Proposal for a Council Regulation imposing a definitive anti-dumping duty on imports of certain magnetic disks (3,5" microdisks) originating in Hong Kong and the Republic of Korea
Date: 2002-02-01
Institutions: European Commission
Subjects: Hong Kong, anti-dumping duty, import, magnetic medium, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 01.02.2002
COM(2002) 48 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain magnetic disks
(3,5” microdisks) originating in Hong Kong and the Republic of Korea

(presented by the Commission)

EXPLANATORY MEMORANDUM

Attached  is  a  proposal  for  a  Council  Regulation  maintaining  the  anti-dumping  duties  on
imports  of  certain  magnetic  disks  (“3,5”  microdisks”)  originating  in  Hong  Kong  and  the
Republic of Korea.

The  review  investigation  concerning  anti-dumping  measures  on  imports  of  3,5”  microdisks
originating  in  Hong  Kong  and  Korea  was  initiated  on  9  September  1999  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  Hong  Kong  and  the  Republic  of  Korea  is  based  on  the
likelihood  of  a  recurrence  of  dumping  for  both  countries,  on  likelihood  of  continuation  of
dumping for Hong Kong, and on likelihood of continuation and/or recurrence of injury.

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 Hong Kong and the Republic of Korea. Subsequent to this disclosure,
comments were received from the Hong Kong Economic and Trade Office. These comments
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 Hong Kong and the Republic of Korea 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 6,7 % to 13,3 %
and a residual rate of 27,4 % in the case of Hong Kong and a residual rate of 8,1 % in the case
of the Republic of Korea.

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 Hong Kong and the Republic of Korea

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. GENERAL INFORMATION

1.

Procedure

Previous investigations

(1)

(2)

1

2

3

4

5

In September 1994, by Regulation (EC) No 2199/942, the Council imposed definitive
anti-dumping  measures  on  imports  of  certain  magnetic  disks  (“3,5”  microdisks”)
originating in Hong Kong and the Republic of Korea (“Korea”).

Proceedings concerning other countries

Apart  from  measures  on  3,5”  microdisks  originating  in  Hong  Kong  and  Korea,  it  is
recalled that definitive anti-dumping duties have also been imposed on imports of 3,5”
microdisks  originating  in  Japan,  Taiwan  and  the  People’s  Republic  of  China3  and
Indonesia4. The measures on imports of 3,5” microdisks originating in Japan, Taiwan
and the People’s Republic of China are currently subject to an expiry review5.

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 236, 10.9.1994, p. 2. Regulation as last amended by Regulation (EC) No 2537/1999 (OJ L 307,
2.12.1999, p. 1).
Regulation  (EC)  No  2861/93  (OJ  L  262,  21.10.1993,  p.  4),  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 322, 21.10.1998, p. 4.

3

                                                
(3)

(4)

(5)

(6)

2.

(7)

(8)

In December 1999 the product scope of the measures was clarified. It was found that
the  microdisks  based  on  optically  continuous  servo  tracking  technology  or  magnetic
sector servo tracking technology  with a storage capacity of 120 MB  or  more did not
fall under the scope of any of the existing anti-dumping measures on 3,5” microdisks6.

Current investigation

Following  the  publication  of  the  notice  of  impending  expiry  of  the  anti-dumping
measures  applicable  to  imports  of  3,5”  microdisks  originating  in  Hong  Kong  and
Korea,  the  Commission  received,  in  June  1999,  a  request  to  review  these  measures
pursuant to Article 11(2) of 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  3,5”  microdisks  (“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  an  expiry  review,  the  Commission  initiated  an
investigation7 pursuant to Article 11(2) of the basic Regulation.

Period of investigation

The investigation of the likelihood of continuation and recurrence of dumping covered
the  period  from  1  September  1998  to  31  August  1999  (“IP”).  The  examination  of
trends relevant for the assessment of the likelihood of continuation and recurrence of
injury  covered  the  period  from  1995  up  to  the  end  of  the  investigation  period  (“the
analysis period”).

Parties concerned by the investigation

The  Commission  officially  advised  the  four  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  directly  concerned  the  opportunity  to  make  their  views  known  in
writing and to request a hearing.

The Commission sent questionnaires to all parties known to be concerned and received
full  replies  from  three  Community  producers  (“the  co-operating  Community
producers”) and one unrelated importer of 3,5” microdisks originating in Hong Kong.
No complete replies were received from any exporting producers in either Hong Kong
or Korea.

6

7

Regulation (EC) No 2537/1999 (OJ L 307, 2.12.1999, p. 1).
OJ C 256, 9.9.1999, p. 3.

4

                                                
(9)

The  Commission  sought  and  verified  all  information  they  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:

Co-operating Community producers

Sentinel N.V., Bodem, Belgium;

Computer Support Italcard srl, Milan, Italy;

Datarex srl, Assemini, Italy.

Importers

Datamatic srl, Milan, Italy.

3.

Product concerned and like product

Product concerned

(10)

(11)

The  product  concerned  is  the  same  as  in  the  original  investigation  and  as  clarified
subsequently, i.e. 3,5”  microdisks 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  are  available  in  various  types,  depending  on  various
factors,  including,  amongst  others,  their  storage  capacity,  formatting,  degree  of
certification  (this  is  a  measure  used  to  test  the  performance  of  the  microdisk  which
influences its market value) and on the way in which they are marketed, i.e. whether
sold  as  branded  products  or  in  bulk.  Despite  the  existence  of  various  types  of
3,5” microdisks, 
their  basic  physical
characteristics and technology, and they all show a high degree of interchangeability.

there  are  no  significant  differences 

in 

(12) On  this  basis,  the  3,5”  microdisks  as  defined  above  are  to  be  considered  as  one

product.

Like product

(13)

The various types of 3,5” microdisks, as defined above, which are manufactured and
sold in the Community, and those manufactured and sold in the countries concerned or
exported  to  the  Community  are  alike  in  their  essential  physical  characteristics  and
technology  and  show  a  high  degree  of  interchangeability.  Therefore,  they  are
considered  to  be  like  products  within  the  meaning  of  Article  1(4)  of  the  basic
Regulation.

5

B. LIKELIHOOD OF CONTINUATION OR RECURRENCE OF DUMPING

1.

General

(14)

(15)

The  market  share  represented  by  imports  of  3,5”microdisks  from  Hong  Kong  was
significant at the time of the original investigation, when it represented more than 10
% of the total Community consumption. In the period following the imposition of the
anti-dumping measures, this market share decreased to 5,5 % in 1997 and during the
IP of this investigation, it represented 7,3 % of the total Community consumption.

The  market  share  represented  by  imports  from  Korea  represented  at  the  time  of  the
original investigation more than 2 % of the total Community consumption.  After  the
imposition  of  the  anti-dumping  measures,  the  market  share  of  Korean  imports
decreased  substantially,  and  during  the  IP  it  represented  less  than  0,2  %  of  the  total
Community consumption of the product concerned.

(16) As  far  as  Hong  Kong  is  concerned,  four  out  of  the  10  companies  contacted  came
forward  and  stated  that  they  were  no  longer  producing  or  selling  the  product
concerned  to  the  Community.  The  remaining  companies  did  not  reply  at  all  to  the
questionnaire.

(17)

In the case of Korea, neither of the two companies named in the request for a review
replied to the questionnaire. During the investigation no indication of the existence of
other  Korean  exporting  producers  was  found.  It  should  be  recalled  that  only  one
company  co-operated  in  the  investigation  which  led  to  the  adoption  of  the  anti-
dumping measures.

(18) Under  these  circumstances,  findings  concerning  Hong  Kong  and  Korea  were
established  on  the  basis  of  the  facts  available,  in  accordance  with  Article  18  of  the
basic Regulation.

2.

Continuation of dumping

a) Hong Kong

Normal value

(19)

(20)

In  view  of  the  non-cooperation,  normal  value  was  established  on  the  basis  of  the
information  provided  in  the  request  for  review,  which  was  the  only  reliable
information  available.  The  use  of  the  normal  value  established  in  the  original
investigation would be inappropriate, because prices and costs for  the manufacturing
of  the  product  concerned  have  decreased  significantly  over  the  period  on  all  known
international markets.

In the request, normal value was constructed separately for bulked and branded/packed
microdisks,  by  adding  to  the  cost  of  production  of  the  product  concerned  in  the
European  Community  a  reasonable  margin  of  profit  (10  %,  as  in  the  original
investigation).  Given  the  nature  of  data  available  for  the  export  price,  i.e.  Eurostat,
which does not distinguish between different types, a single weighted average normal
value  was  established.  The  weighing  was  done  on  the  basis  of  the  export  shares  of
bulked  and  branded/packed  microdisks  to  the  Community,  as  evidenced  by  the  few
import  invoices  available.  On  the  basis  of  this  information,  it  was  established  that
3,5” microdisks  marketed  in  bulk  represented  almost  80  %  of  the  imports  of

6

(21)

(22)

microdisks  in  the  Community,  while  the  remaining  20  %  were  branded/packed
microdisks.

The Hong Kong Economic and Trade Office (“HKETO”) objected to the possible use
of the cost of production  submitted in  the request  for  review  to  establish  the  normal
value  for  Hong  Kong  exports.  However,  the  only  alternatives  suggested  by  the
HKETO were  the use  of  either the domestic sales or the cost  of production in Hong
Kong. As none of these methods could be applied because of the non-cooperation, the
evidence  provided  by  the  complainant  remained  the  most  reliable  information
available to the Commission. After disclosure, the HKETO claimed that normal value
should instead have been based on the exports from Hong Kong to other countries, as
resulting from Hong Kong’s trade statistics. This claim was rejected, notably as these
trade  statistics  (at  the  6  digit  level  of  the  international  nomenclature:  Harmonised
System) also include products other than the product under consideration.

Export price

In  view  of  the  non-cooperation,  the  export  price  was  established  on  the  basis  of
Eurostat data. However, Eurostat figures (on a per month and individual Member State
basis) sometimes showed high unit values that were entirely irreconcilable with sales
prices  of  3,5”'  microdisks  in  the  Community.  This  seems  to  be  due  to  the  fact  that
other  products  such  as  CD-Rs  have  been  recorded  under  the  CN  code  covering  3,5”
microdisks. The Eurostat figures concerning the IP were therefore adjusted in order to
exclude  monthly  data  having  an  average  unit  value  higher  than  0,17  Euro/unit.  This
was a very conservative approach because:

– 

– 

The  export  prices  for  Hong  Kong  set  out  in  the  review  request  were
significantly  below  this  threshold.  The  import  prices  resulting  from  the
invoices  made  available  by  the  sole  co-operating  unrelated  importer  in  the
Community, which however represented only a small share in the total import
volume from Hong Kong were also significantly below this level.

The threshold of 0,17 Euro/unit corresponds to the weighted average unrelated
importers/Community producers’ resale/selling price of 3,5” microdisks in the
Community market during the IP. The weighing was carried out on the basis of
sales  quantities  of  the  Community  industry  and  the  total  import  volumes  of
3,5”  microdisks  from  all  origins.  It  was  in  fact  reckoned  that  imports  from
Hong  Kong  should  reasonably  not  take  place  at  CIF  Community  frontier
average  prices  higher  than  the  average  resale/selling  prices  prevailing  in  the
Community market.

The  HKETO  claimed  that  the  above-mentioned  methodology  was  arbitrary  and
incorrect,  and  that  values  and  quantities  reported  under  the  total  CN  code  should
have  been  used  to  calculate  the  export  price.  This  claim  is  rejected  for  the  reasons
outlined above.

Comparison

(23) Normal  value  and  export  price  were  compared  on  an  ex-works  basis,  in  accordance
with Article 2(10) of the basic Regulation. Due allowance in the form of adjustments
was made for differences in transport, insurance, handling, loading and ancillary costs
on the basis of the information contained in the request for a review.

7

Dumping margin

(24)

(25)

(26)

In accordance with Article 2(11) of the basic Regulation, the weighted average normal
value was compared with the weighted average export price to the Community.

This comparison showed the existence of a margin of dumping of between 10 % and
15  %,  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. This compares with a residual margin of dumping of
27,4  %  established  in  the  course  of  the  original  investigation  (when  individual
dumping margins ranged from 6,7 % to 13,3 %).

Should the comparison be made between the normal value calculated as described in
recitals (17) to  (19)  and  the  export  prices obtained from the invoices  made  available
from the co-operating unrelated importer, the dumping margin would be even bigger.
However, as mentioned above, this importer only accounted for a fairly small share of
total imports from Hong Kong.

Conclusion

(27)

The  above  findings  show  the  existence  of  a  continuation  of  dumping  for  imports  of
3,5”  microdisks  originating  in  Hong  Kong  established  on  the  basis  of  significant
export volumes.

b) Korea

Methodology

(28) Normal  value  and  export  price  concerning  Korea  were  established  by  following  the
same methodology described  above  for  Hong  Kong,  though  in  the  case  of  Korea  no
import  invoices  were  available  from  the  co-operating  unrelated  importer.  The
comparison between normal value and export price  was also  carried out by  applying
the  same  methodology  used  for  Hong  Kong.  It  should  however  be  noted  that  the
results of the examination of continuation of dumping were not decisive in this case in
view of the low volume of imports from Korea as described at recital (49).

Dumping margin

(29)

(30)

In accordance with Article 2(11) of the basic Regulation, the weighted average normal
value was compared with the weighted average export price to the Community.

This comparison showed the existence of a margin of dumping of between 20 % and
25  %,  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. This compares with a margin of dumping margin of
8,1 % established in the course of the original investigation.

Conclusion

(31)

The  above  findings  show  the  existence  of  a  continuation  of  dumping  for  imports  of
3,5”  microdisks  originating  in  Korea,  although  the  import  volumes  on  the  basis  of
which this conclusion had been reached were very small.

8

3.

Likelihood of recurrence of dumping

a) Hong Kong

(32)

(33)

(34)

(35)

(36)

The  market  share  represented  by  imports  of  3,5”  microdisks  from  Hong  Kong  was
significant  at  the  time  of  the  original  investigation,  when  it  represented  more  than
10 % of the total Community consumption. In the period following the imposition of
the anti-dumping measures, this market share decreased to 5,5 % in 1997, and, during
the  IP,  it  represented  7,3  %  of  the  total  Community  consumption.  It  should  also  be
mentioned  that  imports  from  Hong  Kong  have  shown,  after  the  IP,  a  significant
decrease.

The  HKETO  claimed,  at  the  initiation  of  the  investigation,  that  there  was  only  one
Hong Kong exporting producer of 3,5” microdisks still active  in  the  market and that
the production capacity of this company, if exported, was too limited to cause injury to
the  Community  industry  even  if  the  anti-dumping  duties  were  allowed  to  lapse.  In
addition,  after  disclosure,  the  HKETO  claimed  that  after  the  IP  production  of
microdisks  in  Hong  Kong  had  ceased  altogether  and  that  therefore  there  was  no
likelihood of recurrence of dumping any more.

In this respect, it should be pointed out that Hong Kong has held a substantial market
share throughout the period analysed (mostly around 7 %). It should also be noted that
imports of 3,5” microdisks from Hong Kong significantly decreased after the IP while
there  was  a  commensurate  increase  of  imports  of  this  product  from  Macao  which  is
not subject to anti-dumping measures. Following disclosure, the HKETO has provided
information  claiming  that  production  and  exports  to  the  Community  of  microdisks
originating in Hong  Kong  has  ceased  after  the  IP.  However,  this  cannot  compensate
for the fact that manufacturing activities for the product concerned have been found to
be mobile and, if measures were repealed it is likely that certain exporting producers
would  relocate  their  production  back  to  Hong  Kong,  or  resume  their  export  should
they  only have suspended  them temporarily.  It should also  be noted  that,  because  of
the  lack  of  cooperation  shown  by  exporting  producers  during  the  IP,  it  was  not
possible  to  ascertain  whether  the  source(s)  of  dumped  exports  had  indeed  ceased
its(their) activities after the IP.

b) Korea

The  market  share  represented  by  imports  from  Korea  represented  at  the  time  of  the
original investigation more than 2 % of the total Community consumption.  After  the
imposition  of  the  anti-dumping  measures,  the  market  share  of  Korean  imports
decreased  substantially,  and  during  the  IP  it  represented  less  than  0,2  %  of  the  total
Community  consumption  of  the  product  concerned.  It  was  therefore  considered
whether there was a likely risk of a recurrence of dumping of Korean imports at above
de minimis levels.

Two  companies  had  been  named  in  the  request  for  a  review  as  producers  of  the
product  concerned,  however  neither  of  them  co-operated.  For  one  of  these  two
producers, exports to the Community represented  a very  substantial proportion of  its
total sales during the original investigation. Moreover, this company had a production
capacity which used to satisfy an important part of Community consumption (close to
5 %). In the absence of cooperation by this company, it can therefore be assumed that
substantial unused production capacity still exists in Korea which could be exploited,

9

should the measures be repealed. Information available indicates that this producer is
still manufacturing the product concerned.

(37) Moreover, given the above mentioned ease of relocation of production for the product
concerned, it cannot be excluded that certain exporting producers would relocate their
production  back  to  Korea,  should  they  have  shifted  production  to  locations  outside
Korea.

(38) As  imports  from  Korea  were  made  at  significantly  dumped  prices,  albeit  in  limited
quantities, and as spare production capacity is reckoned to exist in the country and in
view of the  possibility  of  a  relocation  of  production,  it  is  concluded  that,  should  the
measures  be  repealed,  there  is  a  likelihood  of  recurrence  of  dumping  at  significant
export volumes.

C. DEFINITION OF THE COMMUNITY INDUSTRY

(39)

In the Community, during the IP, 3,5” microdisks were manufactured by:

– 

– 

– 

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

Another  producer  which  supported  the  request  for  review  but  did  not  supply
data.

Other  economic  operators  related  to  Japanese,  Taiwanese  and  Chinese
exporting producers.

(40) As  in  the  previous  proceedings,  the  Commission  found  that  the  assessment  of  the
situation  of  the  Community  industry  would  be  distorted  if  Community  producers
related  to  those  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”.

(41)

(42)

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

The  HKETO  argued  that  companies  related  with  Japanese,  Taiwanese  or  other  non-
Community-owned  producers  should  not  be  excluded  from  the  definition  of  the
Community production and stated this exclusion inflated the applicants’ standing.

(43) As  explained  above,  these  producers  were  excluded  from  the  definition  of  the
Community production, because they were found to be related to parties dumping on
the Community market and no reasons have been given as to why this approach should
be  changed  in  the  review  investigation.  Furthermore,  even  when  taking  these
producers  into  account,  the  co-operating  Community  producers  would  still  represent
more  than  25  %  of  production  taking  place  in  the  Community.  The  HKETO  claim
was, therefore, rejected.

10

(44) On this basis 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
Article 4(1)  and  5(4) of  the  basic Regulation. They  are  hereinafter  referred  to  as  the
“Community industry”.

D. THE COMMUNITY MICRODISKS’ MARKET

1.

General

(45)

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 recordable  compact
disks  (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 (currently estimated at 30 million units in the Community), 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

(46)

(47)

Figures for consumption in the Community are based on information contained in the
request for review crossed checked by verified production and sales figures provided
by the Community industry and total import volumes obtained from Eurostat.

In  Eurostat  data  however,  3,5”  microdisks  are  only  a  part  of  the  CN  heading
concerned. During the analysis period they were deemed to be by far the largest part of
this heading since the market for other non-rigid magnetic discs was very small. It has
become evident to the Commission that in 1998 and 1999 some recordable CDs (CD-
Rs)  were  misdeclared  to  the  customs  authorities  under  this  CN  heading.  Volume
import  figures  were  corrected  using  detailed  confidential  statistical  information  to
reflect this misdeclaration.

(48) Consumption fell by 50 % during the analysis period.

Total consumption of 3,5”
microdisks in the
Community

1995

1996

1997

1998

IP

Millions of units

1300

1100

1000

Index 1995 = 100

100

85

77

800

62

650

50

11

3.

Imports from the countries concerned

Preliminary remark

(49) Due to the lack of  cooperation, Eurostat and custom information (Taric) was used to
estimate  imported  volumes.  For  Hong  Kong,  the  Commission  has  used  custom
information  concerning  the  product  concerned  for  1995  to  1998.  For  the  IP,  it  was
considered  that  20  %  of  the  trade  registered  by  Eurostat  under  the  relevant  heading
could  be  linked  to  a  misdeclaration  of  CD-Rs  and  volumes  were  corrected
accordingly, while prices were estimated as explained at recital (20) above. For Korea,
the custom information was used across the analysis period for volume and prices.

Volume and market share

(50) Based  on  the  above  methodology,  the  development  of  the  volume  of  imports  of

3,5” microdisks into the Community was as follows:

Imports into the Community
(millions of units) and Market
share (%)

1995

1996

1997

1998

IP

Imports from Hong Kong

89,1

72

54,7

62,1

47,2

Market share Hong Kong

6,9 %

6,5 %

5,5 %

7,8 %

7,3 %

Imports from Korea

5,7

1,7

0,1

0,5

1,2

Market share Korea

0,5 %

0,2 %

0 %

0,2 %

0,2 %

Total imports from Hong Kong
and Korea

Total market share of Hong
Kong and Korea

94,7

73,7

54,8

62,6

48,4

7,3 %

6,7 %

5,5 %

7,8 %

7,4 %

(51)

(52)

The  volume  of  imports  from  Hong  Kong  fell  throughout  the  analysis  period  from
89 million units in 1995 to 47 million units during the IP. The market share of imports
originating  in  Hong  Kong  fell  initially  from  6,9  %  in  1995  to  5,5  %  in  1997  before
rising again in 1998, to reach 7,3 % in the IP.

The volume of imports from Korea was at low levels throughout the period analysed,
falling  from  6  million  units  in  1995  to  almost  zero  in  1997  and  rising  to  just  over
1 million  units  during  the  IP.  Korean  market  share  remained  at  negligible  levels
throughout the analysis period.

Price behaviour of exporting producers

(53)

The Commission compared average CIF prices of imports originating in Hong-Kong
and in Korea with sales prices of the Community industry in the Community.

12

(54)

The  comparison showed,  on a  weighted  average  basis,  that  the  prices  of  the  imports
originating in Hong Kong were 5 % lower than those of the sales of the Community
industry  during  the  IP,  and  that  the  prices  of  the  imports  originating  in  Korea  were
14 % lower than those of the sales of the Community industry during the IP.

4.

Imports from other third countries

(55) During the IP, imports from other countries develop as follow. They were originating
mainly in India and Singapore (5,7 % and 8,7 % of market share respectively).

Imports from other countries

637,5

237,6

198,4

167,5

190,5

Market share imports from other
countries

49,0 % 21,6 % 19,8 % 20,9 % 27,9 %

5.

Situation of the Community industry

Production, capacity and capacity utilisation

(56)

The  production  volume  of  the  Community  industry  decreased  by  30  %  over  the
analysis  period.  Over  the  same  period,  the  rate  of  capacity  utilisation  by  the
Community industry decreased by 19 percentage points.

1995

1996

1997

1998

IP

Production in million of units

Index 1995=100

Capacity in millions of units

225

100

234

208

92

273

190

84

235

178

79

240

157

70

235

Capacity utilisation

96 %

76 %

81 %

74 %

67 %

Sales, market share and growth

(57)

Sales made by the Community industry decreased by 31 %  over  the  analysis  period.
Whilst the total Community  consumption for 3,5” microdisks has decreased over the
analysis  period  by  50  %,  the  Community  industry's  market  share  has  increased  by
6 percentage  points.  This  gain  reflects  a  consolidation  of  the  position  of  the
Community industry that was permitted by anti-dumping measures in force.

Sales of 3,5” microdisks in
the Community by the
Community industry

1995

1996

1997

1998

IP

Millions of units

Index 1995=100

218

100

205

94

187

86

168

77

149

69

Percentage market share

17 %

19 %

19 %

21 %

23 %

13

Price development

(58)

The development of prices of the Community industry for sales to unrelated customers
during the analysis period is as follows. Prices fell by 44 % during the analysis period.

Development of prices of
3,5” microdisks of the
Community industry

Average price per unit
(EURO)

1995

1996

1997

1998

IP

0,2599

0,2065

0,1796

0,1531

0,1453

Index 1995=100

100

79

69

59

56

Inventories

(59)

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

Profitability, return on investments and cash flow

(60)

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 –5,57 % in 1996 to –1,75 % in the IP.

(61) 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.

Employment, productivity, wages

(62) Between 1995 and the IP, the Community industry  reduced its labour force by 35 %
from 252 to 163 employees. Accordingly, its productivity rose by 9 % during the same
period, and total wages decreased by 23 % (wages per employee increased by 19 %).

Investments and ability to raise capital

(63)

Production  of  3,5”  microdisks  is  capital  intensive  and  production  facilities  typically
operate  24  hours  daily  all  year  round.  After  some  insignificant  investments  made  in
1995 and 1996, there has been no new net investment in this industry.

(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 3 years.

Exports by the Community industry

(65)

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

14

Magnitude of dumping margin and recovery from past dumping

(66)

The  situation  of  the  Community  industry  improved  to  a  certain  extent  after  the
imposition  of  measures,  but  it  has  not  completely  recovered  from  past  dumping  as
evidenced mainly from its weak financial situation.

(67) As concerns the impact on the situation of the Community industry of the magnitude
of the actual margin of dumping during the IP, this is not considered a relevant factor
in the present review examination as the imposition of duties is meant to remedy the
dumping found.

(68)

(69)

(70)

Submission by The Hong Kong Economic and Trade Office

The  HKETO  claimed  that  the  Community  industry  has  had  good  economic  results
during the analysis period, taking into account the decrease in demand and that it was
not showing any weakness. They also claimed that, because of the declining trend in
the volume and value of imports from Hong Kong, it was doubtful that these imports
had caused an injury to the Community industry and would do so in the future.

These claims could not be accepted. Indeed, the above analysis describes the situation
of  the  Community  industry  as  improved  in  a  difficult  context  of  declining  demand
although it is clearly  concluded that this industry has not completely recovered from
past  dumping  from  Hong-Kong  and  from  other  countries  subject  to  anti-dumping
measures. Moreover, it must be underlined that imports from Hong Kong continued to
be dumped as concluded at recital (25) and that Hong-Kong was the largest supplier to
the Community during the IP, with a market share of more than 7 %. Finally, it must
be stressed that, in the context of an expiry review, it is necessary to establish whether
there is a likelihood of recurrence of injury should measures expire.

Conclusions

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 significantly reducing costs of production (reduced by
40  %  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  yet
been able to reach a satisfactory financial situation.

E. LIKELIHOOD OF CONTINUATION AND/OR RECURRENCE OF INJURY

(71)

(72)

(73)

It  is  recalled  that  it  was  concluded  at  recitals  (33)  and  (37)  that  a  likelihood  of  a
recurrence of dumping in significant volumes existed for both Hong Kong and Korea.

It  was  concluded  above  that  the  Community  industry  was  in  a  vulnerable  situation
during the IP.

Should  measures  expire,  dumped  imports  from  Hong  Kong  and  Korea  are  likely  to
push down the prices of the Community industry which are already depressed.

15

(74)

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.

(75)

In the 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.

F. COMMUNITY INTEREST

1.

General considerations

(76)

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

(77)

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

(78)

(79)

In  view  of  the  conclusions  on  the  situation  of  the  Community  industry  set  out  at
recital (68), 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.

16

(80)

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

(81) 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.

(82)

Furthermore the limited co-operation of importer in this  case leads  to  the  conclusion
that  the  measures  in  force  on  imports  originating  in  Hong  Kong  and  Korea  did  not
have  any  significant  impact  on  the  situation  of  unrelated  importers  and  traders  of
3,5” microdisks in the Community.

(83)

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

(84) 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.

(85)

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

(86) 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.

(87) 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.

17

6.

Conclusion

(88) 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.

(89) Due  to  the  long  duration  of  the  investigation,  it  is  considered  appropriate  that  the

measures be limited to four years.

G. PROPOSED DUTIES

(90)

The  anti-dumping  duties  imposed  by  Regulation  (EC)  No  2199/94  should  be
maintained at existing levels, i.e.:

Country

Company

Duty

Hong Kong

Jackin Magnetic Co Ltd.

Plantron (HK) Ltd.

Technosource Industrial Ltd.

All other companies

Republic of Korea

All companies

HAS ADOPTED THIS REGULATION:

Article 1

7,2 %

6,7 %

13,3 %

27,4 %

8,1 %

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 Hong Kong and
the  Republic  of  Korea,  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  definitive  anti-dumping  duty  applicable  to  the  net,  free-at-Community-
frontier price before duty, shall be as follows for the products manufactured by:

Country

Company

Rate of AD duty % TARIC additional

Hong Kong

Jackin Magnetic Co Ltd.

Plantron (HK) Ltd.

Technosource Industrial Ltd

All other exporting producers

Republic of
Korea

All exporting producers

7,2 %

6,7 %

13,3 %

24,7 %

8,1 %

18

code

8775

8776

8778

8999

-

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

Article 2

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

Article 3

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

Article 4

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

Done at Brussels,

For the Council
The President

19