Council Regulation (EC) No 312/2002 of 18 February 2002 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: 2002-02-18
Institutions: Council of the European Union
Subjects: China, Japan, Taiwan, anti-dumping duty, anti-dumping legislation, magnetic medium

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Official Journal of the European Communities

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COUNCIL REGULATION (EC) No 312/2002

of 18 February 2002

imposing a definitive anti-dumping duty on imports of certain magnetic disks (3,5(cid:1) microdisks)
originating in Japan and the People's Republic of China and terminating the proceeding in respect
of imports of 3,5(cid:1) microdisks originating in Taiwan

THE COUNCIL OF THE EUROPEAN UNION,

3. Request for review

Having regard to the Treaty establishing the European
Community,

(4)

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 Community (1), and in
particular Article 11(2) thereof,

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

Whereas:

Following the publication of the notice of impending
expiry of
the anti-dumping measures applicable to
imports of 3,5(cid:1) microdisks originating in Japan, Taiwan
and the People's Republic of China (7), the Commission
received in July 1998, a request to review these meas-
ures 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 product
concerned.

the total Community production of

A. PROCEDURE

(5)

1. Previous investigations involving Japan, Taiwan

and the People's Republic of China

(1)

By Regulation (EEC) No 2861/93 (2),
the Council
imposed definitive anti-dumping measures on imports
into the Community of certain magnetic disks (‘3,5(cid:1)
microdisks’) originating in Japan, Taiwan and the
People's Republic of China.

2. Related investigations

(2)

Definitive anti-dumping duties have also been imposed
on imports of 3,5(cid:1) microdisks originating in Hong Kong
and the Republic of Korea (3) and Indonesia (4).

The measures concerning Hong Kong and the Republic
of Korea are subject to a review which was initiated in
September 1999 (5).

(3)

The measures concerning Malaysia, Mexico and the
United States of America expired on 14 April 2001 (6).

(1) 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).

(2) OJ L 262, 21.10.1993, p. 4. Regulation as last amended by Regula-

tion (EC) No 2537/1999 (OJ L 307, 2.12.1999, p. 1).

(3) Regulation (EC) No 2199/94 (OJ L 236, 10.9.1994, p. 2). Regula-
tion as last amended by Regulation (EC) No 2537/1999 (OJ L 307,
2.12.1999, p. 1).

(4) Regulation (EC) No 1821/98 (OJ L 236, 22.8.1998, p. 1). Regula-
tion as last amended by Regulation (EC) No 2537/1999 (OJ L 307,
2.12.1999, p. 1).

(5) OJ C 256, 9.9.1999, p. 3.
(6) OJ C 111, 12.4.2001, p. 9.

The request was based on the grounds that the expiry of
the measures would be likely to result in the continua-
recurrence of dumping and injury to the
tion or
after
Community
sufficient
consulting the Advisory Committee,
the
evidence existed for the initiation of a review,
Commission initiated such a review (8) pursuant
to
Article 11(2) of the basic Regulation.

determined,
that

industry. Having

4. Investigation

(6)

(7)

(8)

The Commission officially advised the five Community
producers supporting the request, the exporting produ-
cers 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(cid:1) microdisks in
the Community.

(7) OJ C 123, 22.4.1998, p. 5.
(8) OJ C 322, 21.10.1998, p. 4.

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Official Journal of the European Communities

L 50/25

(9)

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

against

(13)

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

E x p o r t i n g p r o d u c e r s

(a) Exporting producer in Taiwan:

CIS Technology Inc., Taipei Hsien, Taiwan;

(b) Exporting producer
China/Hong Kong:

in the People's Republic of

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

(14)

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

C o m m u n i t y p r o d u c e r s

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
Community 3,5(cid:1) microdisks market covered the period
from 1994 up to the end of the investigation period (the
‘analysis period’).

the situation of

(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 accord-
ingly.

B. PRODUCT UNDER CONSIDERATION AND LIKE

PRODUCT

1. Product under consideration

(12)

The product under consideration (3,5(cid:1) microdisks)
is
used to record and store encoded digital computer infor-
mation falling within CN code ex 8523 20 90, with the
exception of 3,5(cid:1) microdisks based on optically contin-
uous servo tracking technology or magnetic sector servo

tracking technology with a storage capacity of 120 MB
or more.

The 3,5(cid:1) microdisks concerned were available in various
types, depending on various factors, including, amongst
others, their storage capacity, formatting, degree of certi-
fication (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(cid:1) microdisks, there were no signif-
icant differences in their basic physical characteristics
and technology. They all showed a high degree of inter-
changeability.

On this basis, the 3,5(cid:1) microdisks as defined above are
to be considered as one product.

2. Like product

The various types of 3,5(cid:1) microdisks, as defined above,
which are manufactured and sold in the Community or
manufactured in the countries concerned and exported
to the Community use the same basic technology, are
alike in their basic physical characteristics and tech-
nology and show a high degree of interchangeability. All
these 3,5(cid:1) microdisks, therefore, have to be considered
as a like product within the meaning of Article 1(4) of
the basic Regulation.

(15)

(16)

C. LIKELIHOOD OF A CONTINUATION OF DUMPING

1. Preliminary remarks

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

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 Commis-
sion's questionnaire, and so it was impossible to estab-
lish on the basis of their individual data whether or not
these companies were dumping. Therefore, and in order
findings concerning
not
to reward non-cooperation,
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. Euro-
stat data could not be used for the purposes of calcu-
lating dumping because the product concerned covers

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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 %.

This claim could not be accepted on the grounds that,
under reviews pursuant to Article 11(2) of the basic
Regulation, measures must either be maintained or
repealed, but not modified. Reference is also made to the
findings concerning a likelihood of
recurrence of
it could
dumping. The company was informed that
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.

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(cid:1) 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 cooperating company which accounted for practi-
cally all
to the
Community during the investigation period has ceased
manufacturing the product concerned, it was considered
that
continuation of
dumping during the investigation period was devoid of
any purpose.

exports of 3,5(cid:1) microdisks

assessment of possible

any

the

(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
investigation.
time of the original

(21)

For all the types of 3,5(cid:1) microdisk, except one, exported
by the cooperating Chinese exporting producer, normal
value was calculated by reference to representative
domestic sales prices to independent customers.

For the one type of 3,5(cid:1) 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 cooperating Taiwanese exporting producer,
including a reasonable amount for selling, general and
administrative expenses and for profit.

4. People's Republic of China

(a) General

(c) Export price

(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 cooperating 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.

(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(cid:1) microdisks business were not reflected in the
related importer's accounts, these 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.

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L 50/27

(d) Comparison

(23) Normal values and export prices were compared for
each product type. Due allowance in the form of adjust-
ments 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,
insur-
the
ancillary
ance,
Community, and packing. The adjustment for physical
characteristics reflected the fact that certain types of 3,5(cid:1)
microdisks sold by the Chinese exporting producer were
formatted, whilst the similar types sold on the Taiwa-
nese markets did not have this characteristic.

handling

outside

costs

and

(e) Dumping margin

(24)

(25)

sales

State,

independent

It was found that there was a pattern of export prices
which differed significantly among regions:
in one
Member
customers
to
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
it was considered appro-
the full degree of dumping,
priate 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.

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
a
percentage of the cif import price at the Community
border, duty unpaid.

exceeded the

export price,

expressed as

(28)

(29)

amounted to around 130 million units and collectively
accounted for around 30 % of the apparent Community
Imports originating in Japan accounted
consumption.
for approximately three-quarters of the total
imports
from these two countries.

Imports from both countries fell sharply after the impo-
sition 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 appro-
priate also to examine the likelihood of recurrence of
i.e. the likelihood of increased quantities of
dumping,
imports at dumped prices originating in these two
countries.

2. Unused production capacities in Japan and the

People's Republic of China

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.

5. Conclusion

3. Prices to other third country markets of Japan

and the People's Republic of China

(26)

The above findings show the existence of a continuation
of dumping for imports of 3,5(cid:1) 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.

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

D. LIKELIHOOD OF RECURRENCE OF DUMPING

4. Likely effect of the expiry of the measures for

Japan and the People's Republic of China

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

(32) As shown above, the dumping calculations made are
based on relatively
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.

low export

volumes

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Official Journal of the European Communities

21.2.2002

(33)

(34)

expiry

current

Cooperation from Japan was low in both the original
investigation and the
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(cid:1) microdisk market. In these circum-
stances, 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.

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 redirected towards the Community
market at dumped prices.

5. Likely effect of the expiry of the measures for

Taiwan

(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(cid:1)
microdisks, no likelihood of a recurrence of dumping
from this company exists.

(36)

(37)

The Community industry claimed that two other Taiwa-
nese producers of microdisks are still active in the busi-
ness and that
these two companies, which had not
large
cooperated in the investigation, would export
quantities of 3,5(cid:1) 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-cooperating companies might
have exported 3,5(cid:1) 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 cooperating producer which has ceased
the dumping activities concerning 3,5(cid:1)
production,
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(cid:1)
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 negli-
gible 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 origin-
ating 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 recur-
rence of dumping from Taiwan exists at present.

E. DEFINITION OF THE COMMUNITY INDUSTRY

(40)

In the Community, 3,5(cid:1) microdisks are manufactured
by:

— two Community producers, which fully cooperated
with the Commission during the investigation,

— three other producers which were supporting the

application,

— other economic operators related to Japanese, Taiwa-

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

excluded from the definition of

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L 50/29

(42)

the two cooperating Community
The production of
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.

more, according to recent market studies, most PC
manufacturers continue to incorporate 3,5(cid:1) 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.

(43) During the course of the proceeding a submission was
received from the Chinese exporting producer which
the products manufactured by the two
alleged that
cooperating Community producers did not satisfy the
provisions of the Community's own origin rules as laid
down in Article 24 of Council Regulation (EEC) No
2913/92 of 12 October 1992 establishing the Commu-
nity's customs code (1) and as further elaborated by the
provisions of Regulation (EC) No 12/97 (2) and there-
fore
included in the Community
production.

could not be

(47)

2. Consumption

of

3,5(cid:1) microdisks

on

the

Community market

Figures for consumption in the Community are based on
application, verified
information contained in the
production
the
figures
and
Community industry and import volumes obtained via
Eurostat. These estimates allowed a reasonable assess-
ment of the Community consumption of the product
concerned.

provided

sales

by

(44)

the

This claim was
investigation
rejected because
revealed that the 3,5(cid:1) microdisks manufactured by these
two Community companies are produced mainly from
In addition,
components sourced in the Community.
they add substantial value in the manufacturing process,
their headquarters and centres for research and develop-
ment are all
located in the Community and the 3,5(cid:1)
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 cooper-
ating Community producers represent a major propor-
tion, 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 Article 5(4) of the basic Regulation. They are
hereinafter referred to as the ‘Community industry’.

F. THE COMMUNITY 3,5(cid:1) MICRODISKS MARKET

1. General

(46)

The market
for 3,5(cid:1) microdisks is mature, and is
currently characterised by a situation of falling demand.
Other products such as Zip 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(cid:1) microdisks. However, given the
significant base of PCs with 3,5(cid:1) microdisk disk drives
incorporated, it is clear that there will be a continuing
need for these microdisks in the Community. Further-

(1) OJ L 302, 19.10.1992, p. 1.
(2) OJ L 9, 13.1.1997, p. 1.

On this basis, total consumption in the Community fell
the period analysed from 1 400 million
throughout
units (1994)
to 1 300 million units (1995), 1 100
million units (1996), 1 000 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 cooperation, 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.

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Official Journal of the European Communities

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Imports into the Community
(millions of units)

Imports from Japan

1995

4,86

1996

1997

Investigation
period

1,695

1,390

0,655

Market share Japan

0,37 %

0,15 %

0,14 %

0,07 %

Imports from the People's Republic of China

6,090

2,065

5,835

1,915

Markets 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
Republic of China

share of

Japan and the People's

0,84 %

0,34 %

0,72 %

0,29 %

(c) Imports declared as having originated in Macao

(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
imports (1).

4. Price behaviour of the exporting producers

(52)

The development of prices of the imports of 3,5(cid:1) microdisks from the People's Republic of China is
shown in the following table.

Average price of imports

1995

1996

1997

(ECU per unit)

Investigation
period

Imports from the People's Republic of China

0,330

0,135

0,119

0,146

Source: Eurostat.

(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 certi-
fication, 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 cooperated 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. With regard to price quotations, they showed prices
for Japanese products similar to those of the Community industry.

(1) 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).

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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:

Production in millions of units

Index 1995 = 100

Capacity in millions of units

Index 1995 = 100

1994

1995

1996

185

100

201

100

218

118

223

111

201

109

261

130

1997

182

98

222

110

Investigation
period

174

94

222

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

Sales in millions of units

Index 1995 = 100

175

100

211

121

200

114

178

102

Investigation
period

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

(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
investigation. Profit levels for 1995 are not available due to industry
industry in the original
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.

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(e) Employment, wages and labour productivity

(61)

(62)

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

(63)

Production of 3,5(cid:1) 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 two 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 cooperating exporting producer in the People's Republic of China claimed that the 3,5(cid:1)
microdisk market can be divided into two market segments, namely ‘branded’ and ‘bulk’. The bulk
part of the market is characterised by large-scale deliveries of 3,5(cid:1) microdisks where there is no
emphasis on high quality. Branded products, on the other hand, are those which normally corre-
spond 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(cid:1) 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(cid:1) microdisks sold by Chinese
producers and those sold by the Community producers; they are competing therefore in the same
market segment.

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(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(cid:1) 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(cid:1) 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(cid:1) 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 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 recurrence of dumping, should measures expire, since
volumes of dumped imports would considerably increase.

(73)

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

(74)

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.

(75)

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(cid:1) microdisks would not be worth-
while 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.

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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(cid:1) 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.

C o n c l u s i o n

(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)

(79)

(80)

(81)

The Commission examined whether the maintenance of the anti-dumping measures on 3,5(cid:1) micro-
disks 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.

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

In view of the conclusions on the situation of the Community industry set out at section F, 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 computerisa-

tion);

(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(cid:1) 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.

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3. Interests of unrelated importers/traders

(83) Only one unrelated importer cooperated 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(cid:1)
microdisks from the countries concerned and from other third countries, including countries not
subject to anti-dumping measures.

(84)

Furthermore the limited cooperation 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 China did not have
any significant impact on the situation of unrelated importers and traders of 3,5(cid:1) 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(cid:1) 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(cid:1) 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.

(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.

6. Conclusion

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 should be maintained at existing levels,

i.e.:

J a p a n

Memorex Telex Japan Ltd

Hitachi Maxell Ltd

TDK

All other companies

Hanny Magnetics

All other companies

P e o p l e ' s R e p u b l i c o f
C h i n a

6,1 %

20,6 %

26,7 %

40,9 %

35,6 %

39,4 %.

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(92)

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

A definitive anti-dumping duty is hereby imposed on imports of 3,5(cid:1) microdisks used to record and
1.
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(cid:1)
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

2.
produced by the following manufacturers shall be as follows:

Country

Company

Rate of AD duty %

TARIC additional code

Japan

Memorex Telex Japan Ltd

Hitachi Maxell Ltd

TDK

All other exporting producers

The People's Republic

Hanny Magnetics

of China

6,1 %

20,6 %

26,7 %

40,9 %

35,6 %

All other exporting producers

39,4 %

8705

8706

8707

8999

8711

8999

3.

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

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(cid:1) microdisks originating in Taiwan is hereby terminated.

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

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

Done at Brussels, 18 February 2002.

For the Council

The President

J. PIQUÉ I CAMPS