation and Community
interest,  no  provisional  anti-dumping  measures  were  imposed  on  IGH  originating  in
Japan.

4.

Subsequent procedure

(12) At  that  stage,  additional  information  was  requested,  notably  from  the  exporting
producer,  and  all parties were  informed  of  the  Commission's  preliminary  assessment
of the case. The Commission continued  to  seek and verify all information it deemed
necessary  for  its  definitive  findings.  In  particular,  further  on-the-spot  investigations
were  carried  out  at  the  premises  of  the  exporting  producer  in  Japan,  of  an  unrelated
importer in the Community and of users in the Community.

(13) All  parties  were  informed  of  the  essential  facts  and  considerations  on  the  basis  of
which it was intended to recommend the imposition of definitive anti-dumping duties.
They  were  also  granted  a  period  within  which  they  could  make  representations
subsequent to this disclosure.

(14)

The oral and written comments submitted by the parties were considered, and, where
appropriate, the findings have been modified accordingly.

B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT

1.

Product under consideration

(15)

(16)

(17)

The product under consideration is an internal gear hub, defined as a hub of a bicycle
wheel with an integrated gear system with three or more gears, regardless of whether
or  not  a  braking  system  is  integrated  in  the  hub,  attached  to  the  hub  or  mounted  on
another part of the bicycle.

The  investigation  has  shown  that  the  product  concerned  is  exclusively  used  as  an
integrated gear hub of a bicycle wheel to operate the bicycle.

The  investigation  has  also  shown  that  IGH  consist  of  three  basic  types,  namely
“coaster brake hubs” (where the gearing system, as well as the back-pedalling braking
system, are integrated in the  hub), “drum  brake  hubs"  (where  the  gearing  system,  as
well as the hand-operated braking system, are integrated in the hub),  and “freewheel
hubs”  (where  only  the  gearing  system  is  integrated  in  the  hub),  all  having  the  same
basic physical and technical characteristics and uses.

(18)

In this respect, the exporting producer and some other interested parties  claimed that
the above types of IGH had different physical characteristics. In particular they argued
that users would regard coaster brake hubs (with back-pedalling braking system), and
drum  brake  and  freewheels  hubs  (with  hand-operated  braking  systems)  as  different

5

(19)

(20)

(21)

products due to the differences in the braking systems. On this basis, they claimed that
the investigation should be limited to coaster brake hubs only.

The investigation showed that the main physical and technical characteristic of an IGH
is the gear-shifting mechanism itself, which is always integrated in the hub. An IGH
consists  of  a  set  of  gears  integrated  in  a  hub,  and  this  in  contrast  to  an  external
(dérailleur)  gearing  system.  Whether  or  which  type  of  braking  system,  if  any,  is
additionally  integrated  in  or  attached  to  the  hub,  while  relevant  for  calculations  and
price comparison purposes, does not affect the basic characteristics and use of an IGH
and is thus irrelevant in respect of the definition of the product concerned.

In  addition, 
investigation  has  shown 
interchangeable and that they have the same use and applications.

that  different 

the 

types  of  IGH  are

In view of the above, the claim to exclude certain types of IGH from the scope of the
present  investigation  had  to  be  rejected,  and  all  IGH  containing  a  gear-shifting
mechanism with three or more gears are considered as a single product for the purpose
of this proceeding.

2.

Like product

(22)

(23)

The  investigation  has  shown  that  the  basic  physical  and  technical  characteristics  of
IGH  produced  and  sold  by  the  Community  industry  in  the  Community  and  IGH
produced  and  sold  on  the  domestic  Japanese  market,  and  of  IGH  imported  into  the
Community from Japan are the same. Furthermore, the end use of IGH is the same.

In  view  of  the  above  it  is  concluded  that  all  these  products  are  alike  within  the
meaning  of  Article  1(4)  of  Council  Regulation  (EC)  No  384/96  (“the  basic
Regulation”).

1.

Normal value

C. DUMPING

(24)

(25)

In order to establish normal value it was first determined whether the total volume of
the  domestic  sales  of  the  product  concerned  was  representative  in  accordance  with
Article 2(2) of the basic Regulation, i.e. whether these domestic sales represented 5%
or more of the sales volume of the product concerned exported to the Community. It
was established that this requirement was met.

The  exporting  producer  claimed  that  prices  of  some  models  sold  on  the  domestic
market  which are  very similar  to exported models could  be used  to  establish  normal
value  if  they  were  adjusted  by  differences  in  the  costs  of  manufacturing.  The
Commission  verified  the  degree  of  similarity  between  the  19  exported  models
concerned  and  two  similar  models  sold  on  the  domestic  market  and  concluded  that
they were very similar and could be compared.

(26)

It  then  was  examined  whether  total  domestic  sales  of  each  model  exported  to  the
Community constituted 5% or more of the sales volume of the same model exported to
the Community. It was found that only four models passed this test.

(27)

For these four models, it was examined whether sufficient sales had been made in the
ordinary course of trade in accordance with Article 2(4) of the basic Regulation.

6

(28)

(29)

It  was  established,  for  three  of  the  four  models,  that  the  volume  of  domestic  sales
above unit cost represented more than 80% of sales and that the weighted average unit
price in Japan was higher than the weighted average unit cost. Consequently, normal
value  for  those  three  models  was  established  on  the  basis  of  the  weighted  average
price actually paid for all domestic sales of those models.

For  the  fourth  model,  the  volume  of  domestic  sales  above  unit  cost  represented  less
than  10%  of  sales.  For  this  model  and  for  all  other  models  which  were  not  sold  in
sufficient quantities in the Japanese market, normal value was constructed on the basis
of  the  costs  of  manufacturing  incurred  by  the  exporting  producer  for  the  exported
models  in  question  plus  a  reasonable  amount  for  selling,  general  and  administrative
expenses (“SG&A”) and profit in accordance with Article 2(3), (5) and (6) of the basic
Regulation.  The  amount  of  SG&A  expenses  was  based  on  domestic  sales  of  IGH,
which  were  made  in  representative  quantities.  The  profit  margin  was  based  on
domestic sales of IGH in the ordinary course of trade.

2.

Export price

(30) Approximately  40%  of  export  sales  to  the  Community  were  made  directly  to
independent customers and export prices for these were established on the basis of the
prices actually paid or payable by these customers in accordance with Article 2(8) of
the basic Regulation.

(31)

The  remaining  sales  were  made  to  related  companies  based  in  the  Community.
Therefore, export prices for these sales were constructed pursuant to Article 2(9) of the
basic Regulation, namely on the basis of the price at which the imported products were
first  resold  to  an  independent  buyer.  In  order  to  establish  a  reliable  export  price,
adjustments were made for all costs incurred between importation and resale by those
importers  and  for  profits  accruing.  The  profit  margin  applied  was  the  weighted
average profit margin of unrelated importers.

3.

Comparison

(32)

For the purposes of a fair comparison due allowance, in the form of adjustments, was
made for differences under Article 2(10) of the basic Regulation which affected price
comparability.  Accordingly,  allowances  were  applied  concerning  physical
characteristics,  discounts,  transport,  insurance,  handling,  loading  and  ancillary  costs,
packing, credit costs, after-sales costs, commissions and currency conversions.

4.

Dumping margin

(33)

(34)

In accordance with Article 2(10) and (11) of the basic Regulation, the dumping margin
was  established  on  the  basis  of  a  comparison  between  the  weighted  average  normal
values and the weighted average export prices at ex-factory level for the same model
and at the same level of trade.

This  comparison  showed  the  existence  of  dumping,  the  dumping  being  equal  to  the
amount  by  which  the  normal  value  exceeded  the  export  price.  Expressed  as  a
percentage  of  the  CIF  Community  frontier  import  price,  duty  unpaid,  the  weighted
average dumping margin is: 36,6%.

7

(35)

The exporting producer represents the entirety of the Japanese exports of IGH to the
Community. Accordingly, the residual dumping margin definitively established is set
at the same level.

D. COMMUNITY INDUSTRY

1.

Definition of the Community production

(36) At the time of the lodging of the complaint and during the IP there were two operators

producing the product concerned on the Community market:

– 

– 

the complainant,

another  Community  producer  ("the  other  Community  producer")  which
accounted  for  less  than  10%  of  the  total  estimated  Community  production  of
IGH  during  the  IP.  The  other  Community  producer  did  not  reply  to  the
questionnaire and did not take a position on the complaint.

(37)

The exporting producer requested that the Commission review the figures with respect
to the other Community producer. In this respect, it should be noted that given the lack
of cooperation of the other Community producer, best facts available had to be used,
which were in this case from both the complainant and the sole cooperating exporting
producer.  It  was  also  found  that  this  operator  went  into  liquidation  and  ceased
production shortly after the IP.

(38) Based  on  the  above,  the  production  of  the  complainant  and  the  other  Community
producer constitute the total Community production within the meaning of Article 4(1)
of the basic Regulation.

2.

Definition of the Community industry

(39)

It  was  found  that  the  complaining  cooperating  Community  producer  represented  a
major proportion of the total Community production of the product concerned, in this
case  more  than  90%.  It  was  therefore  concluded  that  the  complaining  Community
producer constituted the Community industry within the meaning of Articles 5(4) and
4(1) of the basic Regulation. It is hereafter referred to as "the Community industry”.

1.

Preliminary remark

E. INJURY

(40) Given that there is only one cooperating exporting producer and that the Community
industry comprises only one company, specific data relating to these companies have
been  indexed  in  order  to  preserve  the  confidentiality  of  the  data  submitted  in
accordance with Article 19 of the basic Regulation.

2.

Community consumption

(41) Community  consumption  was  established  on  the  basis  of  the  sales  volumes  of  the
Community industry, an estimate of the sales made by the other Community producer
and the imports of the Japanese exporting producer onto the Community market. With
respect to the sales of  the  other Community producer, the estimate was made on  the

8

basis  of  figures  presented  by  the  Community  industry  and  the  exporting  producer.
There were no imports originating in other third countries.

(42) On  this  basis,  it  was  found  that  consumption  of  IGH  decreased  by  5%  during  the
period considered. While only decreasing by 4% from 1996 to 1998, it went down by
a further 8% between 1998 and 1999.  During the  IP, consumption recovered to  near
1998 levels.

3.

Imports concerned

(a) Volume of the imports concerned

(43) Between 1996 and the IP the volume of imports concerned originating in the country
concerned  increased  by  a  significant  23%.  While  these  imports  decreased  by  14%
from  1996  to  1998,  they  increased  by  as  much  as  43%  in  the  period  1998-IP.  On  a
year-to-year  basis,  it  emerged  that  despite  the  fall  in  consumption  in  1999  (-8%
compared  to  1998),  the  imports  concerned  increased  by  17%  in  1999  compared  to
1998. The increase in the volume of these imports was even more pronounced between
1999 and the IP (+22%).

(b) Market share of the imports concerned

(44) Over  the  period  considered,  the  market  share  of  the  imports  concerned  increased  by
over  30%  in  a  declining  Community  market.  Between  1996  and  1998,  the  market
share held by the exporting producer decreased by 10% but increased by 30% between
1998 and 1999 and by a further 11% between 1999 and the IP, in line with the above
development of its import volume.

(c) Average prices of imports concerned

(45) Based on the information provided by the exporting producer, it appeared that between
1996 and 1998 prices of Japanese IGH sold on  the  Community market  decreased by
5%. They rose by 15% in 1999 and by a  further 2% during the  IP.  In this context it
should be noted that this price trend is exclusively based on the data submitted by the
exporting producer, which could not be verified for all the period considered.

(d) Price undercutting

(46)

For the determination of price undercutting, the prices of IGH sold by the Community
industry  were  compared  to  the  prices  of  the  Japanese  exporting  producer  on  the
Community market during the IP. This comparison was made for comparable types of
IGH and at the same level of trade, namely for sales to the first independent customer.

(i) Comparability

(47) As  explained  above  in  recital  (7),  detailed  information  on  product  comparability  for
types  of  IGH  sold  on  the  Community  market  was  requested  in  an  additional
questionnaire.  The  directly  comparable  types  of  IGH  produced  by  the  Japanese
exporting producer and sold on the Community market, and those produced and sold
by  the  Community  industry  on  that  market  were  identified  on  the  basis  of  these
replies.

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(48)

For the purpose of a meaningful price comparison, it was thus ensured that IGH could
be compared on a type-by-type basis taking into account notably the number of gears.

(ii) Adjustments

(49)

The Community industry claimed that certain IGH sold by the exporting producer on
the Community market were equipped with hub shells made of aluminum, whereas the
comparable  hubs  sold  by  them  were  exclusively  equipped  with  hub  shells  made  of
steel.  The  Community  industry  claimed  that  the  exporting  producer’s  prices  should
therefore  be  adjusted  downwards  to  reflect  the  market  value  of  this  material
difference. The Japanese exporting producer, while acknowledging that an adjustment
was  appropriate,  claimed  that  this  should  be  in  the  order  of  not  more  than  5%,  by
reference to differences in cost of production.

(50)

In  this  respect,  the  investigation  showed  that  more  than  55%  of  the  7-speed  coaster
brake  hubs  and  100%  of  the  7-speed  freewheel  hubs  sold  by  the  exporting  producer
during  the  IP  on  the  Community  market  were  equipped  with  aluminum  hub  shells,
whereas the Community industry exclusively sold comparable IGH with steel shells.

(51) Based on evidence available, in particular a price list of the exporting producer, it was
found that IGH equipped with aluminum hub shells were, during the IP, priced about
22%  higher  than  the  same  IGH  with  steel  hub  shells.  According  to  the  transaction
listing  for  the  IP  provided  by  the  exporting  producer,  the  prices  effectively  invoiced
for  the  aluminum  hubs  were,  however,  only  11%  higher  than  the  prices  for  the
corresponding steel hubs.

(52) On  this  basis,  it  was  considered  that  there  was  an  objective  market  value  difference
between  an  IGH  equipped  with  an  aluminum  shell  and  a  hub  equipped  with  a  steel
one. This difference was established at 11% of the price of the aluminum hub.

(53)

In  addition,  both  the  Community  industry  and  the  exporting  producer,  respectively,
claimed that further adjustments should be made, on the basis of alleged differences in
the product types under consideration. However, they were informed that none of the
alleged  differences  were  found  to  be  objective  and  measurable  notably  in  terms  of
market value. The additional claims from both parties therefore had to be rejected.

(iii) Price undercutting

(54) Based on the above, and further to the additional verifications carried out, two types of
IGH  (coaster  brake  hub  and  freewheel  hub)  representing  around  78%  of  the  sales
made by the Community industry on  the  Community market  and around 85%  of the
exports made by the Japanese exporter, were considered to be comparable and made at
the  same  level  of  trade.  The  following  IGH  sold  on  the  Community  market  by  the
Community industry and the exporting producer were compared with each other on a
type-by-type basis:

– 

– 

– 

– 

3-speed coaster brake hubs;

7-speed coaster brake hubs;

3-speed freewheel hubs;

7-speed freewheel hubs.

10

(55)

(56)

The  sales  prices  considered  for  the  exporting  producer  concerned  were  those  at  CIF
Community border level, including customs duties. The sales prices of the Community
industry were adjusted where necessary to an ex-works level, i.e. excluding transport
costs.

The results of the comparison on a transaction to weighted-average basis showed that
the  average  price  undercutting  margin,  expressed  as  a  percentage  of  the  Community
industry's average selling prices, was 6.8% during the IP.

4.

Situation of the Community industry

(a) Preliminary remark

(57)

In accordance with Article 3(5) of the basic Regulation, the Commission examined all
economic factors and indices having a bearing on the state of the Community industry
on its domestic market.

(b) Production, capacity and utilisation of capacity

(58) During the period considered, the Community industry's production increased by 3%.

(59) However,  between  1998  and  1999  Community  industry  production  significantly
decreased by 19%, whilst Community consumption in terms of volume decreased by
only 8% during the same period. Production then  recovered during the  IP (+18%  by
comparison to 1999) but was below the level of 1998. This increase in production, in
spite of the decrease in the Community industry's sales volume on its domestic market,
is explained by the increased export activities of the Community industry to other third
countries during the IP.

(60) Given that production capacity did not change during the period considered, the trend
in  utilization  of  capacity  was  similar  to  the  trend  in  production,  remaining  between
50% and 65%.

(c) Volume of sales, market share and growth

(61)

From  1996  to  the  IP  the  Community  industry’s  sales  to  unrelated  customers  in  the
Community decreased by 6% in volume. During the period 1996-1998, in parallel with
its increased production, the Community industry managed to increase its Community
sales by 8%. There then followed a 17% fall in sales volume between 1998 and 1999.
This  decrease  was  far  more  pronounced  than  the  decrease  of  the  Community
consumption during that period which was limited to -8%. The slight increase in sales
volume  between  1999  and  the  IP  (+4%)  did  not  allow  the  Community  industry  to
recover the volume previously lost.

(62) Although the Community industry's market share increased by 13% between 1996 and
1998, it went back down to its 1996 level in the period 1998-IP. This should be seen in
the  light  of  the  decrease  in  consumption.  This  situation  coincided  with  a  significant
increase of 43% in the volume of the imports concerned on the Community market in
the same period.

(63)

It  should  be  noted  that  the  exporting  producer  claimed  that  the  Community  industry
had  been  able  to  increase  its  market  share  at  the  expense  of  the  other  Community
producer during the period considered. However, the investigation has shown that this

11

claim  was  not  founded.  In  fact  the  increase  in  the  Japanese  exporting  producer's
market share during the IP was made at the expense of both the Community industry
and the other Community producer in particular in the period 1998  to the  IP. Actual
sales figures show that the sales volume lost by the Community industry and the other
Community  producer  during  that  period  was  completely  taken  over  by  the  Japanese
exporting producer.

(d) Prices and factors affecting prices

(64) During the period considered, the Community industry's average sales price of IGH on
the  Community  market  dropped  significantly  by  21%.  It  should  be  noted  in  this
context that neither the price differences between types of IGH nor the product mix of
the Community industry on the Community market changed significantly during that
period. Therefore, the decrease in average price is not due to any change in its product
mix towards cheaper types of IGH.

(65) Whilst price lists indicate that Japanese prices seem to have increased over the period
considered,  it  should  be  noted  that  they  were  still  undercutting  the  Community
industry's prices on the  Community  market  by  around  7%  on  average  during  the  IP.
On  this  basis,  it  can  also  be  assumed  that  a  higher  price  differential  between  the
Japanese  exporting  producer  and  the  Community  industry  indeed  existed  during
considerable parts of the period considered. This had the effect of depressing domestic
prices  to  the  extent  that  they  were  not  profitable  during  the  period  considered.  This
was notably the case during the IP.

(e) Inventories (stocks)

(66) During the period considered, except between 1997 and 1998, the levels of stocks kept
by  the  Community  industry  was  rather  low.  This  is  notably  due  to  the  fact  that  the
Community industry mainly produces for orders and does not produce to pile stocks.
On this basis, the impact, if any, of stock movement on the situation of the Community
industry, particularly during the IP was negligible. The evaluation of stocks does not
appear to be a relevant factor in examining the economic situation of the Community
industry.

(f) Profitability and cash flow

(67) As  to  profitability,  the  losses  incurred  by  the  Community  industry  in  1996  were
between  5%  and  10%  of  turnover.  In  1997,  the  situation  improved  and  profitability
was  close  to  break-even.  Between  1997  and  the  IP,  after  the  take-over  of  the
Community  industry  (formerly  Mannesmann  Sachs)  by  SRAM  Deutschland  GmbH,
the  Community  industry  restructured  its  activities,  thus  reducing  its  costs  of
production by almost 20%. Over the period considered, the cost reduction was indeed
as high as 26%. Notwithstanding this, the Community industry's profitability remained
negative during the whole period considered.

(68)

From the break-even situation in 1997, it could reasonably have been expected that the
efforts made by the Community industry to restructure and reduce costs would lead to
a profitable situation.  However,  the  price  depression  experienced  by  the  Community
industry,  in  particular  in  1999  and  during  the  IP,  undermined  these  efforts.  This
suggests  that,  without  the  restructuring  of  its  activities,  the  Community  industry's
losses would have been even higher or that Community  IGH  production would  have

12

ceased completely. The losses incurred by the Community industry during the IP were
around  3%  of  turnover.  It  should  be  noted  that  this  result  does  not  take  account  of
restructuring and extraordinary costs incurred by the  Community industry during the
period considered.

The reduction in cost of production and in losses allowed an improvement of the cash
flow generated by the Community industry during the period considered. In line with
the  evolution  of  the  losses  incurred  by  the  Community  industry,  cash  flow
significantly  deteriorated,  in  particular  between  1997  and  1999,  but  recovered
somewhat during the IP.

(g) Investments, return on investments and ability to raise capital

Investments  made  in  the  period  considered  were  particularly  high  in  1999.  This  is
explained by the new IGH manufacturing facility set up in Germany which started to
operate at the beginning of 1999. This investment shows that the company intends to
remain  an  active  player  on  the  market  and  has  a  long  term  strategy  for  the  product
under consideration.

In  this  respect,  the  investigation  showed  that  the  restructuring  undertaken  by  the
Community  industry  led  to  a  slight  improvement  in  the  operating  return  on
investments during the IP. However, this improvement does not detract from the fact
that  the  Community  industry's  financial  result  remained  negative  during  the  whole
period considered.

(69)

(70)

(71)

(72) Despite  the  financial  losses  incurred,  the  Community  industry  was  not  found  to  be

experiencing serious difficulties in its ability to raise capital.

(h) Employment, productivity and wages

(73)

Employment  decreased  by  17%  from  1997  to  1998  and  remained  stable  until  the  IP
despite the difficulties encountered by the Community industry.

(74) Given the level  of production and the reduction  in  personnel  employed,  productivity

was improved during the period from 1997 to the IP.

(75)

The  total  amount  of  wages  increased  slightly  during  the  period  considered.  The
average wage per employee remained rather stable.

(i) Magnitude of dumping margin

(76)

The  impact  on  the  Community  industry  of  the  magnitude  of  the  actual  margin  of
dumping cannot be considered to be negligible given the volume and the prices of the
imports  concerned.  Indeed,  the  investigation  showed  that  overall  the  imports
originating in Japan were sold at dumped prices on the Community market during the
IP.  Price  pressure  on  Community  prices  would  obviously  have  been  lower  or  even
non-existent without dumping.

5.

Conclusion on injury

(77) During the period considered the presence of imports originating in Japan significantly
increased on the Community market and the main relevant injury indicators pertaining
to the Community industry showed a negative development.

13

(78)

(79)

This development was particularly evident between 1998 and the IP when the volume
of the imports concerned increased by 43% while Community consumption decreased
by 1%. This allowed the Japanese  exporting producer to  gain a significant additional
share of the Community market (12 percentage points), mainly at the expense of the
Community  industry.  In  this  context,  it  should  be  noted  that  the  imports  concerned
were undercutting the Community industry's prices by around 7% during the IP, and
that the Community industry's sales prices were depressed, not reaching any profitable
level.

It was also found that the main negative development in the economic situation of the
Community  industry  took  place  during  the  same  period,  namely  from  1998-IP:  its
sales volume decreased by  13% and its  sales prices by 7%. Production decreased by
4% and the loss in market share incurred by the Community industry was as high as 7
percentage  points.  Despite  restructuring  efforts  and  cost  reductions,  profitability
worsened  and  remained  negative,  and  this  in  parallel  with  the  sales  price  pressure
faced by the Community industry on its domestic market.

(80)

In the light of the foregoing, in particular the decrease in sales price, profitability and
market share experienced by the Community industry, in the period from 1998 to the
IP  in  particular,  it  is  concluded  that  the  Community  industry  has  suffered  material
injury within the meaning of Article 3(1) of the basic Regulation during the IP.

1.

Introduction

F. CAUSATION

(81)

In  accordance  with  Article  3(6)  and  (7)  of  the  basic  Regulation,  it  was  examined
whether  the  dumped  imports  of  IGH  originating  in  Japan  caused  injury  to  the
Community  industry  to  a  degree  that  enables  it  to  be  classified  as  material.  Known
factors other than the dumped imports, which  could  at the same  time be injuring the
Community  industry,  were  also  examined  to  ensure  that  possible  injury  caused  by
these other factors was not attributed to the dumped imports.

2.

Effect of the dumped imports

(82) During the period considered, the volume of dumped imports originating in Japan into
the Community increased  by  23%  and  their  market  share  rose  by  39%,  a  significant
gain at the expense of producers in the Community.

(83)

(84)

The  link  between  the  injury  suffered  by  the  Community  industry  and  the  dumped
imports  is  demonstrated  in  particular  by  the  developments  observed  from  1998  until
the end of the IP. During this period, dumped imports originating in Japan increased
by  43%  in  terms  of  volume  and  the  increase  in  the  share  of  the  Community  market
was as high as 44%.

It  has  been  found  that  the  Community  industry  was  subject  to  price  pressure,  as
evidenced by the price undercutting practised by the Japanese exporting producer and
the  evolution  of  the  prices  of  the  Community  industry,  which  were  depressed  to  a
considerable  extent.  This  price  pressure  was  further  aggravated  by  the  fact  that  the
IGH  market  is  price  transparent  with  only  two  operators.  The  above  developments
coincided  with  the  significant  declining  trend  of  the  main  economic  indicators
pertaining to the Community industry from 1998 to the IP: its sales volume decreased

14

by 13%, and significant market share was lost. The average sales price decreased by
7%. As a result, the Community industry continued to incur financial losses.

(85)

It is concluded, therefore, that the dumped imports of IGH originating in Japan had a
material impact on the injury suffered by the Community industry, within the meaning
of Article 3(6) of the basic Regulation.

3.

Effect of other factors

(86)

In  accordance  with  Article  3(7)  of  the  basic  Regulation,  it  was  examined  whether
factors other than the dumped imports originating in Japan might have contributed to
the material injury suffered by the Community industry to ensure that injury caused by
these  other  factors  is  not  attributed  to  the  dumped  imports.  In  this  context,  the
following factors were examined: the allegedly higher prices of the Japanese exporting
producer,  the  fall  in  consumption  in  1999,  the  relocation  of  production  of  certain
bicycle  manufacturers  to  Central  and  Eastern  European  Countries  (CEEC),  the
Community  industry's  export  activities  and,  the  situation  of  the  other  Community
producer.

(a) Allegedly higher prices of the exporting producer

(87) A number of users contested the results of the price undercutting exercise and causal
link between the dumped imports originating in Japan and the  injury  suffered by the
Community  industry.  They  claimed  that  prices  of  Japanese  IGH  were  consistently
higher than those of the Community industry during the IP.

(88)

(89)

It should be  noted that this  claim  was  made  mainly  by  parties  which  are  not  buying
IGH directly from the exporting producer or its related companies on the Community
market.  In  other  words,  these  users  compared  the  prices  directly  charged  by  the
Community  industry  with  prices  charged  by  an  intermediary  sales  company  selling
Japanese IGH. On this basis, contrary to the contents of recital (46) prices of IGH are
not compared at the same level of trade and show unreliable results.

The Commission established price undercutting by comparing the Japanese exporting
producer's prices with the Community industry's prices at the same level of trade. As
explained in recital (56) above, this comparison showed that price undercutting existed
for  a  large  number  of  IGH  types  and  transactions  during  the  IP.  The  undercutting
found  during  the  IP  was  in  the  order  of  7%  on  average  of  the  sales  price  of  the
Community industry.

(90) As mentioned in recitals (64), (65) and (76) above, price undercutting by the Japanese
exporting  producer  was  found  to  exist  during  the  IP  and  price  depression  was  also
found for the Community industry's prices during the period considered.

(91) Consequently the above argument is considered to be unsubstantiated and is therefore

rejected.

(b) Fall in consumption in 1999 and market development

(92)

It  has  been  examined  whether  the  fall  in  consumption  in  1999  was  a  major  factor
contributing to the injury suffered by the Community industry. Given the presence of
basically  two  major  operators  on  the  Community  market,  it  was  considered  that  the

15

possible  impact  of  the  fall  in  consumption  and  the  subsequent  market  development
should be examined in the light of the performances of both operators.

(93)

In 1999, as compared with 1998, the Community industry's sales volume decreased by
around  18%,  whereas  demand  decreased  by  8%,  i.e.  to  a  much  lesser  degree.  The
Community industry also lost around 9% of market share. During the same period, the
exporting producer was able to increase its sales volume by 17% and its market share
by 30%.

(94) During  the  IP,  by  comparison  to  1999,  the  Community  industry  increased  its  sales
volume  by  4%  but  its  market  share  dropped  by  4%.  In  the  meantime,  the  exporting
producer was able to further increase its sales volume (22%) and market share (11%),
namely to a much larger extent than the recovery of the market (8%).

(95) Based on the above facts, it is clear that the deterioration of the Community industry's
position  in  1999  was  more  dramatic  than  any  reduction  in  consumption.  Similarly,
when the market recovered during the IP, the performance of the Community industry
was  far  below  the  market  development.  In  the  meantime,  the  dumped  imports
substantially improved their position on the Community market. Consequently, unlike
dumped  imports  it  is  considered  that  the  fall  in  consumption  did  not  play  any
significant role in the injurious situation of the Community industry.

(c) Relocation  of  production  of  certain  bicycle  manufacturers  to  Central  and
Eastern  European  Countries  (CEEC)  and  export  sales  of  the  Community
industry

(96)

(97)

(98)

The Japanese exporting producer argued that the decrease in the Community industry's
sales volume during the  period  considered  was caused by the  contraction of  demand
on  the  Community  market.  This  contraction  was  due  to  the  shift  of  production  of  a
number  of  the  Community  industry's  customers  from  the  Community  to  Central  and
Eastern European Countries (CEEC) in 1998. The exporting producer therefore argued
that  any  loss  of  sales  volume  (and  further  injurious  consequences)  incurred  by  the
Community industry on its domestic market was offset when taking into account the
Community industry's export sales to CEEC.

In  this  respect,  it  has  been  found  that  the  number  of  bicycle  manufacturers  that
relocated their production to certain CEEC during the period considered is likely to be
rather small compared to Community consumption. Furthermore, the investigation did
not  show  that  the  Community  industry  increased  its  export  sales  in  1998  or  even  in
1999 compared to previous years.

There are indications that relocation was also undertaken by customers of the Japanese
exporting producer. It has also been found that a number of bicycle manufacturers still
retained  their  production  in  the  Community  while  setting  up  production  plants  in
certain CEEC, during the IP. The effect, if any, of such relocation on the situation of
the Community industry cannot therefore be considered substantial during the period
considered.

(99) An analysis of the export sales of the Community industry was also carried out. The
analysis showed that from 1996 up to 1999, the Community industry's export sales to
third  countries  represented  around  8%  of  its  total  sales,  whereas  they  rose  to  15%
during the IP. Had the export sales not increased, the loss of  economies of scale and

16

the impact on the unit cost of the Community industry's production would have been
even higher, leading to even greater financial losses.

(100) Therefore,  the  argument  that  the  relocation  of  bicycle  production  to  Central  and
Eastern  European  Countries  explains  the  fall  in  sales  volume  of  the  Community
industry in its domestic market is rejected.

(d) The other Community producer

(101)

It  was  further  considered  whether  the  other  Community  producer  could  have
contributed to the injury suffered by the Community industry. However, on the basis
of  the  facts  available,  the  other  Community  producer  lost  around  60%  of  sales  and
around 60% of its market share during the period considered, remaining with a market
share of around 6% during the IP. It is therefore concluded that the other Community
producer did not contribute to the injury suffered by the Community industry.

4.

Conclusion on causation

(102) The  substantially  dumped  imports  which  increased  materially  during  the  period
considered, the price undercutting and the  price depression found,  all had significant
negative consequences on the economic situation of the Community industry, notably
in terms of sales prices and sales volumes, which in turn had an effect on market share
and profitability. The impact of the dumped imports was such that it caused material
injury to the Community industry. Based  on the  above facts and  considerations, it is
also  concluded  that  any  other  factors  which  may  have  contributed  to  the  injury
suffered by the Community industry were not such as to break the causal link between
the injury established and the impact of the dumped imports concerned.

G. COMMUNITY INTEREST

1.

Preliminary remarks

(103)

In  order  to  determine  whether  the  Community  interest  called  for  intervention,  an
investigation was carried out into the likely effects of the imposition/non-imposition of
anti-dumping  measures  on  the  economic  operators  concerned.  For  this  purpose,
information  was  requested  from  all  interested  parties,  including  the  Community
industry,  the  unrelated  importers/traders  and  the  users  of  the  product  under
consideration.

2.

Interest of the Community industry

(104)

It  was  found  that  the  Community  industry  had  been  making  considerable  efforts
during  the  period  considered  to  improve  its  productivity,  in  a  successful  attempt  to
lower its costs of production and to enhance its competitiveness in the Community and
world-wide.  In  this  respect,  the  Community  industry  made  a  major  investment  in
1999,  opening  a  new  production  site  in  order  to  further  improve  efficiency  and
production quality. This investment was decided upon at the time of the take-over of
Mannesmann  Sachs,  in  1997,  based  on  a  reasonable  assessment  of  market
developments.  During  the  period  considered,  the  Community  industry  managed  to
reduce  its  costs  by  26%  and  increase  its  export  sales.  This  indicates  that  the
Community industry is viable and competitive  and intends to  continue production of
IGH in the Community unless it is driven out of the market by dumped imports. The
large investment made by the Community industry also indicates that the company has

17

a long term Community-based strategy for the product concerned. However, its future
largely depends on the existence of fair conditions of competition and therefore on the
absence of dumped and injurious imports on the Community market.

(105)

In  view  of  the  nature  of  the  injury  suffered  by  the  Community  industry,  it  is
considered that, in the absence of anti-dumping measures, a further deterioration in the
situation  of  the  Community  industry  is  unavoidable.  This  will  most  likely  entail
further  injury  and  in  the  medium  term  even  the  disappearance  of  that  industry.  The
adoption  of  anti-dumping  measures  would  therefore  be  in  the  interest  of  the
Community industry.

3.

Interest of unrelated importers and traders

(106) Of  the  10  unrelated  importers  contacted,  eight  submitted  meaningful  replies  to  the
questionnaire.  They  represent  about  21%  of  Community  imports  and  8%  of
Community  consumption.  All  of  them  were  exclusive  distributors  of  the  Japanese
exporting producer.

(107) As  far  as  these  eight  cooperating  importers  are  concerned,  the  IGH  segment
represented  on  average  2.4%  (varying  between  0%  and  8%)  of  their  total  turnover
during the IP.

(108) The likely average impact of the proposed anti-dumping duty on the importers' overall
profitability was examined. Given the small share of the IGH segment in their overall
turnover,  the  maximum  negative  impact  of  the  proposed  measures  on  the  eight
importers is likely to be negligible.

(109) Consequently,  given  the  average  proportion  of  the  IGH  segment  in  their  total
activities, and bearing in mind the level of the measures proposed, it is considered that
the interests of importers will not be affected to any significant overall extent.

4.

Interest of users

(110) Users of the product under consideration are bicycle manufacturers and assemblers, as
well  as  certain  retailers  in  the  Community.  Of  the  users  contacted,  35  submitted  a
meaningful reply to the questionnaire. These 35 users represented around 32% of total
IGH  consumption  in  the  Community.  Submissions  were  also  received  from
associations of users in the Community.

(111)

It was found that these users actually achieve an average profit margin of around 3%
on their overall activities, and of around 11% with respect to bicycles equipped with
IGH.

(112) During  the  IP,  the  sale  of  bicycles  equipped  with  IGH  (the  latter  being  of  either

Japanese or Community origin) represented about 25% of the users' total turnover.

(113)

In  view  of  the  limited  proportion  of  bicycles  equipped  with  IGH  in  their  total
activities, and bearing in mind the level of the measures proposed and the profitability
situation of the co-operating users, it is concluded that the possible negative effects of
the measures proposed on users cannot be considered such as to outweigh the expected
benefits for the Community industry.

18

5.

Competition and trade distorting effects

(114)

It  was  found  that  the  Community  industry  basically  only  produces  and  sells  the
product under consideration, whereas the exporting producer is a major player for all
bicycle components especially on the Community market but also world-wide. In view
of the price-undercutting found, the existing price pressure, the financial losses and the
loss of market share experienced, it cannot be excluded that the Community industry
will  struggle  to  remain  an  effective  player  on  the  market.  The  exporting  producer's
overall strong position on the Community market, where it only faces competition for
IGH, and the level of the measures, make it unlikely, from an economic point of view,
that the Community market will be foreclosed to its imports The continued presence of
its  IGH  will  therefore  be  ensured  in  the  event  of  the  imposition  of  anti-dumping
measures.

(115) Some  parties  have  further  alleged  that  the  measures  would  reduce  users'  and
consumers' choice and prevent them from benefiting from the innovations developed
by the Japanese exporting producer. However, as outlined above, it is considered that
IGH originating in Japan will continue to be available on the Community market in the
future  due  to  both  the  strong  position  of  the  exporting  producer  on  the  Community
market  for  a  large  number  of  bicycle  parts  and  the  importance  of  the  Community
market for the exporting producer.

(116) Thus  users  and  consumers  will  continue  to  have  the  choice  between  the  competing
products, albeit at non-injurious prices. Conversely, such freedom of choice would be
affected if the Community industry was allowed to disappear, which is not excluded if
anti-dumping measures were not imposed.

(117) Measures, therefore, are expected to re-establish fair and effective competition on the
Community market, merely correcting the distorting effects of the injurious dumping
practised  by  the  Japanese  exporting  producer.  Not  imposing  measures  in  the  present
case would maintain and amplify the distortion of competition, resulting in  a  further
deterioration  in  the  situation  of  the  Community  industry.  Were  the  Community
industry to disappear, reduced competition and less choice for users and consumers on
the Community market would be the result.

6.

Conclusion on Community interest

(118) On  the  basis  of  the  above  facts  and  considerations,  it  is  concluded  that  there  are  no
compelling  reasons  on  the  ground  of  Community  interest  against  the  imposition  of
anti-dumping measures on imports of IGH originating in Japan.

H. PROPOSED MEASURES

1.

Injury elimination level

(119) Having established that the dumped imports under consideration have caused material
injury to the Community industry and that there are no compelling reasons against the
imposition of measures, an anti-dumping duty should be imposed at a level sufficient
to eliminate the injury caused without exceeding the dumping margin found.

19

(120) When calculating the amount of duty necessary to remove the effects of the injurious
dumping, it was considered that any measures should allow  the  Community industry
to cover its costs of production and to obtain a reasonable pre-tax profit that could be
achieved in the absence of dumped imports.

(121) On  this  basis  it  was  found  that  a  profit  margin  of  8%  on  total  turnover  could  be
regarded as an appropriate minimum which the Community industry could reasonably
have expected to obtain in the absence of injurious dumping, account being taken of
its  successful  and  cost-reducing  restructuring  efforts  and  the  need  for  long-term
investments by the Community industry. World-wide, there are only two large markets
for IGH: the Community market and the Japanese market where dumped imports are
absent. Given the significantly higher profit realised in Japan, it is considered that the
above margin of profit is very conservative.

(122) Accordingly, injury elimination levels were determined as the difference between the
cost of production of the Community industry, increased by the abovementioned profit
margin on the one hand, and the adjusted  actual net sales price of  the  imported  IGH
used  for  the  price  undercutting  calculations  on  the  other.  This  difference  was  then
expressed as a percentage of the CIF import price at the Community frontier customs
duty unpaid. The result of this calculation was an injury margin of 11.3%.

2.

Definitive anti-dumping duty

(123)

In the light of the foregoing, and in accordance with the lesser duty rule as set out in
Article  9(4)  of  the  basic  Regulation,  it  is  considered  that  a  definitive  anti-dumping
duty should be set at the level of the injury margin.

(124) As the sole known Japanese exporting producer accounts for substantially all exports
to the Community originating in Japan, the residual duty is set at the same level.

(125) On the basis of the above, the proposed definitive duty rate, expressed as a percentage

of the CIF Community border price, customs duty unpaid, is as follows:

Company

Shimano Inc.

All other companies

Rate of anti-dumping duty

TARIC additional code

11,3%

11,3%

A252

A999

20

HAS ADOPTED THIS REGULATION:

Article 1

1.

2.

3.

A definitive anti-dumping duty is hereby imposed on imports of internal gear hubs of
a bicycle wheel with an integrated gear system with three or more gears, regardless
of whether or  not  a  braking  system  is  integrated  in  the  hub,  attached  to  the  hub  or
mounted  on  another  part  of  the  bicycle,  currently  classifiable  within  CN  code  ex
8714 9990, (TARIC code: 8714 99 90 91) and originating in Japan.

The duty also applies to coaster braking hubs and hub brakes falling under CN code
ex  8714  94  10  and  hubs  without  free-wheel  of  braking  device,  other  than  coaster
braking hubs and hub brakes falling under CN code ex 8714 93 10, both combined
with an integrated gear system with three or more gears (TARIC codes: 8714 94 10
10, 8714 93 10 10) originating in the same country.

The  rate  of  definitive  anti-dumping  duty  applicable  to  the  net  free-at-Community-
frontier price, before duty, for the product originating in Japan shall be as follows:

Company

Shimano Inc.

All other companies

Rate of anti-dumping duty

TARIC additional code

11,3%

11,3%

A252

A999

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

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

Article 2

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

Done at Brussels,

For the Council

The President

21