Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of certain magnetic disks (3,5" microdisks) originating in Japan and the People's Republic of China and terminating the proceeding in respect of imports of 3,5" microdisks originating in Taiwan
Date: 2002-02-01
Institutions: European Commission
Subjects: China, Japan, Taiwan, anti-dumping duty, import, magnetic medium, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 01.02.2002
COM(2002) 50 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain magnetic disks
(3,5” microdisks) originating in Japan and the People’s Republic of China and
terminating the proceeding in respect of imports of 3,5” microdisks originating
in Taiwan

(presented by the Commission)

EXPLANATORY MEMORANDUM

Attached  is  the  proposal  for  a  Council  Regulation  maintaining  the  anti-dumping
duties on imports of certain magnetic disks  (“3,5” microdisks”)  originating in Japan
and the People’s Republic of China and allowing measures on imports originating in
Taiwan to expire.

The  review  investigation  concerning  anti-dumping  measures  on  imports  of  3,5”
microdisks  originating  in  Japan,  Taiwan  and  the  People’s  Republic  of  China  was
initiated  on  21  October  1998,  pursuant  to  Article  11(2)  of  Council  Regulation  (EC)
No 384/96. In accordance with this Article the measures remain in force pending the
outcome of the review.

The proposal to maintain the definitive anti-dumping  duties in respect of imports  of
3,5” microdisks originating in Japan and the People’s Republic of China is based both
on  the  likelihood  of  a  continuation  of  dumping  (and  of  recurrence  of  dumping  at
higher volumes), and on likelihood of recurrence of injury.

The proposal to allow measures applicable to imports of 3,5” microdisks originating
in  Taiwan  to  expire  is  based  on  the  conclusion  that  there  is  no  likelihood  of  a
continuation or recurrence of dumping in respect of this country.

The interested parties were informed of the  essential facts and considerations on the
basis of which the Commission intended to recommend that definitive anti-dumping
duties be  maintained in respect of Japan and the  People’s  Republic  of  China  and  to
terminate  the  proceeding  for  Taiwan.  Subsequent  to  this  disclosure,  comments  were
received from a co-operating exporter in the People’s Republic of China and from the
Community industry, which have been taken into consideration but did  not alter the
basic conclusions of the investigation.

Users  did  not  make  any  comments  on  the  proceeding.  In  reviewing  all  the  interests
involved  in  the  light  of  the  comments  received,  it  can  be  concluded  that  the
maintenance of the measures for Japan and the People’s Republic of China would not
imply any significant adverse effects on users.

In  the  light  of  the  above,  the  Commission  proposes  that  the  Council  approve  the
maintaining  of  anti-dumping  duties  on  imports  with  company  specific  rates  ranging
from  6,1  %  to  26,7  %  and  a  residual  rate  of  40,9  %  in  the  case  of  Japan  and  a
company  specific  rate  of  35,6  %  and  a  residual  rate  of  39,4  %  in  the  case  of  the
People’s  Republic  of  China.  The  Commission  further  proposes  that  the  Council
terminates the proceeding concerning Taiwan.

Because  of  the  duration  of  the  investigation,  it  is  considered  appropriate  that  the
duration of the measures should be limited to four years.

2

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain magnetic disks (3,5”
microdisks) originating in Japan and the People’s Republic of China and terminating
the proceeding in respect of imports of 3,5” microdisks originating in Taiwan

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having  regard  to  Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection
against  dumped  imports  from  countries  not  members  of  the  European  Community1,  and  in
particular Article 11(2) thereof,

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

Whereas:

A. PROCEDURE

1.
China

(1)

2.

(2)

Previous  investigations  involving  Japan,  Taiwan  and  the  People’s  Republic  of

By  Regulation  (EEC)  No  2861/932,  the  Council  imposed  definitive  anti-dumping
measures  on  imports  into  the  Community  of  certain  magnetic  disks  (“3,5”
microdisks”) originating in Japan, Taiwan and the People’s Republic of China.

Related investigations

Definitive anti-dumping duties have also been imposed on imports of 3,5” microdisks
originating in Hong Kong and the Republic of Korea3 and Indonesia4.

The  measures  concerning  Hong  Kong  and  the  Republic  of  Korea  are  subject  to  a
review which was initiated in September 19995.

1

2

3

4

5

OJ L 56, 6. 3. 1996, p. 1. Regulation as last amended by  Regulation  (EC)  No  2238/2000 (OJ  L  257,
11.10.2000, p. 2).
OJ L 262, 21.10.1993, p. 4. Regulation as last amended by Regulation (EC) No 2537/1999 (OJ L 307,
2.12.1999, p. 1).
Regulation  (EC)  No  2199/94  (OJ  L  236,  10.9.1994,  p.  2),  as  last  amended  by  Regulation  (EC)  No
2537/1999 (OJ L 307, 2.12.1999, p. 1).
Regulation  (EC)  No  1821/98  (OJ  L  236,  22.8.1998,  p.  1),  as  last  amended  by  Regulation  (EC)  No
2537/1999 (OJ L 307, 2.12.1999, p. 1).
OJ C 256, 9.9.1999, p. 3.

3

                                                
(3)

3.

(4)

(5)

4.

(6)

(7)

(8)

(9)

The measures concerning Malaysia, Mexico and the United States of America expired
on 14 April 20016.

Request for review

Following  the  publication  of  the  notice  of  impending  expiry  of  the  anti-dumping
measures  applicable  to  imports  of  3,5”  microdisks  originating  in  Japan,  Taiwan  and
the People’s Republic of China7, the Commission received in July 1998, a request to
review  these  measures  pursuant  to  Article  11(2)  of  Council  Regulation  (EC)  No
384/96 (the “basic Regulation”).

The  request  was  lodged  by  the  Committee  of  European  Diskette  Manufacturers
(“Diskma”)  on  behalf  of  producers  whose  combined  output  constitutes  a  major
proportion of the total Community production of the product concerned.

The request was based on the grounds that the expiry of the measures would be likely
to  result  in  the  continuation  or  recurrence  of  dumping  and  injury  to  the  Community
industry. Having determined, after consulting the Advisory Committee, that sufficient
evidence existed for the initiation of a review, the Commission initiated such a review8
pursuant to Article 11(2) of the basic Regulation.

Investigation

The  Commission  officially  advised  the  five  Community  producers  supporting  the
request, the exporting producers and the importers known to be concerned as well as
the representatives of the exporting countries of the initiation of the investigation, and
gave the parties concerned the opportunity to make their views known in writing and
to request a hearing.

The  Commission  sent  questionnaires  to  the  parties  known  to  be  concerned  and
received full replies from two Community producers, a Taiwanese exporting producer
and a Chinese producer, its related exporter in Hong Kong and its related importer in
the UK.

The  Commission  also  sent  questionnaires  to  a  large  number  of  economic  operators
understood  to  be  or  to  represent  purchasers  and  importers  of  3,5”  microdisks  in  the
Community.

The  Commission  sought  and  verified  all  information  deemed  necessary  for  the
purposes of determining whether there was a likelihood of a continuation or recurrence
of dumping and injury and whether maintaining the measures would not be against the
Community interest.

Verification visits were carried out at the premises of the following companies:

Exporting producers

(a)

Exporting producer in Taiwan

6

7

8

OJ C 111, 12.4.2001 p. 9. Notice of the expiry of certain anti-dumping measures.
OJ C 123, 22.4.1998, p. 5.
OJ C 322, 21.10.1998, p. 4.

4

                                                
CIS Technology Inc., Taipei Hsien, Taiwan

(b) Exporting producer in the People’s Republic of China/Hong Kong

Hanny  Zhuhai  Ltd,  Kowloon,  Hong  Kong  (related  exporter  of  the  producer
Hanny  Magnetics  (Zhuhai)  Ltd.,  Guangdong  Province,  People’s  Republic  of
China).

and its related importer Memtek Products Europe Ltd, Harmondsworth, UK

Community producers

Computer Support Italcard s.r.l., Milan, Italy

Sentinel N.V., Bodem, Belgium

(10)

The investigation of the likelihood of continuation and recurrence of dumping covered
the  period  from  1  October  1997  to  30  September  1998  (the  “investigation  period”).
The  examination  of  the  situation  of  the  Community  3,5”  microdisks  market  covered
the period from 1994 up to the end of the investigation period (the “analysis period”).

(11) All  parties  concerned  were  informed  of  the  essential  facts  and  considerations  on  the
basis of which it was intended to recommend the maintenance of the existing measures
for Japan and the People’s Republic of China and the termination of the proceeding in
respect  of  Taiwan.  The  Commission  received  representations  from  two  interested
parties  following  these  disclosures.  The  comments  of  these  parties  were  considered
and, where appropriate, the findings have been modified accordingly.

B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT

1.

Product under consideration

(12)

(13)

The product under consideration (3,5” microdisks) is used to record and store encoded
digital computer information falling within CN code ex 8523 20 90, with the exception
of  3,5”  microdisks  based  on  optically  continuous  servo  tracking  technology  or
magnetic sector servo tracking technology with a storage capacity of 120 MB or more.

The 3,5” microdisks concerned were available in various types, depending on various
factors,  including,  amongst  others,  their  storage  capacity,  formatting,  degree  of
certification (a measure used to test the performance of the microdisk) and on the way
in which they were marketed, i.e. whether sold as branded products (usually sold in 10
pieces  boxes)  or  in  bulk.  Despite  the  existence  of  various  types  of  3,5”  microdisks,
there  were  no  significant  differences  in  their  basic  physical  characteristics  and
technology, they all showed a high degree of interchangeability.

On  this  basis,  the  3,5”  microdisks  as  defined  above  are  to  be  considered  as  one
product.

2.

Like product

(14)

The various types of 3,5” microdisks, as defined above, which are manufactured and
sold in the Community or manufactured in the countries concerned and exported to the

5

Community  use  the  same  basic  technology,  are  alike  in  their  basic  physical
characteristics and technology and show a high degree of interchangeability. All these
3,5” microdisks, therefore, have to be considered as a like product within the meaning
of Article 1(4) of the basic Regulation.

C. LIKELIHOOD OF A CONTINUATION OF DUMPING

1.

Preliminary remarks

(15)

It should be noted that imports from the countries concerned during the investigation
period  represented  only  a  fraction  of  the  quantities  which  were  exported  during  the
original  investigation period (1 April 1990 - 31  March 1991), i.e.  about 10 %  in  the
case of the People’s Republic of China  and Taiwan and less than 1 % in the case of
Japan.

2.

Japan

(16)

Three of the five companies named in the request for a review stated that they were no
longer producing or selling the product concerned to the Community. The remaining
two  companies  did  not  reply  to  the  Commission’s  questionnaire,  and  so  it  was
impossible  to  establish  on  the  basis  of  their  individual  data  whether  or  not  these
companies  were  dumping.  Therefore,  and  in  order  not  to  reward  non-cooperation,
findings  concerning  Japan  were  made  on  the  basis  of  facts  available  in  accordance
with  Article  18  of  the  basic  Regulation,  in  this  case  the  evidence  provided  by  the
applicant. It should be noted that the information contained in the review request was
the  best  information  available.  Eurostat  data  could  not  be  used  for  the  purposes  of
calculating dumping because the product concerned covers only a part of the CN code.
In  the  review  request,  the  dumping  margin  was  established  on  the  basis  of  a
comparison of constructed normal values (cost of production plus a reasonable amount
for  selling,  general  and  administrative  expenses,  and  for  profit)  with  constructed
export  prices  (prices  delivered  to  the  first  unrelated  customers  less  allowances
reflecting costs and profits of importers). On this basis, and without any deduction for
anti-dumping duties, the margin of dumping was between 5 % and 10 %.

3.

Taiwan

(17)

It  is  to  be  noted  that  one  company  in  Taiwan  responded  to  the  questionnaire.  This
company  alone  accounted  for  practically  all  the  exports  of  the  product  concerned  to
the  Community  during  the  investigation  period,  which  amounted  to  almost  three
million units. Key events which had taken place after the investigation period had to
be taken into account. The fact is that, in the course of the investigation, the company
ceased production of 3,5” microdisks by closing its Storage Media Business Division.
This  event  was  considered  to  be  manifest,  undisputed,  lasting,  not  open  to
manipulation and did not stem from deliberate action by interested parties. As the co-
operating company which accounted for practically all the exports of 3,5” microdisks
to  the  Community  during  the  investigation  period  has  ceased  manufacturing  the
product concerned, it was considered that any assessment of possible continuation of
dumping during the investigation period was devoid of any purpose.

4.

People’s Republic of China

(a) General

6

(18)

It is to be noted that one company in the People’s Republic of China responded to the
questionnaire.  This  company  alone  accounted  for  practically  all  the  exports  of  the
product concerned to the Community during the investigation period, which amounted
to almost two million units.

(b) Normal value

(19) As  in  the  original  investigation,  Taiwan  was  proposed  as  an  appropriate  market
economy  country  for  the  purpose  of  establishing  normal  value  for  the  People’s
Republic  of  China,  in  accordance  with  Article  2(7)(a)  of  the  basic  Regulation.
Interested  parties  were  invited  to  comment  on  this  choice.  The  only  co-operating
producer  from  the  People’s  Republic  of  China  objected  to  the  fact  that  an  analogue
country  had  to  be  selected  at  all,  and  argued  that  normal  value  should  instead  be
calculated on the basis of its own cost of production in the People’s Republic of China.
It  claimed  that  it  met  all  the  criteria  referred  to  in  Article  2(7)(c)  of  the  basic
Regulation.

This  claim  could  not  be  accepted  on  the  grounds  that,  under  reviews  pursuant  to
Article 11(2) of the basic Regulation, measures shall either be maintained or repealed,
but  not  modified.  Reference  is  also  made  to  the  findings  concerning  a  likelihood  of
recurrence  of  dumping.  The  company  was  informed  that  it  could  claim  market
economy status in the context of an application for a review pursuant to Article 11(3)
of the basic Regulation. However, the company declined to do so.

(20) As  no  alternative  analogue  country  was  proposed,  the  Commission  decided  to  use
Taiwan as the basis for establishing normal value for the People’s Republic of China.
In addition, Taiwan was considered to be an appropriate and not unreasonable market
already at the time of the original investigation.

(21)

For all the types of 3,5” microdisk, except one, exported by the co-operating Chinese
exporting  producer,  normal  value  was  calculated  by  reference  to  representative
domestic sales prices to independent customers.

For the one type of 3,5” microdisk, however, for which no comparable domestic sales
in  the  analogue  country  could  be  found,  normal  value  had  to  be  constructed  in
accordance  with  Article  2(3)  of  the  basic  Regulation.  The  constructed  normal  value
was calculated on the basis of the cost of production of an equivalent type produced by
the  co-operating  Taiwanese  exporting  producer,  including  a  reasonable  amount  for
selling, general and administrative expenses and for profit.

(c)

Export price

(22) As  exports  were  made  to  a  related  importer  in  the  Community,  export  prices  were
constructed on the basis of the price at which the product concerned was first resold to
an independent buyer in the Community, in accordance with Article 2(9) of the basic
Regulation. Adjustments were made for costs incurred between importation and resale
and for profits accruing, so  as to  establish a reliable export  price.  These adjustments
included  costs  for  transportation,  insurance,  handling  and  ancillary  costs  in  the
Community,  and  customs  duties.  The  related  importer’s  selling,  general  and
administrative costs relating to the product concerned were also deducted, as well as a
reasonable  margin  of  profit.  As  it  was  found  that  the  financing  costs  relating  to  the
3,5”  microdisks  business  were  not  reflected  in  the  related  importer’s  accounts,  these

7

costs  were  calculated  as  a  percentage  of  the  final  selling  price  of  the  product
concerned,  and  deducted  accordingly.  An  additional  adjustment  was  made  to  take
account  of  the  selling  and  marketing  costs  incurred  by  a  subsidiary  of  the  related
importer involved in the sale of the product concerned in the Community.

(d) Comparison

(23) Normal values and export prices were compared for each product type. Due allowance
in  the  form  of  adjustments  was  made,  in  accordance  with  Article  2(10)  of  the  basic
Regulation for differences in factors  which  were  claimed  and  demonstrated  to  affect
prices  and  price  comparability.  Allowances  were  granted  for  differences  in  physical
characteristics, discounts, transport, insurance, handling and ancillary costs outside the
Community, and packing. The adjustment for physical characteristics reflected the fact
that  certain  types  of  3,5”  microdisks  sold  by  the  Chinese  exporting  producer  were
formatted,  whilst  the  similar  types  sold  on  the  Taiwanese  markets  did  not  have  this
characteristic.

(e) Dumping margin

(24)

It  was  found  that  there  was  a  pattern  of  export  prices  which  differed  significantly
among  regions:  in  one  Member  State,  sales  to  independent  customers  amounting  to
almost  half  of  the  total  were  made  at  prices  consistently  higher  than  sales  to
independent customers in all the other Member States. Since, in these circumstances,
the  use  of  the  average-to-average  method  for  the  calculation  of  the  dumping  margin
did not reflect the full degree of dumping, it was considered appropriate that weighted
average  normal  values  per  type  be  compared  to  prices  of  all  individual  export
transactions  to  the  Community,  in  accordance  with  Article  2(11)  of  the  basic
Regulation.

(25)

The comparison showed the existence of a margin of dumping of between 5 % and 10
%,  the  dumping  margin  being  equal  to  the  amount  by  which  the  normal  value
exceeded  the  export  price,  expressed  as  a  percentage  of  the  CIF  import  price  at  the
Community border, duty unpaid.

5.

Conclusion

(26)

The  above  findings  show  the  existence  of  a  continuation  of  dumping  for  imports  of
3,5” microdisks originating in Japan and the People’s Republic of China, although the
import volume on the basis of which this conclusion had been reached were small. In
the case of Taiwan, dumping is no longer continuing.

D. LIKELIHOOD OF RECURRENCE OF DUMPING

1.

Imports from Japan and the People’s Republic of China

(27)

Imports from Japan and the People’s Republic of China during the period covered by
the  original  investigation  amounted  to  around  130  million  units  and  collectively
accounted  for  around  30  %  of  the  apparent  Community  consumption.  Imports
originating  in  Japan  accounted  for  approximately  three-quarters  of  the  total  imports
from these two countries.

8

(28)

Imports from both countries fell sharply after the imposition of the measures in 1993,
so that already in 1995 they amounted collectively to around 10 million units. In view
of  the  conclusion  on  the  continuation  of  dumping  regarding  imports  originating  in
Japan  and  the  People’s  Republic  of  China,  it  was  considered  appropriate  to  also
examine  the  likelihood  of  recurrence  of  dumping,  i.e.  the  likelihood  of  increased
quantities of imports at dumped prices originating in these two countries.

2.

Unused production capacities in Japan and the People’s Republic of China

(29)

Two  of  the  three  Japanese  companies  which  came  forward  declared  that  they  no
longer  manufactured  the  product  concerned.  The  third  Japanese  company,  which
manufactured the product concerned but did not export it to the Community during the
investigation  period,  claimed  not  to  have  unused  production  capacity.  The  two
remaining  companies  mentioned  in  the  application  did  not  reply  in  any  way  to  the
questionnaire.  It  was  therefore  assumed  that  these  two  companies  may  have  unused
production capacity to exploit.

(30)

For the sole cooperating Chinese exporting producer, production decreased by almost
50  %  between  1995  and  the  investigation  period.  However,  evidence  shows  that
substantial unused production capacity exists.

Prices  to  other  third  country  markets  of  Japan  and  the  People’s  Republic  of

3.
China

(31) During  the  investigation  period,  sales  of  the  sole  co-operating  Chinese  exporting
producer  to  non-EU  countries  were  made  at  average  prices  substantially  lower  than
those to the Community market. No information in this respect was provided by  any
Japanese exporting producer.

Likely effect of the expiry of the measures for Japan and the People’s Republic of

4.
China

(32) As  shown  above,  the  dumping  calculations  made  are  based  on  relatively  low  export
volumes to the Community. It is reasonable to assume that the expiry of the measures
will lead to lower prices for Japanese and Chinese microdisks when delivered to final
customers with the result that volumes are likely to increase.

(33) Co-operation  from  Japan  was  low  in  both  the  original  investigation  and  the  current
expiry review. As mentioned at recital (16), two companies contacted did not reply to
the  questionnaire  at  all,  though  they  are  still  active  in  the  3,5”  microdisk  market.  In
these  circumstances,  it  was  concluded,  on  the  basis  of  Article  18  of  the  basic
Regulation, that unused production capacity is likely to exist, which could be exploited
in  the  event  of  the  anti-dumping  measures  being  allowed  to  expire.  On  this  basis,
substantial exports at dumped prices are likely.

(34)

Since the People’s Republic of China has substantial unused production capacity and
average  export  prices  to  non-EU  countries  were,  during  the  investigation  period,
substantially  lower  than  those  to  the  Community  market,  it  could  be  expected  that,
should the measures be  repealed,  a substantial  proportion of sales  currently  made on
the domestic market or exported to non-EU countries would be re-directed towards the
Community market at dumped prices.

5.

Likely effect of the expiry of the measures for Taiwan

9

(35) As  the  only  company  which  accounted  for  practically  all  the  exports  of  the  product
concerned to the Community during the investigation has ceased manufacturing  3,5”
microdisks, no likelihood of a recurrence of dumping from this company exists.

(36)

(37)

The  Community industry  claimed  that  two  other  Taiwanese  producers  of  microdisks
are  still  active  in  the  business  and  that  these  two  companies,  which  had  not  co-
operated  in  the  investigation,  would  export  large  quantities  of  3,5”  microdisks  at
dumped prices, should measures be repealed in respect of Taiwan.

The  claim  was  rejected  because  no  evidence  was  ever  found  that  these  two  non-co-
operating  companies  might  have  exported  3,5”  microdisks  to  the  Community  during
the investigation period or in other recent periods. As during recent periods, exports to
the Community can be considered as having been made exclusively by the Taiwanese
co-operating producer which has ceased production, the dumping activities concerning
3,5” microdisks can also be considered as having ceased. Moreover, the largest of the
two companies referred to by the Community industry has set up in the Community a
wholly owned subsidiary producing 3,5” microdisks, and it has therefore little or even
no reason at all to resume its exports of the product concerned to the Community.

6.

Conclusions

(38)

The investigation showed that exports from Japan and the People’s Republic of China
are still made at dumped prices. There is no indication as to why this should change if
measures  were  to  be  repealed.  Moreover,  the  volume  of  dumped  imports,  which  is
currently  at  negligible  levels,  was  found  likely  to  increase  significantly  should
measures  expire  because  the  possible  repeal  of  the  measures  and  the  substantial
unused capacities are likely to result in lower resale prices, increasing sales  volumes
and market  shares.  It  was  therefore  concluded  that  should  the  measures  be  repealed,
imports originating in Japan and the People’s Republic of China would continue to be
made  at  dumped  prices  and  there  is  also  a  likelihood  that  the  volume  of  dumped
imports would increase to significant quantities.

(39) As far as Taiwan is concerned, in the absence of dumped exports, the mere existence
of two  other  producers of the  product  concerned is judged as not sufficient to  imply
that these two Taiwanese producers are likely to start exporting to the Community at
dumped  prices.  It  was  therefore  concluded  that  no  serious  risk  of  recurrence  of
dumping from Taiwan exists at present.

E. DEFINITION OF THE COMMUNITY INDUSTRY

(40)

In the Community, 3,5” microdisks are manufactured by:

– 

– 

– 

Two  Community  producers,  which  fully  co-operated  with  the  Commission
during the investigation.

Three other producers which were supporting the application.

Other  economic  operators  related  to  Japanese,  Taiwanese  and  Chinese
exporters.

(41) As in the previous proceedings, it was found that the assessment of the situation of the
Community  industry  would  be  distorted  if  Community  producers  related  to  those

10

producers  from  countries  involved  in  prior  proceedings  found  to  be  dumping  the
product  concerned,  and  causing  material  injury  to  the  applicant,  were  not  excluded
from the definition of the “Community production”. Consequently, the production of
the economic operators which are related to producers in the countries concerned have
been excluded from the definition of the “Community production”.

(42)

The production of the two co-operating Community producers and of the three other
producers  supporting  the  complaint  constitute  therefore  the  Community  production
within the meaning of Article 4(1) of the basic Regulation.

(43) During  the  course  of  the  proceeding  a  submission  was  received  from  the  Chinese
exporting  producer  which  alleged  that  the  products  manufactured  by  the  two  co-
operating  Community  producers  did  not  satisfy  the  provisions  of  the  Community’s
own origin rules as laid down in Article 24 of the Community’s customs code9 and as
further  elaborated  by  the  provisions  of  Regulation  (EC)  No  12/9710  and  therefore
could not be included in the Community production.

(44)

This  claim  was  rejected  because  the  investigation  revealed  that  the  3,5”  microdisks
manufactured  by  these  two  Community  companies  are  produced  mainly  from
components sourced in the Community. In addition, they add substantial value in the
manufacturing  process,  their  headquarters  and  centres  for  research  and  development
are  all  located  in  the  Community  and  the  3,5”  microdisks  that  they  produce  have  a
Community origin in accordance with the Community’s customs code.

(45) On  the  basis  of  the  above,  and  given  that  the  co-operating  Community  producers
represent  a  major  proportion,  in  this  case  more  than  75  %,  of  the  Community
production, they are therefore considered to constitute the Community industry within
the  meaning  of  Articles  4(1)  and  5(4)  of  the  basic  Regulation.  They  are  hereinafter
referred to as the “Community industry”.

F. THE COMMUNITY 3,5” MICRODISKS MARKET

1.

General

(46)

The market for 3,5” microdisks is mature, and is currently characterised by a situation
of falling demand. Other products such as Zip(cid:1) discs, other high capacity microdisks
such  as  HiFDs  and  optical-magnetic  data  storage  media,  such  as  CD-Rs  are
progressively  replacing  the  market  held  by  3,5”  microdisks.  However,  given  the
significant  base  of  PCs  with  3,5”  microdisk  disk  drives  incorporated,  it  is  clear  that
there will be a continuing need for these microdisks in the Community. Furthermore,
according  to  recent  market  studies,  most  PC  manufacturers  continue  to  incorporate
3,5” microdisk drives in the basic configuration of their machines. It is estimated that
by  the  year  2002  there  will  be  38  million  microdisk  drives  in  the  Community.  The
Community microdisk market will therefore remain important.

2.

Consumption of 3,5” microdisks on the Community market

(47)

Figures for consumption in the Community are based on information contained in the
application, verified production and sales figures provided by the Community industry

9

10

Council Regulation (EEC) No 2913/92 (OJ L 302, 19.10.1992, p. 1).
OJ L 9, 13.1.1997, p.1, see in particular page 35.

11

                                                
and  import  volumes  obtained  via  Eurostat.  These  estimates  allowed  a  reasonable
assessment of the Community consumption of the product concerned.

On this basis, total consumption in the Community fell throughout the period analysed
from  1400  million  units  (1994)  to  1300  million  units  (1995),  1100  million  units
(1996),  1000  million  units  (1997),  before  falling  again  to  900  million  units  in  the
investigation period, which represents a fall of 36 % over the whole period analysed.

3.

Imports from the countries concerned

(a) General remark

(48) As  regards  Taiwan,  in  view  of  the  conclusion  that  there  is  no  likelihood  of  a
continuation or recurrence of dumping in the future, the examination of a likelihood of
continuation or recurrence of injury, relating to imports originating from this country
was not pursued.

(b) Volume and market share and prices of imports from Japan  and the People's

Republic of China

(49) Due to the lack  of  co-operation, Eurostat information was  used to  estimate  imported
volumes. As mentioned above, the product concerned is only part of a CN heading and
an estimate had to be made based on detailed custom information.

(50)

The volume of imports from Japan and the People’s Republic of China fell throughout
the  analysis  period  from  11  million  units  in  1995  to  2,6  million  units  in  the
investigation period. The total market share of both these imports fell from 0,8  % in
1995 to 0,3 % in the investigation period.

Imports into the Community (millions of
units)

1995

1996

1997

Investi-
gation
period

Imports from Japan

Market Share Japan

Imports from the People’s Republic of
China

4,86

1,695

1,390

0,655

0,37 %

0,15 %

0,14 %

0,07 %

6,090

2,065

5,835

1,915

Market share People’s Republic of China

0,47 %

0,19 %

0,58 %

0,22 %

Total imports from Japan, and the People’s
Republic of China

10,95

3,76

7,225

2,570

Index 1995 = 100

100

34

66

23

Total  market  share  of  Japan  and  the
People’s Republic of China.

0,84 %

0,34 %

0,72 %

0,29 %

(c) Imports declared as having originated in Macao

12

(51)

It should be noted that 200 million units were imported into the Community as having
originated  in  Macao  in  1995.  However,  this  trade  stopped  during  1996  following  an
investigation by the anti-fraud services of the Commission in which it was proven that
these  microdisks  were  either  of  Chinese  or  Taiwanese  origin.  Anti-dumping  duties
were therefore collected retroactively on these imports11.

4.

Price behaviour of the exporting producers

(52)

The  development  of  prices  of  the  imports  of  3,5”  microdisks  from  the  People’s
Republic of China is shown in the following table.

Average  price  of  imports  (ECU  per
unit). Source Eurostat.

1995

1996

1997

Investi-
gation
period

Imports from the People’s Republic of
China

0,330

0,135

0,119

0,146

(53)

(54)

The  comparison  of  the  prices  of  the  dumped  imports  originating  in  the  People’s
Republic of China was established by comparing their CIF sales prices established as
described  at  recital  (23),  with  the  weighted  average  ex-factory  prices  of  the
Community industry. The comparison was made for the same product types imported
(i.e. high-density, double-density, bulk or packed, degree of certification, formatted or
unformatted). The comparison showed, on a weighted average basis, that the prices of
the imports originating in the People’s Republic of China were more than 20% lower
than those of the sales of the Community industry during the investigation period.

For  Japan,  as  no  exporting  producer  from  Japan  co-operated  in  the  present
investigation,  the  only  available  prices  are  the  Eurostat  prices  or  price  quotations
provided in the review request. The level of prices derived from Eurostat appears very
high in comparison to imports from the People’s Republic of China (0,718 ECU/unit).
However, it should  be  recalled  that  the  Eurostat  price  data  is  for  a  group  of  product
which also covered more expensive high storage microdisks that were excluded from
the  scope  of  the  measures  following  a  review  concluded  in  1999.  Therefore  no
meaningful  price  comparison  was  possible  from  this  source.  To  what  regards  price
quotations,  they  showed  prices  for  Japanese  products  similar  to  those  of  the
Community industry.

5.

Situation of the Community industry

(a) Production, capacity and capacity utilisation

(55)

The  production,  production  capacity  and  capacity  utilisation  of  the  Community
industry were as follows:

11

See recital (15) of Commission Regulation (EC) No 1445/96 of 24 July 1996 (OJ L 186, 25.7.1996, p.
14) and recital (3) of Commission Decision No 98/175/EC of 3 March 1998 (OJ L 63, 4.3.1998, p. 32).

13

                                                
1994

1995

1996

1997

Investi-
gation
period

185

218

201

182

174

100

201

118

223

109

261

98

222

94

222

Production in millions of
units

Index 1995=100

Capacity in millions of
units

Index 1995=100

100

111

130

110

110

Capacity utilisation

92 %

98 %

77 %

82 %

79 %

(b)

Sales, market shares and prices

(56)

Sales on the Community market to unrelated customers, market share and prices of the
Community industry were as follows:

1994

1995

1996

1997 Investi-

gation
period

Sales in millions of units

Index 1995=100

175

100

211

121

200

114

178

102

168

96

Market share

12,5 % 16,2 % 18,2 % 17,8 % 18,7 %

Average price per unit
(ECU)

0,3217

0,2503

0,2056

0,1799

0,1511

Index 1995=100

100

78

64

56

47

(57)

The Community industry’s market share rose by 3,7 percentage points between 1994
and  1995  and  by  a  further  2  percentage  points  between  1995  and  1996.  It  remained
within a relatively narrow range thereafter. Prices fell by 53 % between 1994 and the
investigation period.

(c)

Inventories

(58)

Inventories are relatively stable over time and therefore they do not add any relevant
information as to the situation of the Community industry.

(d) Profitability, return on investments and cash flow

14

(59)

It  was  found  that  throughout  the  analysis  period,  the  Community  industry  had
recorded  financial  results  (i.e.  losses)  which  were  well  below  the  profit  rate  deemed
appropriate for the Community industry in the original investigation. Profit levels for
1995 are not available due to industry restructuring. Overall during the analysis period,
losses fell from –3,36 % in 1994 to –0,17 % in the investigation period.

(60) Return  on  investments  has  been  negative  during  the  analysis  period  and,  in  general
terms,  in line with the trend of  profitability.  Cash  flow has  slightly  improved in  line
with profitability.

(61)

(62)

(63)

(e)

Employment, wages and labour productivity

Employment in the Community  industry  fell steadily throughout the  period analysed
from 266  in  1994  to  132 in the investigation  period,  50  % of  its labour  force,  as  the
Community industry tried to reduce costs and increase productivity. Wages decreased
by 35%.

The  above  employment  levels  were  falling  at  a  time  when  the  Community  industry
was increasing  its  output.  This  implies  that  labour  productivity  was  increasing,  from
695  000  units  per  employee  to  1  318  000  units  per  employee,  an  increase  of  89  %
throughout the period analysed.

(f)

Investments and ability to raise capital

Production  of  3,5”  microdisks  is  capital  intensive  and  production  facilities  typically
operate  24  hours  daily  all  year  round.  Although  there  were  investments  of  ECU  2,9
millions in 1994, ECU 0,6 millions in 1995 and ECU 0,3 millions in 1996, there have
been  no  significant  net  investments  in  this  industry  for  the  last  two  years  of  the
analysis period.

(64)

The losses experienced during the analysis period were such that no financing for new
investment by the Community industry was possible during the last 2 years.

(g) Exports by the community industry

(65)

The  exports  remained  stable  between  2  and  3  %  of  total  turnover  over  the  analysis
period.

(h) Magnitude of dumping margin and recovery from past dumping

(66) As concerns the impact on the situation of the Community industry of the magnitude
of  the  actual  margin  of  dumping  found  during  the  investigation  period,  it  should  be
noted  that  the  margins  found  for  Japan  and  the  People's  Republic  of  China  are  not
negligible. The situation of the Community industry improved to a certain extent after
the  imposition  of  measures,  but  it  has  not  completely  recovered.  Therefore,  should
measures  be  repealed,  the  impact  of  the  dumping  margin  found  in  the  current
investigation would be significant.

6.

Submissions received from interested parties in the People’s Republic of China

(67) One co-operating exporting producer in the People’s Republic  of China  claimed that
the  3,5”  microdisk  market  can  be  divided  into  two  market  segments,  namely
“branded”  and  “bulk”.  The  bulk  part  of  the  market  is  characterised  by  large-scale

15

deliveries  of  3,5”  microdisks  where  there  is  no  emphasis  on  high  quality.  Branded
products,  on  the  other  hand,  are  those  which  normally  correspond  to  high  quality
standards. It was argued that these market segments are distinct from each other, and
that they should therefore receive separate treatment in the analysis.

To illustrate its point, the company claimed that sales of high quality branded product
were stable while sales of low quality bulk product had been falling. It further alleged
that  the  Community  producers’  sales  were  mainly  in  the  area  of  low  quality  bulk
products  and  that  this  would  explain  any  material  injury  they  might  be  suffering.
According to the submission, this company concentrated on sales of branded products,
and therefore allegedly did not compete with the Community industry.

(68)

The argument that branded and bulk segments should be examined separately cannot
be  accepted.  As  has  already  been  pointed  out,  3,5”  microdisks  are  the  same  product
irrespective of whether they are sold under a brand name or not, and are, on a type by
type  basis,  alike  in  all  respects  and  interchangeable.  There  is  a  significant  overlap
between the type of 3,5” microdisks sold by Chinese producers and those sold by the
Community producers; they are competing therefore in the same market segment.

(69) Another  interested  producer  in  the  People’s  Republic  of  China,  which  did  not
cooperate in the investigation, claimed that the Community industry’s injury was not
due to the imports from the People’s Republic of China, but rather was a result of 3,5”
microdisks being a mature product which would disappear within the next two years.
In  addition,  it  was  stated  that  the  Chinese  product  was  a  low  quality  bulk  product
which  did  not  compete  with  the  Community  production  which,  according  to  this
interested party, was at the high quality branded level.

(70)

The claims by this party could not be verified in view of the lack of  cooperation.  In
any  event,  although  3,5”  microdisks  are  indeed  a  mature  product,  the  decline  in
consumption will take place over a considerably longer period than two years. As was
shown  above,  demand  for  3,5”  microdisks  is  expected  to  continue,  albeit  with
declining  sales,  and  personal  computer  manufacturers  will  continue  to  install
microdisk  drive-units  as  standard  equipment  in  their  machines.  The  claim  that  the
Chinese  product  does  not  compete  with  Community  production  has  already  been
rejected.

7.

Conclusions on the situation of the Community industry

(71)

The overall picture that emerges of the situation of the Community industry from the
foregoing is that of an industry still in a  weak  situation, despite an improved market
share and a successful effort at reducing significantly costs of production (which  fell
51  %  over  the  period  examined).  Production  methods  have  been  modernised  and
facilities are now  almost entirely automated  in order  to  improve  efficiency,  maintain
market  share  and  maximise  profits.  However,  the  Community  industry  has  not  been
able yet to reach a satisfactory financial situation.

G. LIKELIHOOD OF RECURRENCE OR CONTINUATION OF INJURY

(72)

It  is  recalled  that  it  was  concluded  at  section  D  above  that  it  is  likely  that,  both  for
Japan  and  the  People's  Republic  of  China,  dumping  will  continue  should  the  anti-
dumping  measures  expire.  It  was  also  concluded  that  there  will  be  a  likelihood  of

16

(73)

(74)

(75)

recurrence  of  dumping,  should  measures  expire,  since  volumes  of  dumped  imports
would considerably increase.

It was shown at section F that the Community industry was in a vulnerable situation
during the investigation period.

Should  measures  expire,  dumped  imports  from  Japan  and  the  People's  Republic  of
China are likely to push down the prices of the Community industry which are already
depressed.

In such conditions, the Community industry,  already loss-making,  would  not be  able
to compete with high quantities sold at such low prices because firstly, a difference in
prices  in  this  market  (microdisks  are  a  commodity-like  product)  leads  to  immediate
substitution  in  supplies  and  secondly,  the  Community  industry  has  already  made  all
the necessary efforts to restructure itself and is already operating at very low costs. It
is therefore likely that the Community industry would see a further deterioration of its
financial situation bringing its very survival into question.

Claim by a Chinese exporting producer

(76) A  Chinese  exporting  producer  argued  that  market  circumstances  were  not  likely  to
lead  to  renewed  injurious  dumping  from  the  People’s  Republic  of  China.  The
investments required to upgrade existing Chinese production facilities to produce high
quality 3,5” microdisks would not be worthwhile given current market trends, and no
stockpiles of product existed as claimed by the applicant parties. It submitted therefore
that no significant increase in imports from the People’s Republic of China was likely
in the event that anti-dumping duties expired.

From  the  outset  it  should  be  noted  that  the  allegations  made  by  the  company
concerned  could  not  be  verified,  as  this  company  did  not  cooperate  in  the
investigation. For the sake of completeness, the arguments brought forward have been
analysed nevertheless. As regards the upgrading argument, this question is considered
to be irrelevant for the question of recurrence of injury as it has been determined that
all types of 3,5” microdisks, including those for which there currently is production in
the  People’s  Republic  of  China,  are  products  alike  to  those  produced  by  the
Community  industry  and  that  consequently  these  products  are  in  competition  with
each other.

Conclusion

(77)

In light of the above findings, it is concluded that the expiry of the measures would be
likely  to  lead  to  a  continuation  and/or  recurrence  of  injury  for  the  Community
industry.

H. COMMUNITY INTEREST

1.

General considerations

(78)

The Commission examined whether the maintenance of the anti-dumping measures on
3,5”  microdisks  would  be  in  the  interest  of  the  Community.  It  has  been  found  that
there  is  a  likelihood  of  continuation  and/or  recurrence  of  injurious  dumping.  The
investigation also considered whether or not there are any overriding interests against

17

maintaining the measures and also took account of the past effects of duties on all the
various interests involved.

(79)

It should be recalled that, in the previous investigation, the adoption of measures was
considered  not  to  be  against  the  interest  of  the  Community.  It  should  also  be  noted
that, since  this  is  an  expiry  review  investigation,  this  investigation  should  also  show
the impact of the existing measures in particular on users consumers and traders.

2.

Interests of the Community industry

(80)

(81)

In  view  of  the  conclusions  on  the  situation  of  the  Community  industry  set  out  at
section  F  above,  especially  in  terms  of  its  negative  profitability,  the  Commission
considers that, in the absence of measures against injurious dumping, the Community
industry is likely to experience a worsening of its financial situation.

The Community industry is viable and capable of supplying the market for a product
which, although at a mature stage of its life cycle, constitutes the basic storage device
for a large number of computer  users.  Indeed,  the  Community  industry  has  shown  a
willingness to maintain a competitive presence on the Community market. Examples
of such steps taken are:

(a)

keeping prices at a minimum to maintain its market share;

(b)

progression towards greater consolidation;

(c)

closure of manufacturing units;

(d) widespread use of modern production techniques (e.g. increased mechanisation

and computerisation);

(e)

improvements in productivity;

(f)

investing in production of other digital storage media products.

(82)

It  is  also  to  be  noted  that  the  production  of  data  storage  media  is  an  area  of
technological  importance  for the  Community  as a whole. The production  technology
and  experience  gained  by  the  Community  industry  in  3,5”  microdisk  production  has
provided,  and  will  continue  to  provide,  a  basis  for  further  innovation  in  the
manufacture  of  other  related  data  storage  media  products.  For  the  Community
industry,  remaining  viable  in  the  microdisk  sector  is  the  economic  basis  for
participating in the growing market of other storage media.

3.

Interests of unrelated importers/traders

(83) Only one unrelated importer co-operated with the investigation. It stated that imports
were restricted by the existence of anti-dumping duties. However, it was obvious that
imports  were  still  possible  for  this  importer.  Should  measures  be  maintained,  this
company would still be able to  source 3,5” microdisks from  the  countries concerned
and  from  other  third  countries,  including  countries  not  subject  to  anti-dumping
measures.

(84)

Furthermore the limited co-operation of importer in this  case leads  to  the  conclusion
that the measures in force on imports originating in Japan and the People’s Republic of

18

China did not have any significant impact on the situation of unrelated importers and
traders of 3,5” microdisks in the Community.

(85)

Therefore, it is concluded that the continuation of the measures is not likely to affect
the situation of unrelated importers and traders of 3,5” microdisks in the Community.

4.

Interests of component suppliers

(86) Any further shrinking and/or deterioration of the Community industry would not only
have  negative  implications  for  employment  and  investment  in  the  industry  itself  but
may  have  a  knock-on  effect  among  the  industry’s  suppliers  of  inter  alia,  shells,
cookies, shutters, hubs, liners and springs.

(87)

The  Community  producers  source  the  large  majority  of  their  materials  and
components  from  suppliers located in the  Community.  Therefore  the  continuation  of
the  anti-dumping  measures  would  clearly  be  in  the  interest  of  the  Community
component supplier industry.

5.

Interests of users and consumers

(88) Major users of 3,5” microdisks include duplicators and final consumers. Neither sector
has  made  representations  in  this  review  investigation.  The  Commission,  therefore,
considers  that  the  findings  of  the  original  investigation  in  this  context  are  still
applicable, i.e. the increase in costs applicable to this sector when compared to overall
costs can be considered as negligible and would have very little or no impact on prices
to retail consumers.

(89) On the contrary the expiry of the measures would seriously threaten the viability of the
Community  industry,  the  disappearance  of  which  would  reduce  supply  and
competition, to the detriment of duplicators and consumers.

6.

Conclusion

(90) After weighing the interests of the various parties involved, the Commission concludes
that there are no compelling reasons of Community interest against the continuation of
measures.

I. PROPOSED DUTIES FOR JAPAN AND THE PEOPLE'S REPUBLIC OF CHINA

(91)

In view of the findings above, it is considered appropriate that the anti-dumping duties
imposed  by  Regulation  (EEC)  No  2861/93  as  last  amended  by  Regulation  (EC)  No
2537/1999 should be maintained at existing levels, i.e.:

Japan

Memorex Telex Japan Ltd.

Hitachi Maxell Ltd.

TDK

All other companies

19

6,1 %

20,6 %

26,7 %

40,9 %

People’s Republic
of China

Hanny Magnetics

All other companies

35,6 %

39,4 %

(92) Because of the long duration of the investigation, it is considered appropriate that the

the measures be limited to four years.

J. TERMINATION OF THE PROCEEDING IN RESPECT OF TAIWAN

(93)

In  view  of  the  findings  set  out  above  concerning  imports  originating  in  Taiwan,  the
anti-dumping measures currently in force against Taiwan are no longer warranted and
the  proceeding  should  be  terminated  with  regards  to  imports  originating  in  this
country.  Notwithstanding  the  duration  of  the  investigation  the  termination  should  be
effective from the date of entry into force of this Regulation. In fact, the termination is
motivated  by  post  investigation  period  events  assessed  several  months  after,  and  to
grant retroactivity in these circumstances would be inconsistent with the sequence of
events during the investigation,

HAS ADOPTED THIS REGULATION:

Article 1

1.

2.

A  definitive  anti-dumping  duty  is  hereby  imposed  on  imports  of  3,5”  microdisks
used  to  record  and  store  encoded  digital  computer  information  falling  within  CN
code  ex  8523  20  90  (Taric  code  8523  20  90  40)  and  originating  in  Japan  and  the
People’s Republic of China, with the exception of 3,5'' microdisks based on optically
continuous servo  tracking technology  or  magnetic  sector  servo  tracking  technology
with a storage capacity of 120 MB or more.

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

Country

Company

Rate of AD duty % TARIC additional

Japan

Memorex Telex Japan Ltd.

Hitachi Maxell Ltd.

TDK

All other exporting producers

Hanny Magnetics

All other exporting producers

The People's
Republic of
China

6,1 %

20,6 %

26,7 %

40,9 %

35,6 %

39,4 %

code

8705

8706

8707

8999

8711

8999

3.

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

20

The anti-dumping  duties  shall  be  imposed  for  a  period  of  four  years  from  the  date  of  entry
into force of this Regulation.

Article 2

The  proceeding  concerning  imports  of  3,5”  microdisks  originating  in  Taiwan  is  hereby
terminated.

Article 3

Article 4

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

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