Proposal for a Council Regulation imposing a definitive countervailing duty and collecting definitively the provisional countervailing duty imposed on imports of sulphanilic acid originating in India
Date: 2002-07-11
Institutions: European Commission
Subjects: India, World Trade Organisation, analysis of causes, chemical product, countervailing charge, damage, import, import policy, monetary compensatory amount, originating product

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Official Journal of the European Communities

C 262 E/439

for a Council Regulation imposing a definitive countervailing duty and collecting
Proposal
definitively the provisional countervailing duty imposed on imports of sulphanilic acid originating
in India

(2002/C 262 E/32)

COM(2002) 376 final

(Submitted by the Commission on 11 July 2002)

EXPLANATORY MEMORANDUM

The present anti-subsidy investigation concerning imports into the Community of sulphanilic acid orig-
inating in India was initiated by the Commission on 6 July 2001. A parallel anti-dumping investigation
concerning imports of the same product originating in both India and the People’s Republic of China was
initiated on the same date.

Provisional anti-dumping and countervailing duties were imposed on 3 April 2002 by Regulation (EC) No
575/2002 and Regulation (EC) No 573/2002.

The attached proposal for a Council Regulation is based on the definitive findings concerning subsidisation,
injury, causation and Community interest. These definitive findings have confirmed that the provisional
countervailing duty was warranted.

It is therefore proposed that the Council adopt the attached proposal for a Regulation, which should be
published in the Official Journal no later than 3 August 2002.

THE COUNCIL OF THE EUROPEAN UNION,

B. SUBSEQUENT PROCEDURE

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 2026/97 of
6 October 1997 on protection against subsidised imports
from countries not Members of the European Community (1),
and in particular Article 15 thereof,

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

Whereas:

A. PROVISIONAL MEASURES

(1) The Commission by Regulation (EC) No 573/2002 (2)
(‘provisional Regulation’) imposed a provisional counter-
vailing duty on imports of sulphanilic acid originating in
(EC)
India.
No 575/2002 (3)
(‘provisional anti-dumping Regulation’)
also imposed a provisional
anti-dumping duty on
imports of sulphanilic acid originating in the People's
Republic of China and in India.

Commission

Regulation

The

by

(2) Subsequent to the disclosure of the essential facts and
considerations on the basis of which it was decided to
impose a provisional countervailing duty, a number of
interested parties submitted comments in writing. All
interested parties who requested a hearing were granted
an opportunity to be heard by the Commission.

(3) The Commission continued to seek and verify all
information deemed necessary for the definitive findings.

(4) All parties were informed of

the essential

facts and
considerations on the basis of which it was intended to
recommend the imposition of a definitive countervailing
duty and the definitive collection of amounts secured by
way of the provisional countervailing duty. They were
also granted a period within which they could make
representations subsequent to this disclosure.

(5) The oral and written arguments submitted by the parties

were taken into account.

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 87, 4.4.2002, p. 5.
(3) OJ L 87, 4.4.2002, p. 28, as corrected by corrigenda of 6.4.2002,

OJ L 91, p. 52 and 11.4.2002, OJ L 94, p. 34.

(6) Having reviewed the provisional findings on the basis of
the information gathered since then, the main findings as
set out in the provisional Regulation are confirmed.

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C. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

acid produced and sold by Community producers and that
produced in India and exported to the Community are
like products.

the

technical

(7) Subsequent to the publication of the provisional Regu-
lation, a number of interested parties claimed that the
definition of the product concerned was incorrect. They
argued that
and purified grades of
sulphanilic acid were substantially different in terms of
their purity and had different properties and applications.
It was claimed that the two grades of sulphanilic acid
could not be considered as a homogeneous product and
should therefore have been treated as distinct products for
this
the purposes of
assertion, it was argued that there was insufficient inter-
changeability between the two grades of sulphanilic acid.
Whilst it was accepted that the purified grade could be
used in all applications, the same could not be said of
technical grade sulphanilic acid because of the level of
impurities it contained, most notably aniline residues.
These impurities consequently made technical grade acid
unsuitable for use in the production of optical brighteners
and food dyes.

the investigation.

In support of

(8) It is recalled that purified grade sulphanilic acid results
from the purification of technical grade sulphanilic acid
in a process which removes certain impurities. This purifi-
cation process does not alter the molecular properties of
the compound or the way in which it reacts with other
chemicals. Therefore, technical and purified grades share
that
the same basic chemical characteristics. The fact
interchangeability may only be in one direction in some
applications because of concerns about
is
therefore not considered to be sufficient
justification
that purified and technical grades constitute different
products which should be treated separately in two
different investigations. Whilst accepting that the purifi-
cation process adds certain additional costs
to the
production process,
it is recalled that these were taken
into account when making a fair comparison between
the Community
the different
industry
country
imported
and
concerned for the purposes of calculating the level of
price undercutting and the injury elimination level.

grades produced by
those

from the

impurities

(9) Consequently, it was not considered that the comments
made by interested parties concerning the definition of
the
to alter
the product concerned were
findings on this issue that had been reached at
the
provisional stage.
is therefore definitively concluded
that both grades of sulphanilic acid should be treated as
the present
one single product
proceeding.

the purpose of

sufficient

for

It

2. Like product

(10) No new elements were brought to the attention of the
Commission that would lead it to alter the conclusions
reached at the provisional stage, namely that sulphanilic

(11) The provisional findings concerning the like product as
set out in recital (13) of the provisional Regulation are
hereby confirmed.

D. SUBSIDY

(12) The

findings made

in the provisional Regulation
concerning the countervailable subsidies obtained by the
exporting producers are hereby confirmed, unless it is
otherwise expressly stated bellow.

1. Export Processing Zones (EPZ)/Export Oriented

Units (EOU)

(13) No new comments were received under this heading. The
the

findings as
provisional Regulation are hereby confirmed.

to (28) of

in recitals

set out

(18)

2. Duty Entitlement Passbook Scheme (DEPB) — post

export

(14) The Government of

India (‘GOI’) claimed that

the
Agreement on Subsidies and Countervailing Measures
(ASCM)
is infringed both in spirit and letter by the
Commission not investigating the practical utilisation of
the
the DEPB in each case. They
these
Commission's assessment of
schemes was
excess duty
drawback could be considered a subsidy in accordance
with Article 2 of Regulation (EC) No 2026/97 (‘basic
Regulation’). Therefore,
in order to establish whether a
subsidy exists, an examination as to whether an excess
exists must be undertaken.

that
the benefits under

since only the

incorrect

argued

(15) The Commission used the following approach in order to
export-basis
to
so,

establish whether
constitutes a countervailable
calculate the amount of benefit.

the DEPB on post

subsidy and if

a

this

that

involves

(16) Pursuant to Article 2(1)(a)(ii) of the basic Regulation, it is
concluded
financial
scheme
contribution by the GOI since government revenue (i.e.
import duties on imports) otherwise due is not collected.
There is also a benefit conferred, within the meaning of
Article 2(2) of the basic Regulation, to the recipient since
the exporting producers were relieved of having to pay
normal
import duties. The DEPB subsidy is contingent
upon export performance and is thus countervailable
under Article 3(4) of the basic Regulation unless one of
the exceptions provided for by the basic Regulation
applies.

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(17) Article 2(1)(a)(ii) provides for such an exception for, inter
alia, drawback and substitution drawback schemes which
conform to the strict rules laid down in Annex I item (i),
Annex II (definition and rules for drawback) and Annex III
(definition and rules for substitution drawback).

paid by the company was not fully taken into account
because only the Minimum Alternative Tax (MAT) was
included in the original calculation and not the prepaid
income taxes of previous years.

are

the

to check whether

(18) The analysis revealed that DEPB on post-export basis is
not a drawback or a substitution drawback scheme. This
scheme lacks a built-in obligation to import only goods
that are consumed in the production of the exported
goods (Annex II of the basic Regulation) which would
ensure that the requirements of Annex I item (i) were
there is no verification system in
met. Additionally,
place
actually
imports
consumed in the production process.
It is also not a
substitution drawback scheme because the imported
goods do not need to be of the same quantity and charac-
teristics as the domestically sourced inputs that were used
for export production (Annex III of the basic Regulation).
Lastly, exporting producers are eligible for the DEPB
benefits regardless of whether they import any inputs at
all. In order to obtain the benefit,
it is enough for an
exporter to simply export goods without showing that
any input material was
exporting
producers which procure all of their inputs locally and
do not import goods which can be used as inputs are still
entitled to the DEPB benefits. Hence, the DEPB on post-
export basis does not conform to any of the provisions of
Annex I to III. Since the above exception to the subsidy
definition does therefore not apply, the countervailable
benefit is the remission of total import duties normally
due on all imports.

imported. Thus,

(19) From the above it clearly follows, according to the basic
Regulation, that the excess remission of import duties is
the basis for calculating the amount of the benefit only in
the case of bona fide drawback and substitution drawback
schemes. Since it is established that the DEPB on post-
export basis does not fall in one of these two categories,
the benefit is the total remission of import duties, not any
supposed excess remission, since all duty remission is
deemed to be in excess in such cases.

(20) For the above reasons, the claim of the GOI cannot be
accepted and the provisional
regarding the
countervailability of this scheme and the calculation of
the benefit, as set out in recitals (35) to (40) of the
provisional Regulation, are confirmed.

findings

3. Income Tax Exemption Scheme (ITES)

(21) The cooperating company claimed that when calculating
the benefit under this scheme, the actual amount of tax

(22) This claim was found to be valid. The benefit to the
company was recalculated and was found to be negligible.

4. Advance Licence — Advance Release Orders

(ARO) Scheme

(23) The GOI submitted that the ARO is merely a legitimate
extension of a legitimate substitution drawback scheme
(Advance License). According to the GOI this is proved
by the fact that there is an unbreakable link between the
subsequently exchanged for
licences gained (even if
AROs), and the importation of the necessary inputs for
the
the manufacture of exported goods. Furthermore,
system is organised and administered by the GOI
in
such a way as to prevent there being any possibility of
excess drawback occurring.

(24) In this

against

respect,

the GOI argued that a substitution
require that a company
drawback scheme does not
obtaining duty drawback benefits
imported
inputs need consume those exact inputs in the production
of the relevant exported goods. According to the GOI, the
company may consume domestically procured inputs in
the manufacture of the exported product provided they
are consumed in equivalent volumes as the inputs on
which the benefit of remission of import duty is taken.
The GOI further argued that a user of an ARO may only
exchange it for the input product (procured indigenously)
indicated on the Advance License and that the Advance
Licence was obtained by reference to an exported product
which has already consumed a matching quantity of the
same input.

(25) When addressing these arguments, it should be recalled
that advance licences are available to exporters (manu-
facturer-exporters or merchant-exporters) to enable them
inputs used in the production of exports,
to import
duty-free. The advance licences measure the units of auth-
orised imports either in terms of their quantity or in
terms of
In both cases the rates used to
determine the allowed duty free purchases are established,
for most products including the product covered by this
investigation, on the basis of the Standard Input Output
Norms (SION). The input items specified in the advance
licences are items used in the production of the relevant
exported finished product.

their value.

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(26) The advance licence holder intending to source the inputs
from indigenous sources, in lieu of direct import, has the
option to source them against AROs. In such cases the
advance licences are validated as AROs and are endorsed
the items specified
to the supplier upon delivery of
therein.
In accordance with the ‘Export and Import
Policy’ document, the endorsement of the ARO entitles
the supplier to the benefits of deemed export such as
deemed exports drawback and refund of terminal excise
duty.

(27) In this case, the cooperating company made very limited
use of advance licences
to import duty-free inputs.
Instead, the company converted the licences into AROs
obtaining
and
commercial benefits. The commercial benefits of
the
the
AROs correspond to the amount of duties that
AROs enable the supplier to forgo under the deemed
export drawback facility.

them to

endorsed

suppliers

local

those substituted for

(28) It is acknowledged that duty drawback systems can allow
for the refund or drawback of import charges on inputs
which are consumed in the production process of another
product and where the export of
the latter product
contains domestic inputs having the same quality and
characteristics as
the imported
inputs. It would for instance be allowed for a company,
in case of a shortage of duty-free inputs, to use domestic
inputs and incorporate these in the exported goods, and
then at a later stage, import the corresponding quantity of
duty-free inputs. In this context, the existence of a verifi-
cation system or procedure is
important because it
enables, in this case, the GOI, to ensure and demonstrate
that the quantity of inputs for which drawback is claimed
does not exceed the quantity of similar products exported,
in whatever form, and that
there is not drawback of
import charges in excess of those originally levied on
the imported inputs in question.

the

(29) As stated in the provisional Regulation, the verification
established that
there was no system or procedure in
place to confirm whether and which inputs, sourced
against AROs, are consumed in the production process
of the exported product or whether an excess benefit of
import duties occurred within the meaning of item (i) of
Annex I and Annexes II and III to the basic Regulation. In
particular, the exporter is under no obligation to actually
consume
in the
production process. Since the remission of import duties
is not limited to that payable on goods consumed in the
production process of
the
the
condition that only goods actually consumed in the
exported products may
the
production process of
is
benefit
therefore concluded,
the
Advance Licence scheme is not a permitted remission/
drawback scheme within the meaning of the basic Regu-
lation.

sourced against AROs

the ARO element of

from such remission,

exported products,

fulfilled.

is not

inputs

that

It

since

there

appears

importing inputs.

(30) In addition, the AROs cannot be considered as a duty
to be no
drawback scheme,
requirement of
In this context, a
scheme could only be considered as a bona fide duty
drawback scheme in cases where an import element
i.e. when there is a link between the imported
exists,
inputs
exported goods. The quantity of
and the
imported inputs should be corresponding to exported
goods.

(31) For the above reasons, these claims cannot be accepted
and the provisional findings as regards the countervail-
ability of this scheme and the calculation of the benefit
are confirmed.

5. Package Scheme of

Incentives

(PSI) of

the

Government of Maharashtra

(32) As stated in the provisional Regulation, the PSI scheme is
only available to companies having invested in certain
designated geographical areas within the jurisdiction of
to
the
companies located outside these areas. The level of the
benefit is different according to the area concerned. The
scheme is therefore specific in accordance with Article
3(2)(a) and Article 3(3) of the basic Regulation.

State of Maharashtra.

available

is not

It

(33) The GOI and the company concerned claimed that this
scheme is a non-countervailable subsidy since it meets the
criteria of Article 4(3) of the basic Regulation, and thus
qualifies as a ‘green-light’ regional subsidy granted within
the State of Maharashtra.

(ii)

subsidies

(34) Under this Article, in order not to be subject to counter-
to disadvantaged regions
vailing measures,
within the territory of
the country of origin and/or
export would have to comply with certain criteria; most
notably, they would have to be: (i) pursuant to a general
the regions
regional development,
framework of
concerned would have to be clearly designated contiguous
geographical areas with a definable economic and admin-
istrative identity, and (iii) be regarded as disadvantaged on
the basis of neutral and objective criteria which must be
clearly spelled out by law or other official document.
These criteria shall include a measurement of economic
development which shall be based on at least one of the
following factors: income per capita, or household income
per capita, or GDP per capita (in each case, not above
85 % of the average for the territory of the country of
origin or export concerned), or unemployment rate as
measured over a three-year period (at least 110 % of the
average for the territory of the country of origin or export
concerned).

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advanced

comprised

(35) The Government of Maharashtra has in a letter to the
Ministry of Commerce & Industry of the GOI stated that
the PSI applies to the entire contiguous region outside the
region
relatively
the
the State of Maharashtra, and
Mumbai-Thane belt of
that the disadvantaged region outside this belt is char-
acterised by a per capita income which is below the
State average. Figures were provided which showed that
per capita income for the region to which the PSI applies
was 74,54 % of the figure for the whole Maharashtra State
in 1982/83 and 74,81 % by 1998/99. However, these
figures were not substantiated by supporting evidence.

in

(36) In any event, the examination of the green light claim has
revealed that the per capita income in the State of Maha-
rashtra, as measured over a period of
three years
(1996/97 to 1998/99),
is more than 60 % higher than
the national average of India. It should be clear that the
the per capita
85 % benchmark is measured against
income for the whole of the country of origin or export
and not that of a particular State or region. On this basis,
it is clear that the income per capita of the eligible region
in Maharashtra, although less than 85 % of the regional
is well above the national average income per
average,
capita, and the region therefore does not fall
into the
green-light category on the basis of
this criterion. As
regards the unemployment criterion, no information was
provided by the Indian authorities.

(37) On the basis of the above, it is concluded that, in this
case, this scheme does not meet the criteria of Article 4(3)
findings as
of
regards the countervailability of this scheme are, therefore,
confirmed.

the basic Regulation. The provisional

(38) Concerning the calculation of the subsidy amount as set
out in recitals (72) to (74) of the provisional Regulation,
the GOI and the company concerned claimed that the
amount of benefit obtained under
the tax deferral
incentive should be allocated over the total sales during
the investigation period (‘IP’) rather than over the total
domestic sales during the IP as it was provisionally
allocated, because it is a benefit to the company as a
whole and should for this reason not solely be attributed
to its domestic sales.

(39) In addition,

they brought

the
Commission certain factors by which the calculations of
the benefit obtained by the company concerned under the
sales tax exemption incentive were inflated.

to the attention of

(40) The claim concerning the basis of allocation of the benefit
obtained under the tax deferral incentive was considered
valid and the Commission amended the calculations of the
subsidy amount accordingly.

(41) In relation to the sales tax exemption incentive, after
taking into account
the comments of
the interested
parties and after a detailed review of
the provisional
adjusted
findings,
resulting in an overall reduction of the amount of subsidy.

calculations were

the provisional

(42) On the basis of the revised calculations described above,
the amount of subsidy that the company has obtained
under this scheme is 0,8 %.

6. Amount of countervailable subsidies

(43) The amount of countervailable subsidies, calculated in accordance with the provisions of the basic

Regulation, expressed ad valorem, is 7,1 %, for the investigated exporting producer.

(44) The level of cooperation for India was high (above 80 %). In view of the high level of cooperation, it
was decided to set the residual subsidy margin at the level of the subsidy found for the cooperating
exporting producer, i.e. 7,1 %.

Type of subsidy

EOU (*)

DEPB (*)

EPCGS

ITES

Advance
Licence/
AROs (*)

Maharashtra
State Scheme

Total

Kokan Synthetics
and Chemicals
Private Limited

All Others

1,4 %

1,7 %

0

0

3,2 %

0,8 %

7,1 %

7,1 %

(*) Subsidies marked with an asterix are export subsidies.

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E. COMMUNITY INDUSTRY

(45) Following the publication of the provisional Regulation, a
number of interested parties queried the definition of the
Community industry and its standing in terms of Article
it was
10(8) of
the complainant producer, Sorochimie
suggested that
Chime Fine, did not have the support of
the second
Community producer, Quimigal SA when it lodged its
complaint.

the basic Regulation.

In particular,

it did express it support

(46) It is recalled that whilst Quimigal was not a party to the
original complaint,
for the
proceeding at the initiation stage and has fully cooperated
in the investigation. In response to the claims of certain
interested parties, it has also reiterated its support for the
investigation.
proceeding during the
Therefore, as no new elements were brought
to the
attention of the Commission that would lead it to alter
its earlier findings, the provisional findings concerning the
definition of the Community industry and its standing as
detailed in recital (78) of the provisional Regulation are
hereby confirmed.

course of

the

F. INJURY

1. Preliminary remarks

for

acid

(47) Several interested parties questioned the way in which the
imports of
Commission had established figures
into the Community, Community
sulphanilic
consumption and market
shares. They claimed that
there had been insufficient disclosure of the Commission's
findings regarding imports,
in both volume and value
terms, and that consequently their rights of defence had
been impeded. It was noted that some of this information
was also missing from the public version of the complaint
with the result
the
standards detailed in Article 10(2) of the basic Regulation.

the complaint did not meet

that

information which is

(48) It is to be noted that according to Article 29(1) of the
basic Regulation,
submitted in
confidence by parties to an investigation shall be treated
as such by the investigation authority so long as the
information concerned warrants such treatment.
is
sulphanilic acid is manufactured by a
recalled that
relatively small number of producers around the world.
Consequently, it was not possible for reasons of confiden-
tiality to disclose precise information relating to imports
of the product into the Community, especially for those
countries where there is only one exporting producer.
Therefore,
indexed
figures
an explanatory narrative were made
available to interested parties concerning this and related
items.

the purposes of disclosure,

and

for

It

(49) As none of the interested parties which raised the issue of
insufficient disclosure were able to demonstrate that the
information made available to them in a summarised
form did not enable them to defend their rights, their
arguments in this respect had to be rejected.

2. Imports concerned

(50) One interested party suggested that the figure for the
increase in imports noted in the provisional Regulation
was misleading. It was claimed that as a number of other
producers had withdrawn from the market, users in the
Community were obliged to purchase sulphanilic acid on
the world market, thereby leading to the sharp rise in
import volumes. This claim had to be rejected for a
number of reasons. In the first instance, no additional
evidence concerning the level of imports was submitted
so as to alter the findings reached at the provisional stage
on this point. Similarly, whilst it was acknowledged in
recital (161) of the provisional Regulation that imports
from India were expected to continue to play a significant
role in meeting demand in the Community, it was also
noted that had the Community industry not been subject
to the injurious effects of the subsidised imports, it would
have been able to put into effect certain expansion plans,
thereby satisfying a larger part of Community demand. In
the light of the above, the provisional findings concerning
imports into the Community from India and the level of
price undercutting as noted in recitals (81) to (85) of the
provisional Regulation are confirmed.

3. Situation of the Community industry

(51) In accordance with Article 8(5) of the basic Regulation,
the examination of the impact of the subsidised imports
on the Community industry included an evaluation of all
relevant economic factors and indices having a bearing on
its state.

(52) Subsequent

to provisional disclosure,

a number of
interested parties questioned the manner in which the
Commission had reached its provisional determination
concerning injury as certain indicators were showing
positive developments.
it was suggested
that the increase in the Community industry's production,
sales and capacity utilisation during the analysis period
(1 January 1997 to 30 June 2001) proved that it had
not suffered injury. One interested party also claimed
that
the Commission had failed to make a proper
assessment of wage costs as required by the Article 8(5)
of the basic Regulation.

In particular,

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It

(53) It is recalled that according to Article 8(5) of the basic
Regulation, none of the economic factors or indices listed
in the aforementioned article shall necessarily be decisive
in the determination of
is indeed true that
injury.
certain indicators relating to quantities produced and
sold by the Community industry showed positive devel-
opments. However, this should be seen in the light of the
fact
that Community consumption of sulphanilic acid
increased by some 13 % during the analysis period and
that there has been a reduction of the number of suppliers
on the market due to the closure of certain Community
producers.

(54) More

it

should be

importantly,

recalled that

the
Community industry suffered injury in the form of price
depression and price suppression. In particular, its average
selling price declined sharply between 1997 and 1998 as
the pressure exerted by the increasing volume of imports
on the market became evident. Subsequently, although the
Community industry was able to increase its average
selling price as demand on the Community market also
increased, it failed to achieve a level which would enable
it to cover its full cost of production and losses continued
to be incurred in the IP.

(55) With regard to the argument raised concerning wages, it
is noted that although the number of workers employed
by Sorochimie decreased during the analysis period, the
average employment cost per employee increased. This is
due to the fact that there was a change in the mix of
employee during the period and also to general wage
inflation. With regard to Quimigal,
is to be noted
that in the base year for the index (1998) the company
was not producing sulphanilic acid. When it began
production in 1999, the workers were engaged full time
in this activity with an extra day being worked from 2000
onwards. Neither company noted that the wages of those
employed in sulphanilic acid activities had been effected
by the imports concerned. Therefore, wages were not
considered to be an indicator of injury.

it

(56) In view of the above, the provisional findings that the
Community industry suffered material
injury within the
meaning of Article 8 of the basic Regulation, as detailed
in recitals (88) to (107) of the provisional Regulation, are
confirmed.

G. CAUSATION

1. General

comments

on

the

Commission's

conclusions regarding the causation of injury

(57) Certain interested parties argued that

the Community
industry was itself partly responsible for the injury it

the

situation of Quimigal,

had suffered. Several parties questioned the quality of
Sorochimie's management, product and customer service
and highlighted the fact it had itself imported sulphanilic
acid during the analysis period. One party also alleged
should be
injury suffered by Sorochimie
that
attributed to its other business activity (glue) which
experienced significant difficulties during the IP. With
second
regard to the
company forming part of
it
was argued that its decision to enter the market with a
low price strategy during its start-up phase had also
contributed to the alleged injury. Finally,
it was also
the Community industry had to meet
claimed that
stringent
and had higher
labour and transport costs than exporting producers in
India with the implication that
imports originating in
that country had a competitive advantage and were not
made at injurious prices.

the Community industry,

environmental

regulations

the

(58) The investigation showed that Sorochimie, despite its
financial difficulties linked to the excessively low prices
prevailing on the market, was able to gain new customers
during the analysis period and to adapt its products to
meet their needs. The company was obliged to purchase
certain quantities of the product concerned during the
analysis period in order
to meet existing customer
its production equipment was
requirements while
undergoing essential repairs. It cannot thus be considered
that Sorochimie contributed to its own injury. Similarly, it
is recalled that any exceptional costs relating to the
company's difficulties in its glue business have been
excluded from the current investigation as they are not
linked to the product concerned and thus are not reflected
in the injury indicators described in the provisional Regu-
lation.

(59) It was noted in recital (118) of the provisional Regulation
that Quimigal's decision to enter the market was taken at
a time when prices for sulphanilic acid on the Community
market were higher. Quimigal was able to establish itself
on the market at a time of both increasing demand in the
Community and changes in the number of suppliers of
sulphanilic acid both in the Community and outside. It
was also noted that the company was obliged to offer
prices similar to those of
the dumped and subsidised
imports in order to establish itself on the market and
gain market share in 1999 and 2000 in that its relatively
small size meant that it was a price taker rather than a
price setter. Nevertheless,
share decreased
slightly in the IP as imports from India increased in
volume. No indication has therefore been found that the
deterioration of the situation of the Community industry
is due to excessive intra-Community industry competition.

its market

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Official Journal of the European Communities

29.10.2002

it

the
that
(60) With regard to the allegedly higher costs
in terms of
Community industry is obliged to meet
regulations and other
complying with environmental
competitive
items,
should be
the imports concerned was taken into
advantage of
value.
the
determination
account
in
Consequently,
concerning
provisional
causation as set out in recitals (121) to (123) of the
provisional Regulation are confirmed.

recalled that

findings

normal

the

the

of

H. COMMUNITY INTEREST

(61) Following the publication of the provisional Regulation,
one interested party questioned how the Commission
could determine,
in the light of Sorochimie being in
administration, that the Community industry was viable
and competitive. It is recalled that Sorochimie was obliged
to seek protection from its creditors following certain
difficulties in its glue business and other pressures in its
sulphanilic acid activities. The Commercial Court of Char-
leville Mézières has appointed an administrator to oversee
the company's trading activities and has granted the
company a period of time in which to prepare a restruc-
turing plan. This period of
recently been
extended until 31 January 2003. In the absence of other
unforeseen events, the company should continue to be in
existence for the immediate future and therefore be in a
from the imposition of definitive
position to benefit
measures. Consequently, the provisional findings that the
the
imposition of measures
is
Community industry as noted in recital
the
provisional Regulation are confirmed.

interest of
(134) of

time has

in the

(62) A number of

claimed that

interested parties

the
Commission had failed to make an objective assessment
of the situation of users in not taking into account any
increase in the Community industry's prices that would
It was also
likely follow the imposition of measures.
claimed that measures were against
the Community
interest as the production capacity of the Community
industry was insufficient
to meet Community demand
and as a possible duopolistic situation based on the two
Community producers could result from the closure of
the market
to imports from India and also from the
PRC, which is itself subject to the parallel anti-dumping
investigation.

(optical brighteners, concrete additives and dyes and
colorant producers). This analysis included an assessment
of the impact of measures on their costs on the basis that
the prices of the imports concerned would increase in line
the same time, due
with the proposed measures. At
allowance was made in this calculation for a maximum
possible increase in the price of sulphanilic acid sold by
the Community industry of 10 % on the basis that its
prices would increase to a level similar to that of the
imports concerned following the imposition of measures
taking into account that it was already operating at a
fairly high rate of capacity utilisation in the IP. As such,
no new elements were submitted by interested parties
which would alter the provisional
findings concerning
the possible increase in the manufacturing costs of the
different user industries.

the measures is in any event not

including India will continue to enter

(64) Regarding the supply and competition situation on the
it is to be noted that the current
Community market,
production capacity of
the Community industry could
satisfy in the region of 50 % of Community demand.
The purpose of
to
close the market to imports from India but to ensure
that they are made at non-subsidised and non-injurious
prices. It is therefore expected that imports from third
countries
the
market. At
should ensure
continued sulphanilic acid production in the Community
with the result that users will have more choice between
domestic and foreign suppliers and competition between
It should also be
all suppliers should be maintained.
stressed that
to
increase its output by investing in new facilities if the
capital expenditure can be justified. For this to occur,
the injurious effects of the subsidised imports need to
be removed.

the Community industry has plans

the same time, measures

(65) In the light of the above, the provisional findings that the
imposition of measures is not contrary to the interest of
the Community as noted in recital
the
provisional Regulation is confirmed.

(164) of

(63) In respect of the claim that the Commission failed to take
account of the various interests in an objective manner
when determining whether the imposition of measures, it
is recalled that at the provisional stage, the Commission
made a detailed analysis of each of the main user sectors

1. Injury elimination level

(66) In the absence of any new submissions on this point, the
methodology used to establish the injury margin as set
out at recitals (165) to (167) of the provisional Regulation
is hereby confirmed.

I. ANTI-SUBSIDY MEASURES

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2. Definitive measures

(67) As the injury elimination level is higher than the subsidy
margin established,
the definitive measures should be
based on the latter. The following duty therefore applies:

India (all companies): 7,1 %.

3. Definitive collection of provisional duties

ex 2921 42 10 (TARIC code 2921 42 10 60) and originating
in India.

2.
The rate of the definitive countervailing duty applicable
to the net, free-at-Community frontier price, before duty shall
be 7,1 %.

3.
Notwithstanding paragraph 1, the definitive duty shall
not apply to imports released for free circulation in accordance
with Article 2.

(68) In view of the magnitude of subsidisation found and in
the light of the seriousness of the injury caused to the
Community industry, it is considered necessary that the
amounts secured by way of the provisional countervailing
duty shall be definitively collected at the rate of the duty
definitively
the
provisional duty in excess of the definitive duty shall be
released.

imposed. Amounts

secured

under

J. UNDERTAKING

(69) Subsequent to the imposition of provisional measures, the
sole cooperating exporting producer in India offered a
price undertaking in accordance with Article 13(1) of
the basic Regulation. By doing so, it agreed to sell the
product concerned at or above price levels which would
have the effect of eliminating the injurious effects of
subsidisation. The
the
company will
and detailed information
Commission with regular
concerning its exports to the Community, meaning that
the undertaking can be monitored effectively by the
structure of
Commission. Furthermore,
the
the Commission
exporting producer
considers that the risk of circumventing the agreed under-
taking is limited.

the sales
such that

also provide

is

(70) In view of this, the offer of an undertaking was accepted

by the Commission in Decision (2002/. . ./EC).

(71) In order to ensure the effective respect and monitoring of
the undertaking, when the request for release for free
circulation pursuant to the undertaking is presented to
the relevant customs authority, exemption from the
duty should be conditional upon presentation of a
commercial
invoice containing the information listed in
the Annex to this Regulation. Where no such invoice is
presented, or when it does not correspond to the product
concerned presented to customs, the appropriate rate of
countervailing duty should instead be payable.

(72) It should be noted that in the event of a breach or with-
drawal of
the undertaking or a suspected breach, a
countervailing duty may be imposed pursuant to Article
13(9) and (10) of the basic Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

1.
imports

A definitive countervailing duty is hereby imposed on
falling within CN code

sulphanilic

acid,

of

Unless otherwise

4.
concerning custom duties shall apply.

specified,

the provisions

in force

Article 2

Imports under

1.
the following TARIC additional code
which are produced and directly exported (i.e. shipped and
invoiced) by the company named below to a company in the
Community acting as an importer shall be exempt from the
countervailing duty imposed by Article 1 provided that they
are imported in conformity with paragraph 2.

Country

Company

India

Kokan Synthetics & Chemicals
Pvt Ltd,
14 Guruprasad, Gokhale Road
(N), Dadar (W),
Mumbai 400 028, India

TARIC
additional code

A398

Imports mentioned in paragraph 1 shall be exempt from

2.
the duty on condition that:

(i) a commercial invoice containing at least the elements of
the necessary information listed in the Annex is presented
to Member States customs authorities upon presentation of
the declaration for release into free circulation; and

(ii) the goods declared and presented to customs correspond
precisely to the description on the commercial invoice.

Article 3

The amounts secured by way of the provisional countervailing
duty imposed pursuant to Regulation (EC) No 573/2002 shall
be definitively collected at
the rate of duties definitively
imposed. Amounts secured in excess of the definitive rate of
countervailing duty shall be released.

Article 4

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

its publication in the Official

Journal of

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

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ANNEX

Elements to be indicated in the commercial invoice referred to in Article 2(2):

1. The heading ‘COMMERCIAL INVOICE ACCOMPANYING GOODS SUBJECT TO AN UNDERTAKING’.

2. The name of the company mentioned in Article 2(1) issuing the commercial invoice.

3. The commercial invoice number.

4. The date of issue of the commercial invoice.

5. The TARIC additional code under which the goods on the invoice are to be customs-cleared at the Community

frontier.

6. The exact description of the goods, including:

— the Product Code Number (PCN), i.e. ‘PA99’, ‘PS85’ or ‘TA98’,

— the technical/physical specifications of the PCN, i.e. for ‘PA99’ and ‘PS85’ white free flowing powder and for

‘TA98’ grey free flowing powder,

— the company product code number (CPC) (if applicable),

— CN code,

— quantity (to be given in tonnes).

7. The description of the terms of the sale, including:

— price per tonne,

— the applicable payment terms,

— the applicable delivery terms,

— total discounts and rebates.

8. Name of the company acting as an importer to which the invoice is issued directly by the company.

9. The name of the official of the company that has issued the commercial invoice and the following signed declaration:

is being made within the

‘I, the undersigned, certify that the sale for direct export to the European Community of the goods covered by this
the Undertaking offered Kokan
invoice
Synthetics & Chemicals Pvt Ltd, 14 Guruprasad, Gokhale Road (N), Dadar (W), Mumbai 400 028,
India, and
accepted by the European Commission through Decision (2002/. . ./EC). I declare that the information provided
on this invoice is complete and correct.’

and under

terms of

scope

the