Proposal for a Council Regulation imposing a definitive countervailing duty on imports of recordable compact disks originating in India
Date: 2003-05-20
Institutions: European Commission
Subjects: India, anti-dumping legislation, anti-subsidy proceeding, common tariff policy, countervailing charge, import (EU), record

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 20.5.2003
COM(2003) 281 final

Proposal for a

COUNCIL REGULATION

imposing a definitive countervailing duty on imports of recordable compact disks
originating in India

(presented by the Commission)

EXPLANATORY MEMORANDUM

1.
On  17  May  2002,  the  Commission  announced,  by  notice  published  in  the  Official
Journal  of  the  European  Communities1,  the  initiation  of  an  anti-subsidy  proceeding  with
regard  to  imports  into  the  Community  of  recordable  compact  disks  ('CD-Rs')  originating  in
India and commenced an investigation.

The initiation of a parallel anti-dumping proceeding concerning imports of the same product
originating in the same country was announced by a notice published in the Official Journal
of the European Communities2, on the same date.

Given  the  need  to  further  examine  certain  aspects  of  subsidy,  no  provisional

2.
countervailing duties were imposed on CD-Rs originating in India.

The attached proposal for a Council Regulation is based on the definitive findings on

3.
subsidy, injury, causation and Community interest.

4.
The investigation revealed that imports of CD-Rs originating in India were subsidised
and  were  causing  injury  to  the  Community  industry.  It  has  moreover  been  established  that
there  are  no  compelling  reasons  which  would  lead  to  the  conclusion  that  it  is  not  in  the
Community interest to impose such measures.

5.
It is therefore proposed that the Council adopt the attached proposal for a Regulation
which should enter into force by publication in the Official Journal of the European Union no
later than 14 June 2003.

1

2

OJ C 116, 17.5.2002, p.4
OJ C 116, 17.5.2002, p.2

2

                                                
Proposal for a

COUNCIL REGULATION

imposing a definitive countervailing duty on imports of recordable compact disks
originating in India

THE COUNCIL OF THE EUROPEAN UNION,

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 Community3 and in
particular Article 15 thereof,

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

Whereas:

1.

Present proceeding

A. PROCEDURE

(1) 

(2) 

(3) 

(4) 

3

4

5

On  17  May  2002,  the  Commission  announced,  by  notice  published  in  the  Official
Journal  of  the  European  Communities4,  the  initiation  of  an  anti-subsidy  proceeding
with  regard  to  imports  into  the  Community  of  recordable  compact  disks  (‘CD-Rs’)
originating in India and commenced an investigation.

The  initiation  of  a  parallel  anti-dumping  proceeding  concerning  imports  of  the  same
product  originating  in  the  same country  was  announced  by  a  notice  published  in  the
Official Journal of the European Communities5, on the same date.

The  proceeding  was  initiated  as  a  result  of  a  complaint  lodged  in  April  2002  by  the
Committee  of  European  CD-Rs  Manufacturers  (‘CECMA’),  acting  on  behalf  of
producers  representing  a  major  proportion  of  the  total  Community  production  of
CD-Rs. The complaint  contained evidence of  subsidisation  of  the  product  concerned
and of material injury resulting therefrom, which was  considered sufficient  to  justify
the initiation of a proceeding.

The Commission officially advised the complainant Community producers, as well as
the  other  known  Community  producers,  the  exporting  producer,  importers  and  users
association known to be concerned and the representatives of India of the initiation of
the  proceeding.  Interested  parties  were  given  the  opportunity  to  make  their  views

OJ L 288, 21.10.1997, p.1 as amended by Regulation (EC) No 1973/2002, OJ L 305, 7.11.2002, p.4
OJ C 116, 17.5.2002, p.4
OJ C 116, 17.5.2002, p.2

3

                                                
(5) 

(6) 

(7) 

(8) 

(9) 

known  in  writing  and  to  request  a  hearing  within  the  time  limit  set  in  the  notice  of
initiation.

The Government of India, the sole exporting producer in India during the IP, as well
as the complainant and other Community producers, importers, consumers association
and suppliers, made their views known in writing. All parties who so requested within
the above time limit and indicated that there were particular reasons why they should
be heard were granted a hearing.

Certain  parties  contended  that  the  applicant  Community  producers  did  not  fulfil  the
requirements  of  Article  10(8)  of  Council  Regulation  (EC)  No  2026/97  (‘basic
Regulation’)  and  that  the  initiation  of  the  investigation  was  not  warranted.  In  this
respect, it should be noted that the conditions for initiation, and in particular the 25%
and  50%  thresholds  of  Article  10(8),  were  met  and,  therefore,  the  initiation  of  the
investigation was warranted.

It has been claimed that one of the complainant Community producers should not have
been  taken  into  account  for  the  purpose  of  determining  the  representativity  of  the
applicants since this company allegedly lost its right to produce the product concerned
for reasons of intellectual property rights.

It should be noted that the company in question was de facto producing and selling the
product concerned on the Community market during the IP and that it co-operated in
this investigation. The mere fact that this producer was involved in a legal proceeding
does  not  imply  automatically  its  exclusion  from  the  definition  of  the  Community
industry.  In  addition,  it  was  found  that  the  company  appealed  the  Court  decision
according to which it would have lost its licence. Given that no final decision has been
taken it was in any event not possible to conclude that the producer had definitely lost
its right to produce CD-R's. The argument was therefore rejected.

The  Commission  sought,  by  means  of  questionnaires  sent  to  all  known  parties,  and
verified all the information it deemed necessary for the purpose of a determination of
subsidy,  injury  and  Community  interest.  In  this  regard,  the  Commission  carried  out
verification  visits  at  the  premises  of  the  Government  of  India  in  New  Delhi  (‘GOI’)
and the following companies:

(a) Exporting producer in India

- Moser Baer India Ltd., New Delhi, India

(b) Producers in the Community

- Computer Support Italcard S.R.L., Milan, Italy

- C.D.A Datenträger Albrechts GmbH, Albrechts, Germany

- CPO Magnetic Products B.V., Oosterhout, The Netherlands

- Fuji Magnetics G.m.b.H., Kleve, Germany

- Mitsui Advanced Media S.A., Ensisheim, France

- MPO Media S.A.S, Averton, France

4

- TDK Recording Media Europe S.A., Bascharage, Luxembourg

- Prime Disc Technologies GmbH, Wiesbaden, Germany

- IMAG Optical Storage Ltd, Limerick, Ireland

- Multimedia Info-Tech Ltd., Belfast, Northern-Ireland

(c) Suppliers in the Community

- Bayer AG, Leverkusen, Germany

- Steag Hamatech, Sternenfels, Germany

(10)  The  investigation  of  subsidy  and  injury  covered  the  period  from  1  April  2001  to  31
March 2002 (‘investigation period’ or ‘IP’). The examination of trends relevant for the
assessment  of  injury  covered  the  period  from  1  January  1998  to  the  end  of  the
investigation period (‘period considered’ or ‘IIP’)).

2.

Provisional measures

(11)  Given  the  need  to  further  examine  certain  aspects  of  subsidy,  no  provisional

countervailing duties were imposed on CD-Rs originating in India.

3.

Subsequent procedure

(12)  All  parties  were  informed  of  the  essential  facts  and  considerations  on  the  basis  of
which it was intended to recommend the imposition of definitive countervailing duties.
They  were  also  granted  a  period  within  which  they  could  make  representations
subsequent to this disclosure. The oral and written comments submitted by the parties
were considered and, where appropriate, the findings have been modified accordingly.

4.

Measures in force on imports of CD-Rs originating in Taiwan

(13) 

In  June  2002,  by  Regulation  (EC)  No  1050/20026  the  Council  imposed  a  definitive
anti-dumping duty on imports of CD-Rs originating in Taiwan.

B. PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT

1.

Product under consideration

(14)  The product under consideration is the same as in the anti-dumping proceeding against

Taiwan i.e. CD-Rs currently classifiable under CN code ex 8523 90 00.

(15)  A  CD-R  is  a  polycarbonate  disk,  which  is  coated  with  a  layer  of  dye,  a  layer  of
reflective material such as gold or silver and  a protective layer. Recording on such a
disk can be done only once and therefore the disk is said to be of the type “WORM”
(Write  Once  Read  Many).  The  disk  is  an  optical  storage  medium  for  digital  data  or
music. Recording is realised by exposing the dye-layer to an infrared laser beam in a
CD-R recorder.

6

OJ L 160, 18.6.2002, p.2

5

                                                
CD-Rs  can  be  distinguished  according  to  the  type  of  data  stored  (data  CD-R  versus
music  CD-R),  the  storage  capacity,  the  reflective  metal  layer  (mainly  silver)  and
whether or not the CD-R is printed upon.

The  product  is  also  sold  in  different  qualities  and  comes  on  the  market  in  different
types of packaging of which the most frequently encountered are regular or slim jewel
cases containing one CD-R, shrink-wrapped spindles of 10 to 100 CD-Rs, cake-boxes
of  10  to  100  CD-Rs,  envelopes  containing  one  CD-R  packed  in  cellophane,  or  in  a
carton or paper sleeve, etc.

Although the use and the quality of the various types of CD-Rs sold may differ, this
does  not  entail  any  significant  differences  in  the  basic  physical  and  technical
characteristics of the different types. They are therefore considered as one product for
the purpose of this investigation.

2.

Like product

(16)  The  investigation  showed  that  CD-Rs  produced  and  sold  on  the  domestic  market  of
India have similar basic physical and technical characteristics and uses compared with
that exported from this country to the Community. Similarly, CD-Rs manufactured by
the  applicant  and  other  Community  producers  and  sold  on  the  Community  market
have similar basic physical and technical characteristics and uses as compared to those
exported to the Community from the country in question.

(17)  Consequently,  CD-Rs  sold  on  the  domestic  market  of  India  and  exported  to  the
Community as well as CD-Rs produced and sold in the Community are considered as
a like product within the meaning of Article 1(5) of the basic Regulation.

1.

Introduction

C. SUBSIDIES

(18)  On  the  basis  of  the  information  contained  in  the  complaint  and  the  replies  to  the
Commission’  questionnaires,  the  following  schemes,  which  allegedly  involved  the
granting of export subsidies, were investigated:

i)

ii)

(19) 

- Income Tax Exemption scheme;

- Export Processing Zones/Export Oriented Units (EPZ/EOU) scheme.

In  addition  to  these  two  schemes,  the  complaint  lists  three  other  schemes:  Duty
Entitlement  Passbook  scheme  (DEPB),  Export  Promotion  Capital  Goods  scheme
(EPCG)  and  Advance  License  scheme  as  possible  source  of  subsidies  for  the  Indian
exporting producers of CD-Rs. However, the investigation has shown that there is only
one exporting producer of CD-Rs in India operating an EOU. This exporting producer
has fully co-operated with the investigation and has not availed itself of any schemes
other than those listed in recital (16). Practically, it does not need to use other schemes
because  it  obtains  the  same  benefits  under  the  EOU  scheme.  These  schemes  were,
therefore, not considered further in the context of this investigation.

The Income Tax Exemption Scheme is based on the Income Tax Act of 1961 which is
amended yearly by the Finance Act.

6

The  current  EPZ/EOU  scheme  is  based  on  the  Foreign  Trade  (Development  and
Regulation)  Act  1992  (No  22  of  1992)  which  entered  into  force  on  7  August  1992
('Foreign Trade Act'). The Foreign Trade Act (Section 5) authorises the GOI to issue
notifications  regarding  the  export  and  import  policy.  These  are  summarised  in  the
‘Export and Import Policy’ documents which are issued by the Ministry of Commerce
every  five  years  and  updated  annually.  One  Export  and  Import  Policy  document  is
relevant  to  the  investigation  period  of  this  case  i.e.  the  five-year  plan  relating  to  the
period 1.4.1997-31.3.2002. In addition, the GOI also sets out the procedures governing
India’s foreign trade policy in the ‘Handbook of Procedures for Exports and Imports
1.4.1997 – 31.3.2002’ (Volume 1).

Income Tax Exemption Scheme (ITES)

(a)

Legal Basis

(20)  The  Income  Tax  Act  1961  is  the  legal  basis  under  which  ITES  operates.  The  Act,
which  is  amended  yearly  by  the  annual  Finance  Act,  sets  out  the  basis  for  the
collection  of  taxes  as  well  as  for  the  various  exemptions/deductions  which  can  be
claimed. Among the exemptions which can be claimed by firms are those covered by
sections 10A, 10B and 80HHC of the Act, which provide an income tax exemption on
profits from export sales.

(b)

Eligibility

(21)  Exemption under Section 10A can be claimed by  firms located in Export  Processing
Zones (EPZ). Exemption under Section 10B can be claimed by Export Oriented Units
(EOU). Exemption under Section 80HHC can be claimed by any firm which exports
goods.

(c)

Practical implementation

(22)  To  benefit  from  the  above-mentioned  tax  deductions/exemptions,  a  company  must
make  the  deduction/exemption  claim  when  submitting  its  tax  return  to  the  Tax
Authorities at the end of the tax year. The tax year runs from 1 April to 31 March. The
tax return  must be  submitted to the authorities by the  following 30 November at  the
latest. The final assessment by the authorities can take up to three years following the
submission  of  the  tax  return.  A  company  may  only  claim  one  of  the  deductions
available under the three sections mentioned above.

(d)

Conclusion on ITES

(23) 

Item (e) of the Illustrative  List of export subsidies (Annex  I  to  the  basic  Regulation)
refers  to  the  “full  or  partial  exemption  …  specifically  related  to  exports,  of  direct
taxes” as constituting an export subsidy. Under the ITES, the GOI confers a financial
contribution  to  the  company  by  forgoing  government  revenue  in  the  form  of  direct
taxes  which  would  be  due  if  the  income  tax  exemptions  were  not  claimed  by  the
company.  This  financial  contribution  would  confer  a  benefit  on  the  recipient  by
reducing its income tax liability.

(24)  The  subsidy  is  contingent  in  law  upon  export  performance  within  the  meaning  of
Article 3(4)(a) of the basic Regulation, since it exempts profits from export sales only,
and is therefore deemed to be specific.

7

(e)

Calculation of the subsidy amount

(25)  The investigated company manufactures CD-Rs in an EOU. Thus it can claim income
tax  exemption  under  Section  10B  on  profits  from  the  export  sales  of  the  EOU.  The
company, although it has incorporated a computation for the 10B exemption in its tax
return, did not finally claim an income tax exemption under 10B, because its income
tax return did not show any taxable profits for the company as a whole during the IP. It
is noted that the company operates other units for different products outside the EOU.
However, the computations of the income tax in the tax return made by the company
and the attached specifications showed that the company increased its depreciation of
fixed assets significantly by changing assets from a category (machines) with a lower
depreciation rate in the previous  year’s tax calculation to a category (moulds) with a
significantly higher depreciation rate in the IP’s tax calculation.

(26)  The Commission considered the reclassification of  assets  for  taxation purposes to  be
legally  questionable,  in  particular  since  the  company  reclassified  the  assets  only  for
taxation purposes and not in its accounting records, as would appear to be required by
law. Indeed, both the Indian Companies Act (applicable for accounting purposes) and
the Indian Income Tax Act (applicable for taxation) provide the same depreciation rate
for  the  category  in  which  the  assets  were  reclassified  for  taxation  purposes.  For  this
reasons,  the  Commission  requested  explanations  from  the  Indian  tax  authorities  and
the company. The Indian tax authorities failed to provide any reply which could clarify
the  situation.  The  company  originally  claimed  that  this  change  was  necessary  to
correct  a  mistake  in  the  classification  of  certain  assets  for  taxation  purposes  in
previous  years.  But,  following  the  disclosure  of  the  findings  of  the  investigation,  it
claimed that this change of category of the assets was advised by tax consultants and
that  the  purpose  of  this  change  was  to  reduce  the  taxable  profits  in  order  to  avoid
paying income tax.

(27)  However,  it  appears  that  the  cash  benefit  the  company  obtained  through  this
reclassification of assets was already available to it through the provisions of Section
10B of the Indian Income Tax Act. Moreover, the benefit that the company could have
obtained under Section 10B without the questionable reclassification of assets equals
the income tax benefit from the same questionable reclassification of assets.

(28)  The situation outlined above has shown that the company did not, at this stage, directly
benefit  from  a  countervailable  subsidy  under  Section  10B  during  the  IP.  This  is
decided on the basis that for a subsidy to be countervailable it must have been actually
received by the company or a decision must have been made to grant it.

(29)  Export Processing Zones (EPZ) / Export Oriented Units (EOU)

(a)

Legal Basis

(30)  The  EPZ/EOU  scheme,  which  was  introduced  in  1965,  is  an  instrument  under  the
“Export Import Policy” involving export related incentives. During the IP the scheme
was regulated by Customs Notifications No 53/97 and 133/94. Details of the schemes
are  contained  in  Chapter  9  and  Appendix  I  of  the  1997/2002  “Export  and  Import
Policy” document, as well as the relevant Handbook of Procedures.

8

(b)

Eligibility

(31) 

In  principle,  companies  undertaking  to  export  their  entire  production  of  goods  and
services  may  be  set  up  under  the  EPZ/EOU  scheme.  Once  the  EPZ/EOU  status  is
granted,  those  companies  can  avail  themselves  of  certain  benefits.  There  are  four
identified  EPZs  in  India.  EOUs  can  be  located  anywhere  in  India.  They  are  bonded
units under the surveillance of Customs officials in accordance with Section 65 of the
Customs Act. The investigated exporting producer has been granted the status of EOU
for  the  production  unit  manufacturing  CD-Rs.  Although  companies  operating  within
the EOU/EPZ scheme are normally expected to export their entire production, the GOI
does allow these units to sell a part of their production on the domestic market under
certain conditions.

(c)

Practical implementation

(32)  Companies  requesting  treatment  as  EOUs  or  located  in  an  EPZ  must  apply  to  the
competent  authorities.  Such  application  must  include  details  for  a  period  of  the  next
five  years,  on,  inter  alia,  planned  production  quantities,  projected  value  of  exports,
import  requirements  and  indigenous  requirements.  If  the  authorities  accept  the
company’s  application,  the  terms  and  conditions  attached  to  the  acceptance  will  be
communicated to the company. Companies in EPZs and EOUs can be involved in the
production  of  any  product.  The  agreement  to  be  recognised  as  a  company  in  an
EPZ/EOU is valid for a five-year period. The agreement may be renewed for further
periods.

EPZ/EOU units are entitled to the following benefits:

(i) exemption from import duties on all types of goods (including capital goods, raw
materials and consumables) required for the manufacture, production, processing, or
in connection therewith;

(ii) exemption from excise duty on goods procured from indigenous sources;

(iii) exemption from income tax normally due on profits realised on export sales in
accordance with Section 10A or 10B of the Income Tax Act, up to 2010 (see ITES
above);

(iv) reimbursement of central sales tax paid on goods procured locally;

(v) possibility of 100% foreign equity ownership;

(vi)  facility  to  sell  a  part  of  production  in  the  domestic  market  on  payment  of
applicable  duties,  as  an  exception  to  the  general  requirement  to  export  the  entire
production.

(33)  EOUs  or  companies  located  in  an  EPZ  should  maintain,  in  the  specified  format,  a
proper account of all imports concerned and of the consumption and utilisation of all
imported materials and of all exports made. These should be submitted periodically, as
may be required, to the competent authorities.

9

(34)  They must also ensure minimum foreign exchange earnings as a percentage of exports
and  export  performance  as  stipulated  in  the  Export  Import  Policy.  The  entire
operations of an EOU/EPZ must take place in customs bonded premises.

(d)

Conclusions on EPZ/EOU

(35) 

In  the  present  investigation,  the  EPZ/EOU  scheme  was  used  for  the  import  of  raw
materials, capital goods and  for  the  procurement of  goods in  the domestic  market.  It
was  found  that  concessions  related  to  the  exemption  from  customs  duties  on  raw
materials  and  capital  goods,  as  well  as  the  exemption  from  excise  duty  on  goods
procured  from  indigenous  sources,  were  used  by  the  exporting  producer.  Therefore,
the Commission examined the countervailability of these concessions. In this regard,
the  exemption  from  customs  duties  on  raw  materials  and  capital  goods  involves  the
granting  of  subsidies  as  these  concessions  constitute  financial  contributions  by  the
GOI, since government revenues otherwise due are forgone and a benefit is conferred
on the recipient. As the granting of this subsidy is contingent according to Indian law
upon  export  performance  within  the  meaning  of  Article  3(4)(a)  of  the  basic
Regulation, it is therefore deemed to be specific and thus countervailable. In the case
of the excise duty exemption, it was found that the duty paid on purchases by a non-
EOU  unit  is  credited  as  a  drawback  (CENVAT)  and  is  utilised  towards  payment  of
excise  duty  on  domestic  sales.  Thus,  by  exempting  excise  duty  on  purchases  by  an
EOU  unit,  no  additional  government  revenue  is  forgone  and  consequently  no
additional benefit accrues to the EOU.

(e)

Calculation of the subsidy amount

Exemption from import duties on raw materials

(36)  Although the company operating within the scheme is normally expected to export its
entire production, the scheme allows the company to sell a part of its production on the
domestic  market  under  certain conditions. During the verification visit,  the  company
was able to show that all imported raw materials, which were exempted from import
duties, were  either  used  in the production of exported  goods, or,  when selling  goods
incorporating such raw materials on the domestic market, the relevant conditions were
met. In particular, it was established that the applicable duties paid by the company on
domestic  sales  covered  all  duties  forgone  on  imported  raw  materials  used  for  the
productions of goods sold on the domestic market.

(37) 

In view of the above, it was concluded that the exemption from import duties on raw
materials granted to the company concerned fulfils the criteria of Annexes I and II of
the  basic  Regulation,  especially  since  no  excess  remissions  of  import  duty  have
occurred in this case. Therefore, it is considered that the investigated company did not
obtain any countervailable benefit when importing raw materials during the IP in this
case.

Exemption from import duties on capital goods

(38)  Unlike  raw  materials,  capital  goods  are  not  physically  incorporated  into  the  finished
goods. For calculation purposes, the amount of duty forgone is equivalent to a grant on
each import of capital good. Consequently, the benefit to the investigated company has
been calculated on the basis of the amount of unpaid customs duty on imported capital

10

goods by spreading this amount across a depreciation period applicable for accounting
purposes.

(39)  The exporting producer claimed that the depreciation period of 13 years as set out in
its accounting records better reflects the real situation of the company, because it is in
accordance with the Indian Companies Act and is determined by its management and
its  auditors.  In  addition,  it  commented  that  in  other  anti-subsidy  investigations  the
depreciation method as set in accounting records was used as the allocation basis for
such  benefits.  It  also  referred  to  a  report  of  the  WTO  informal  group  of  experts  on
subsidies, which indicated that “there should be a preference for using accounting data
rather than tax related depreciation periods for determining the useful life of assets, as
accounting  data  are  more  likely  to  reflect  the  actual  useful  lives  of  assets”.  The
exporting producer also argued that it is incorrect to establish the depreciation period
on the basis of that used for taxation purposes, because that is based on the declining
balance  method  and  not  the  straight-line  method  which  is  normally  used  for  this
purpose.

(40)  The investigation has, however,  shown  that  there  is conflicting  information  from  the
company  concerning  the  depreciation  of  the  assets  in  question.  The  company  has
changed  the  classification  of  these  assets  for  taxation  purposes,  i.e.  for  taxation
purposes  they  were  considered  moulds  rather  than  machines,  and  depreciated
according  to  the  declining  balance  method.  However,  the  company  continued  to
consider  these  as  machines  for  accounting  purposes  despite  the  fact  that  the  Indian
Companies Act and the Indian Income Tax Act provide for the same classification to
be used for both taxation and accounting purposes. If the company had classified the
assets as moulds also for accounting purposes, the existing period of depreciation for
machines,  i.e.  13  years,  could  not  have  been  applied.  In  fact,  the  period  would  have
been  either  6  years,  if  a  straight-line  method  had  been  applied,  or,  if  a  declining
balance  method  had  been  applied  as  it  was  in  the  tax  return  for  the  moulds,
approximately 80% of the value of the assets would have been depreciated in the first
three years.

(41)  Although it is understood that different depreciation periods can be used for taxation
and accounting purposes,  it is not  considered acceptable to  classify  assets  as  moulds
for taxation  purposes and as machines for  accounting purposes.  It would  appear  that
the  assets  in  question  could  only  be  either  machines  or  moulds,  but  not  both  at  the
same  time.  This  logic  is  followed  by  the  relevant  Indian  legislation  which  provides
consistent classification for both taxation and accounting purposes.

(42) 

(43) 

In  this  case,  the  company  applied  for  taxation  a  declining  balance  method  which
resulted in approximately 80% of the assets being depreciated in the first three years.
Therefore,  the  remaining  question  is  to  assess  what  the  appropriate  period  of
depreciation  would  have  been,  had  the  company  followed  the  consequences  of  its
reclassification  of  assets  for  taxation  purposes  with  a  similar  reclassification  for
accounting purposes.

In  this  respect,  two  choices  were  considered  both  of  which  are  specified  as  possible
options  under  the  Indian  Companies  Act,  i.e.  a  6  year  depreciation  period  with  a
straight-line depreciation method or a declining balance method where the value of the
assets is depreciated, on a remaining value basis, by 40% each year. The company did
not indicate  any preference but  continued  to argue for the  application of the  13  year
depreciation period they had applied for machines.

11

(44) 

In  this  respect,  it  was  concluded  that  the  most  reasonable  method  of  deciding  on  an
appropriate  period  of  depreciation  was  to  take  account  of  what  is  normal  for  the
industry,  and  to  consider  the  special  circumstances  of  this  company  which  is  very
profitable and is investing constantly and heavily in the product concerned. From the
information  gathered  during  the  course  of  this  investigation  it  appears  that  most
companies are making losses, and have been making losses for a significant period of
time.  This  slows  investment  and  tends  to  result  in  longer  depreciation  periods.  The
average period for these loss making companies is approximately 6 years.

(45)  However,  the  position  of  the  exporting  producer  is  very  different  to  the  average
company. It is very profitable, it is investing constantly and heavily and it is therefore
reasonable to assume that its depreciation period would be significantly lower than the
above-mentioned  average.  Therefore,  it  was  considered  appropriate  to  apply  a
declining  balance  method  which  takes  account  of  the  fact  that  it  allows  swifter
depreciation than the straight-line method. It is noted that in circumstances of ongoing
regular  investments,  the  declining  balance  method  of  depreciation  provided  by  the
Indian  Companies  Act  set  out  in  recital  (43)  above,  allows  30%  faster  depreciation
than  the  equivalent  straight-line  method  over  a  representative  period  of  6  years
applicable  when  using  the  straight-line  method.  This  corresponds  to  a  period  of  4,2
years as compared to 6 years for the straight-line method and this shorter period was
used to allocate the benefit obtained.

(46)  The amount so calculated which was then attributable to the IP has been adjusted by
adding interest during the IP in order to establish the full benefit of this scheme to the
recipient. Given the nature of this subsidy, which is equivalent to a one-time grant, the
long-term commercial interest rate during the IP in India was considered appropriate.
The  amount  of  subsidy  has  then  been  allocated  over  the  total  export  turnover  of  the
EOU.

(47)  The definitive ad valorem subsidy amount established for the exemption from import
duties on capital goods for the investigated company during the IP was 7,3%.

2.

Amount of countervailable subsidies

(48)  The definitive amount of countervailable subsidies in accordance with the provisions
of the basic Regulation, expressed ad valorem, for the investigated exporting producer
was  7,3%.  Given  that  there  is  only  one  exporting  producer  in  India,  this  finding
applies to all Indian exports.

Type of subsidy

EOU/EPZ

7,3%

ITES

0%

Total

7,3%

D. DEFINITION OF THE COMMUNITY INDUSTRY

1.

Community production

(49)  During  the  IP  CD-Rs  were  manufactured  in  the  Community  by  the  following

companies:

– 

five complainant producers who co-operated in the proceeding;

12

– 

– 

– 

four  non-complainant  producers  who  supported  the  complaint  and  who  co-
operated in the proceeding;

two non-complainant producers who supported the complaint but who failed to
sufficiently co-operate in the investigation;

one  non-complainant  producer  who  supported  the  complaint  and  provided
some general information to the Commission;

– 

other non-complainant producers who did not co-operate in the proceeding.

(50)  The fact that several non-complainant Community producers have co-operated in the
framework  of  the  investigation  provided  the  Commission  with  the  opportunity  to
examine their status in relation to Article 9(1) of the basic Regulation in more detail.
Some  of  the  co-operating  producers  (including  some  who  originally  were  not
applicants)  were  found  to  have  imported  CD-Rs  but  none  of  them  from  India.
Furthermore, a substantial  part  of  those  purchases  was  only  made  in  order  to  satisfy
short term market demand while new  or additional capacity  was being installed,  and
represented a relatively low percentage of purchases compared to total sales and own
production  in  the  IP.  Therefore,  there  were  no  reasons  to  exclude  those  companies
from the definition of Community production.

(51)  On  the  above  basis,  it  was  considered  that  the  CD-Rs  produced  by  all  the  above
mentioned  companies  constitute  the  Community  production  within  the  meaning  of
Article 9(1) of the basic Regulation.

2.

Definition of the Community industry

(52)  As  mentioned  in  recital  (49)  above,  nine  Community  producers,  who  supported  the
complaint fully co-operated in the investigation. These producers represented a major
proportion  of  the  total  Community  production  of  CD-Rs  during  the  IP,  in  this  case
more than 60%. On this basis, they were deemed to constitute the Community industry
within  the  meaning  of  Articles  9(1)  and  10(8)  of  the  basic  Regulation.  They  are
referred to as the ‘Community industry’ hereafter.

1.

Community consumption

E. INJURY

(53)  Community consumption was calculated on the volume of sales of own-produced CD-
Rs by the Community industry, the sales volume of the two companies which failed to
co-operate  sufficiently  and  therefore  were  not  part  of  the  Community  industry,  the
sales  volume  of  the  company  which  supplied  only  general  information,  information
provided by the co-operating exporting producer, Eurostat import data concerning the
import volumes originating in other third countries and on an estimate of the sales of
the remaining non co-operating Community producers based on information collected
by the Commission when considering the acceptability of the complaint.

(54)  On  this  basis,  it  was  found  that  Community  consumption  significantly  increased
between  1998  and  the  IP  (+  1.759.000  thousand  units).  In  more  detail,  it  hugely
increased between 1998 and 2000 to reach its peak in 2001. It then slightly decreased
between 2001 and the IP. The development of consumption should be seen in the light
of  the  fact  that  CD-Rs  are  relatively  recent  products.  They  became  available  to  the

13

general  public  only  recently  and  their  breakthrough  mainly  occurred  during  1997-
1998.  Since  then,  the  growth  of  demand  for  this  new  storage  medium  has  been
spectacular. This explains why a number of indicators, such as inter alia consumption
show a high growth.

Community consumption

1998

1999

2000

2001

IP

CD-Rs (in ‘000 units)

459.166

1.172.950

2.017.557

2.461.271

2.218.563

Index

100

255

439

536

483

2.

Imports of CD-Rs into the Community

(a) Volume and market share of imports originating in India

(55)  On  the  basis  of  Eurostat  figures,  the  volume  of  imports  from  India  drastically
increased over the period considered. While these imports were insignificant in 1998
and  1999,  they  amounted  to  almost  200  million  units  during  the  IP.  The  increase  of
imports was particularly marked between 1999 and 2000 (imports  multiplied  by  26),
although it should  be  noted  that  the  market  share  of  Indian  imports  was  still  at  a  de
minimis level at that time, and between 2000 and 2001, when volumes multiplied by
10. As a consequence, according to Eurostat, India became in 2001 and during the IP,
the  second  most  important  exporting  country  of  the  product  concerned  into  the
Community.

Imports

CD-Rs (in ‘000 units)
Index

1998

1.184
100

1999

2000

2001

IP

712
60

18.462
1.559

179.904
15.196

196.091
16.563

(56)  The market share held by the country concerned went from zero to 9% between 1998
and the IP. The increase was particularly marked between 2000 and 2001 when it went
up by 6 percentage points.

(57)  The growth of the Indian market share should be seen in the light of the development
of the growth of the market share of the Community industry during the period from
1998 to  the  IP. While  Indian's market share increased  by  9  percentage  points  during
the  period  considered,  the  Community  industry's  only  increased  by  3,7  percentage
points over the same period.

Market shares

CD-Rs

1998

0%

1999

0%

2000

1%

2001

7%

IP

9%

(b) Price evolution

(58)  The  average  import  price  of  CD-Rs  from  India  first  significantly  increased  between
1998 and 1999. However, these price increases were probably not very representative
in view of the small quantities exported.

(59)  From 1999, prices constantly decreased until 2001 (by a total of 77% over this period)
before  increasing  again,  even  if  only  by  17%,  between  2001  and  the  IP  where  they
were  found  to  be  around  0,33  Euro  per  unit.  Subsequently,  from  2000  to  2001,  the
import  prices  decreased  massively  again.  This  was  accompanied  by  an  equally

14

massive increase in the volumes of imports from India. The price decrease from 2000
until the end of the IP amounted to 59 % overall.

Unit prices

CD-Rs (Euro/ 000 units)

Index

Index base 100 in 2000

1998

126

100

1999

1.227

975

2000

2001

823

654

100

285

226

35

IP

334

265

41

(60)  The co-operating exporting producer claimed that he was the sole exporting producer
in India during the IP, and that he only started CD-Rs production in 1999. Accordingly
the  Eurostat  figures  used  by  the  Commission  were  misleading  and  were  not  the
appropriate  basis  to  assess  Indian  price  development.  Finally,  it  claimed  that  this
approach leads to an artificially inflated decline in import price of 59% between 2000
and the IP.

(61)  However, as already mentioned in recital (10), the analysis of trends relevant for the
injury covers a longer period of time than the IP (i.e. the  IIP). In addition, as will be
seen  below,  the  Eurostat  figures  lead  to  a  similar  trend  than  the  one  showed  by  the
figures provided by the exporting producer itself.

(62) 

Indeed  for  the  avoidance  of  any  doubt  as  to  the  approach  followed,  the  figures
provided  by  the  exporting  producer  were  nevertheless  examined  and  are  presented
below in indexed form, bearing in mind that these figures are based on the fiscal year
i.e. April to March, as opposed to the calendar year i.e. January to December.

Index

April 97
March 98

April 98
March 99

April 99
March 00

April 00
March 01

IP

Volumes

Market shares

Unit price

0%

0%

Financial
year 2000

Financial
year 2001

100

0%

100

711

2.829

5%-10%

10%-15%

38

46

(63)  On  this  basis,  the  volume  of  imports  from  the  Indian  exporting  producer  increased
drastically  since  they  multiplied  by  28  between  the  start  of  the  production  by  this
particular  exporting producer in 1999 and the  IP,  its market share  went from zero to
more than 10% between 2000 and the IP and its sales price decreased by 54% between
2000 and the IP.

(64)  The above trends for the period from 2000 to the IP are similar to those found on the
basis of Eurostat figures for a similar period. Furthermore, the injury analysis is made
on  a country wide basis and should  not be restricted to  the  analysis  of  an  individual
company.  Since  it  could  not  be  excluded  that  other  unknown  Indian  manufacturers
have produced and exported CD-Rs to the Community during the IIP, it was decided
to  use  Eurostat  for  the  trend  relevant  for  the  injury  analysis.  Nevertheless,  the
conclusions  with  regard to  injury  have  focused  on  the  period  2000  to the  IP,  i.e.  the
period  during  which  the  producer  concerned  actually  exported.  Under  these
circumstances, and for the reasons explained above, the Commission decided to do the
injury analysis on the basis of Eurostat.

15

(c) Price undercutting

(65)  For the determination of price undercutting the verified price data referring to the IP
were analysed. The relevant sales prices of the Community industry are net prices after
deduction of discounts, rebates and levies. Where necessary these prices were adjusted
to an ex-works level, i.e. excluding freight costs within the Community. Indian import
prices  compared  are  also  net  of  discounts  and  rebates  and  are  adjusted  where
necessary to CIF Community frontier.

(66)  Following  clarification requested by the Indian exporting producer it is confirmed as
mentioned  above  (see  recital  (65)),  that  when  appropriate,  an  adjustment  has  been
made to the Community sales prices in order to deduct the copyright levies.

(67)  Based  on  the  questionnaire  replies,  different  product  families  of  CD-Rs  could  be
defined for comparison purposes based on the following criteria: storage capacity, type
of  data  recorded,  nature  of  the  reflective  layer,  printing  and  packaging.  As  in  the
preceding case of Taiwan, the physical characteristics of CD-Rs however were found
to be of a less decisive influence on the sales price of CD-Rs, whereas the packaging
proved to be a particularly influential criterion for comparison purposes.

(68)  The Community industry's sales  prices  and the import prices of the  Indian  exporting
producers  were  compared  at  an  ex-works  level  and  Community  frontier  respectively
and  to  independent  customers  within  the  Community  market,  duly  adjusted  where
appropriate.

(69)  On  that  basis,  the  existence  of  price  undercutting  was  established  for  imports  from
India.  The  level  of  undercutting,  expressed  as  a  percentage  of  the  Community
industry's average selling price, ranged from 3,47% to 66,25%. The weighted average
price undercutting margin was 17,69%. In addition, owing to the losses incurred by the
Community industry  and the  depressed prices,  significant  underselling  has  also  been
found.

(70)  The  Indian  exporting  producer  claimed  that  the  comparison  was  not  made  at  the
proper  level  of  trade,  since  the  vast  majority  of  its  exports  to  the  Community
concerned  sales  to  Original  Equipment  Manufacturers  (‘OEM’),  whereas  the
Community industry is allegedly mainly oriented towards end users and retail outlets.

(71)  At the outset, it should be noted that the Indian company defined the term OEM in a
fairly wide sense. For instance, it also included sales to companies which manufacture
products  other  than  CDRs  and  which  resell  these  CDRs  under  their  own  trademark.
The definition of the OEM used by the Indian company does not correspond to the one
usually used by the Institutions. However, even if sales to OEM are taken to have the
wide  meaning  given  to  it  by  the  Indian  company,  the  weighted  average  price
undercutting margin found would still be significant, i.e. around 12%.

3.

Situation of the Community industry

(a) Preliminary remark

i Effect of past dumping

The Community industry is still in the process of recovering from the effects of the
past dumping of imports of CD-Rs originating in Taiwan. Indeed, since  Regulation

16

(EC) No 1050/20027 imposing definitive measures against imports from Taiwan has
only recently entered into fore (in June 2002), the  Community  industry  has  not  yet
been able to recover fully.

ii Beginning of the CD-Rs’ production in the Community

(72)  As  mentioned  in  Commission  Regulation  (EC)  N°  2479/20018  dealing  with  CDRs
from Taiwan, the first wave of installation of new European facilities can be situated
around  1997,  which  therefore  must  be  considered  as  a  start-up  year  with  inevitably
high per unit cost of production and low capacity utilisation. After having obtained a
reasonable  scale  of  production  and  having  reduced 
the  cost  of  production
considerably,  the  outlook  for  this  industry  was  favourable  in  1999.  This  attracted
further  investments  and  new  entrants  into  the  market.  Moreover,  the  extraordinary
market condition already mentioned in recital (54) should be recalled. The increase of
the  Community  consumption  has  been  spectacular  during  the  period  considered  and
this explains why a number of indicators, such as inter alia production or sales volume
show a high growth.

(b) Production, capacity and capacity utilisation

1998

1999

2000

2001

IP

Production (in ‘000 units)

75.765

172.113

298.792

389.467

403.127

Index

100

227

394

514

532

Capacity (in ‘000 units)

89.871

187.628

352.962

438.015

462.680

Index

100

209

393

487

515

Capacity utilisation

84,3%

91,7%

84,7%

88,9%

87,1%

(73) 

In  view  of  the  expansion  of  Community  consumption,  the  Community  industry's
production of CD-Rs grew continuously over the period considered since it increased
by  an  average  of  80  Mio  units  per  year  between  1998  and  the  IP.  The  increase  was
particularly  high  between  1999  and  2000  (+  74  %)  and  between  2000  and  2001  (+
30%), but slowed down during the IP (+ 4%).

(74)  The production capacity followed a trend similar to the production. It was multiplied
by 5 between 1998 and the IP. From 1998 to the end of 1999, the increase in capacity
was  mainly  due  to  important  investments  in  machinery  and  equipment,  which  were
made  following  the  start-up  period  and  which  were  in  line  with  the  exponential
increase in consumption. As from 2001 however, the increase in capacity was limited
and  can  mainly  be  explained  by  investments  to  replace  machinery  of  the  first
generation by new and more efficient equipment.

(75)  As a consequence of the parallel evolution of the production and of the capacity, the
capacity  utilisation  increased  by  less  than  3  percentage  points  between  1998  and
the IP.

7

8

OJ L 160, 18.6.2002, p. 2
OJ L 334, 18.12.2001, p.8

17

                                                
(c) Sales volume, sales price and factors affecting prices, market share and growth

Sales in the Community

1998

1999

2000

2001

IP

Volume (in ‘000 units)

44.621

124.041

168.594

279.445

296.743

Index

Market shares

Index

Sales price (Euro/ 000 units)

Index

100

9,7%

100

997

100

278

10,6%

109

941

94

378

8,4%

86

633

63

626

665

11,4%

13,4%

117

417

42

138

406

41

(76)  The volume of sales of the Community industry significantly expanded over the period
considered.  From  1998  to  the  IP,  the  Community  industry’s  sales  in  volume  were
multiplied by 6,6 namely an increase by around 250 million units. This growth in sales
volume  should  however  be  seen  in  the  light  of  the  evolution  of  Community
consumption  which  increased  by  1.759  million  units  over  the  period  considered.  It
should  be  noted,  however,  that  while  volumes  increased  by  66%  between  2000  and
2001, they increased only by 6% in the IP as compared to 2001.

(77)  Average sales prices of the Community industry decreased by 59% during the period
considered. The decrease was particularly marked between 2000 and the IP when sales
prices decreased by 36%.

(78)  When evaluating factors affecting domestic prices the analysis focussed primarily on
the contraction of demand between 2001 and the IP and cost of production. Given that
the  prices  of  the  subsidised  imports  were  very  low  on  the  Community  market  it  is
considered that the contraction of demand in itself did not have an overriding impact
on  prices  since  it  is  mainly  due  to  the  decrease  of  low  price  imports  from  Taiwan
following  the  imposition  of  the  anti-dumping  measures.  As  explained  below  (see
recital  (90))  the  cost  of  production  constantly  decreased  between  1998  and  the  IP.
Normally, in fair market condition, such a cost decrease should have direct impact on
the  profitability.  However,  this  was  not  the  case  since  as  shown  in  recital  (91)  the
profitability was positive only once in 1999 and remained negative until the IP.

(79)  The Community industry gained 3,7 percentage points of market share between 1998
and  the  IP  when  their  sales  were  found  to  represent  13,4%  of  the  Community
consumption.

(d) Stocks

(80)  Stocks of own produced CD-Rs increased significantly towards the end of 1999 and to
an even higher degree towards the end of 2001. This is due to the fact  that  the sales
volume increased less than foreseen. Stocks, expressed as a percentage of production
of CD-Rs, were as high as 15% during the IP.

Stocks

in ‘000 units

Index

1998

6.976

100

1999

2000

2001

IP

18.763

64.724

66.956

58.817

269

928

960

843

18

(81)  The exporting producer argued that the stock evaluation made by the Commission is
incorrect  since  the  figures  would  include  the  stock  level  of  three  companies  linked
with  Taiwanese  manufacturers  and  that  these  companies  would  have  increased  their
stock  of  own-produced  CD-Rs  to  absorb  huge  quantities  of  CD-Rs  imported  from
Taiwan before the imposition of the anti-dumping measures.

(82)  Firstly,  it  is  recalled  that  one  of  the  companies  mentioned  by  the  Indian  exporting
producer  was  not  included  in  the  definition  of  the  Community  industry  because  it
failed to sufficiently co-operate in the investigation.

(83)  For one of the two other companies mentioned by the Indian exporting producer, the
stock of its own-produced CD-Rs when it started to purchase the product concerned,
was the lowest of the whole period 1998 to the IP and its part in the total stock figures
of the Community industry is negligible. Therefore, its stocks of own-produced CD-Rs
have  not  been  artificially  increased  by  its  purchases  and  in  addition,  they  have  not
influenced significantly the stock evolution figures of the Community industry.

(84)  For  the  third  company,  it  should  be  noted  that  this  latter  entered  the  CD-Rs  market
only  in  2000  and  had  to  fulfil  the  demand  with  purchased  products  prior  to  its
production  facilities  being  fully  operational.  This  is  confirmed  by  the  fact  that  its
production capacity utilisation was the highest of the whole period considered when it
started to purchase, thus it had no choice but to satisfy any additional demand though
purchases.

(85) 

It was also argued that one of these two companies would have deliberately decreased
its production to absorb its purchases of Taiwanese CD-Rs made before the imposition
of the anti-dumping measures.

(86)  However, it should be noted that the purchases of this company started well before the
initiation  of  the  anti-dumping  investigation  on  Taiwan  (i.e.  in  2000  while  initiation
was  published  in  2001).  It  is  therefore  unlikely  that  these  purchases  were  made  to
avoid the payment of the anti-dumping duties and should rather be seen as a way for
this  company  to  complete  the  product  range  of  the  like  product.  In  addition,  these
purchases decreased by more than 25% between 2000 and 2001.

(87)  Finally, the Indian exporting producer claimed that although stocks of the Community
industry expressed as a percentage of its production  of CD-Rs, were  as high  as  15%
during the IP, a figure of 20% was mentioned for 2000 in the Commission Regulation
(EC)  2479/2001  imposing  measures  on  Taiwan,  thus  leading  to  an  improvement  of
25% in the level of stocks between 2000 and the IP.

(88) 

In this respect, although a slight improvement occurred between 2000 and the IP, it is
far from a 25%  improvement  as  claimed  by  the  exporting  procuer  and  in  addition  it
should  be  pointed  out  that  the  figures  from  both  investigations  are  not  comparable,
since the definition of the Community industry is not the same in these investigations.

(89)  For all the reasons given above, the arguments were rejected.

19

(e) Cost of production and profitability

(90)  The total  unit  cost  of  production significantly decreased (i.e.  by  55%)  between 1998
and the IP. As a result of improvements and the fine-tuning of the production process,
the  Community  industry  managed  to  continuously  reduce  its  manufacturing  cost,
which represented during the IP around 80% of the full cost of production of CD-Rs.

(91)  Notwithstanding its efforts  to  improve  its  competitiveness  by  reducing  the  costs,  the
Community industry’s profitability  went down by 9 percentage  points  between  1998
and the IP. It first improved between 1998 and 1999 when it was found to be positive.
Then  it  fell  back  in  2000  to  the  same  level  of  loss  as  in  1998  (i.e.  –1%),  fell  by  a
further 11 percentage points in 2001 and was found to be at a 11% loss in the IP. The
significant  cost  reduction  that  occurred  between  2000  and  the  IP  (i.e.  –30%),  was
therefore  not  sufficient  to  compensate  for  the  price  decrease  of  36%  that  occurred
during the same period.

Cost  of  production  (in  ECU/€
per CD)

Index

Profitability

1998

1,01

100

1999

0,75

75

2000

0,64

63

2001

0,47

47

IP

0,45

45

-1,11%

19,93%

-1,03%

-12,59%

-10,93%

(f) Investments, return on investment, cash flow and the ability to raise capital

1998

1999

2000

2001

IP

Investments (in ‘000 ECU/€)

29.410

58.666

34.586

12.710

14.317

Index

Return on investment

Cash flow (in ‘000 ECU/€)

100

-1%

8.983

199

27%

118

-1%

38.643

20.510

43

-19%

6.667

49

-18%

6.472

(92)  Major investments were made during 1998, when the Community industry was still in
a start-up phase and during 1999 and part of 2000 when a second wave of investments
took  place,  inspired  by  the  favourable  market  conditions  existing  at  the  time  when
investment appraisals were made.

(93)  Due to the dramatic change of market conditions and more specifically the decline of
market  sales  prices,  new  investment  decisions  in  2000  were  to  a  large  extent
postponed or cancelled, in spite of the further expansion of Community consumption.

(94)  The Indian exporting producer claimed that investment figures are not consistent with
those related to production and capacity which show an increasing trend. Moreover it
argued that investment figures are only 14 Mio Euro for the  IP whereas according to
the  non  confidential  questionnaire  reply  of  a  machinery  supplier,  this  latter  would
have, on its own, sold equipment to European CD-Rs producers for a total of 17 Mio
Euros during the IP.

(95)  Firstly,  it  is  recalled  that  a  difference  exist  between  investment  and  production
evolution  since  a  time-span  of  several  months  elapses  between  the  purchase  of  the

20

equipment and the start of the production. In addition, production increase also results
from  tuning  and  improvements  to  the  production  process  and  not  necessarily  only
from new equipment. Regarding the capacity, it should be noted that the capacity used
as  injury  indicator  is  the  technical  capacity  which  also  differs  from  one  year  to  an
other  due  to  technical  problems  and/or  management  decisions  based  on  market
projections, without having any impact on the number of machinery.

(96)  Secondly, as regards the supplier, the verification visit on its premises showed that the
figures  reported  in  its  questionnaire  reply  could  not  directly  be  compared  with  the
investment figures of the Community industry and were erroneous since, firstly, they
included  European  customers  and  not  only  Community  industry  producers  and,
secondly, they included not only sales to CD-Rs manufacturers but also to other types
of producers of optical disks customers.

(97)  The  return  on  investment,  expressed  as  the  relation  between  the  net  profits  of  the
Community  industry  and  the  net  book  value  of  its  investments,  followed  the
profitability trend and decreased from –1% in 1998 to -18% during the IP.

(98)  The Community industry’s  cash flow although remaining positive was, however, not
sufficient  to  support  depreciations,  value  adjustments  and  provisions.  The  cash  flow
has been in constant decline since 1999.

(99)  The investigation established that it became increasingly difficult for the Community
industry to raise  capital during the period considered owing to its financial situation,
and in particular to its deteriorated profitability.

(g) Employment, productivity and wages

Employment

Index

Average  employment  cost
‘000
per 
ECU/€)

employee 

(in 

Index

Productivity 
employee)

Index

(CD’s 

per

1998

1999

2000

2001

409

100

30

100

185

100

658

161

33

108

262

141

885

216

34

114

338

182

967

236

34

114

403

217

IP

984

241

39

129

410

221

(100)  Employment  for  the  product  under  consideration  more  than  doubled  over  the  period
considered.  The  increase  went  along  with  the  installation  of  new  capacity.  The
productivity per employee also increased continuously between 1998 and the IP when
it  was  found  to  be  twice  as  important  as  in  1998.  The  average  wage  per  employee
increased by 29% over the period considered.

(h) Magnitude of subsidy

(101)  Considering both the high volume and the low prices of imports from India, the impact

of the subsidy on the Community industry cannot be considered negligible.

21

4.

Conclusion on injury

(102)  During the period considered the volume of low-priced imports from  India increased
significantly.  Their  market  share  increased  from  zero  to  9%,  although  the  Indian
import  prices  increased  during  the  years  1998-1999,  they  subsequently  decreased
albeit not to their 1998 levels. It is noteworthy that the increase of the Indian imports
and the decline of the sales price were particularly pronounced between 2000 and the
IP.  Import  volumes  during  that  period  were  multiplied  by  10  and  import  prices
decreased  by  59%,  undercutting  the  Community  industry’s  sales  prices  (which  were
loss-making) by around 17,7% on average during the IP.

(103)  Some economic indicators pertaining to the situation of the Community industry, such
as  production  of  CD-Rs,  production  capacity  installed  and  capacity  utilisation,  sales
volume,  market  share,  cost  of  production,  employment  and  productivity,  showed
positive  developments  over  the  period  considered.  Nevertheless,  these  positive
developments  were  more  than  offset  by  a  number  of  other  indicators  which
dramatically  worsened  during  the  same  period  such  as,  the  average  sales  prices,
stocks, investments, profitability, return on investments and cash flow.

(104)  The reduction of cost of production linked to the increased  productivity,  allowed  the
Community industry to achieve profitability in 1999, but further cost reductions were
not sufficient to compensate for the significant decrease of the sales prices leading to
substantial financial losses during the IP.

(105)  Taking  into  account  all  factors  mentioned  above,  in  particular  the  fact  that  the
Community industry was prevented from benefiting from its costs reductions, that the
investment  programmes  for  CD-Rs  were  significantly  reduced  due  to  the  declining
trend  of  sales  prices,  that  the  Community  industry’s  depressed  sales  prices  were
undercut by Indian imports and the financial losses during the IP, it is considered that
the Community industry has suffered material injury.

F. CAUSATION OF INJURY

1.

Introduction

(106)  In  accordance  with  Article  8(6)  and  (7)  of  the  basic  Regulation,  it  was  examined
whether the subsidised imports of CD-Rs originating in India have caused injury to the
Community  industry  to  a  degree  that  enables  it  to  be  classified  as  material.  Known
factors other than the subsidised imports, which could at the same time be injuring the
Community  industry,  were  also  examined  to  ensure  that  possible  injury  caused  by
these other factors was not attributed to the subsidised imports.

(107)  When analysing the causal link, it has to be borne in mind that it has previously been
concluded  that  imports  originating  in  Taiwan  had  caused  material  injury  to  the
Community  industry.  The  investigation  period  concerning  the  Taiwan  investigation
was the calendar year 2000 and provisional measures on imports originating in Taiwan
were imposed in December 2001.  Imports  from  India,  however,  were  present  on  the
Community market in significant volumes in 2001 and the IP, in other words just after
the IP for the Taiwan proceeding. Given this development over time, the conclusions
in  the  present  case  have  to  be  seen  in  conjunction  with  the  findings  in  the  Taiwan
proceeding.

22

2.

Effect of the subsidised imports

(108)  Community consumption of CD-Rs increased dramatically over the period considered
from 459 million CD-Rs in 1998 to 2.218 million CD-Rs during the IP. Sales of the
Community  industry  increased  at  a  similar  pace,  whereas  subsidised  imports
originating  in  India  increased  significantly  more  over  the  same  period,  reaching  196
million units in the IP, which corresponds to an increase of market share from 0% to
9%.  During  the  same  period,  the  Community  industry  increased  its  market  share  by
only 3,7 percentage points i.e. from 9,7% to 13,4%,  corresponding  with sales of 297
million  units  in  the  IP.  In  addition,  imports  from  India  took  over  part  of  the  market
share lost by Taiwan, after provisional duties were imposed in December 2001.

(109)  Although the Indian import prices increased over  the  period considered, it should be
borne in mind that volumes imported from India were not significant until the end of
the year 2000 when import volume started to considerably increase. Between the year
2000  when  Indian  imports  reached  for  the  first  time  1%  of  the  Community
consumption  and  the  IP  when  they  represented  9%  of  the  Community  consumption,
Indian  import  prices  decreased  by  59%.  According  to  Eurostat  figures,  the  Indian
import prices were, in 2001, 32% below the Community industry’s sales prices. In the
IP, they were still 18% below the Community industry’s sales prices and the weighted
average price-undercutting margin found was around 17,7%.

(110)  In addition, although the Indian import prices increased by 17% between 2001 and the
IP, it should be borne in mind that this increase was not sufficient to compensate for
the  huge  price  decrease  of  65%  that  had  occurred  between  2000  and  2001.  The
resulting  overall  price  trend  shows  a  considerable  reduction,  which  even  taking  into
account the significant expansion of the Community consumption, indicates a negative
effect  on  the  market.  Moreover,  this  price  increase  is  negligible  compared  to  the
increase in volume (multiplied by 10 between 2000 and the IP) that the prices of the
year  2000  permitted  the  Indian  imports  to  obtain.  Finally,  this  pricing  behaviour
permitted  the  Indian  imports  to  gain  a  9%  share  of  the  Community  market  within  2
years.

(111)  The Indian exporting producer disagreed with this analysis and underlined that Indian
imports  became  significant  only  after  2000  and  that  between  2000  and  the  IP,  the
Community industry gained 5 percentage points of market share. It also contested the
fact that the Indian prices decreased by 59% between 2000 and the IP, and alleged that
the decrease was artificially underestimated due to the use of Eurostat figures. For the
same  reasons,  it  disputed  the  65%  decrease  in  Indian  sales  price  between  2000  and
2001.

(112)  Although  it  is  true  that  between  2000  and  the  IP,  the  Community  industry’s  market
share  gained  5  percentage  points,  the  Indian  market  share  during  the  same  period
increased more, namely by 8 percenatge points. As regards the price, it was found in
recital (63) that even when considering the figures of the exporting producer itself, its
price decrease between 2000 and 2001 and between 2000 and the IP were very close
to the results obtained on the  basis of Eurostat  figures. As using the producer’s own
figures would not materially altered the price trend, its claim was therefore rejected.

(113)  It was therefore concluded that a significant downward price pressure was exerted by
the imports from India into the Community market as from 2000, and that these low-

23

priced  subsidised  imports  had  a  significant  negative  impact  on  the  situation  of  the
Community industry marked by losses and a consequential slowdown of investment.

3.

Impact of other factors

(a) Development of consumption

(114)  Over  the  period  considered  Community  consumption  increased  by  around  1.759
million units. The development of consumption thus has not contributed to the injury
suffered by the Community industry.

(b) Imports from other third countries

(115)  Consideration  was  given  to  whether  factors,  other  than  the  subsidised  imports  from
India,  might  have  led  to  or  contributed  to  the  injury  suffered  by  the  Community
industry  and  especially  whether  imports  from  countries  other  than  India  may  have
contributed to the injurious situation.

(i) Taiwan

(116)  As  regards  imports  from  other  countries,  it  has  already  been  determined  by  Council
Regulation  (EC)  N°  1050/2002,  that  imports  of  the  like  product  from  Taiwan  were
dumped and had caused material injury to the Community industry between 1997 and
2000.  Imports  from  Taiwan  still  increased  between  2000  and  2001  and  slightly
decreased between 2001 and the IP. Although the period of investigation of the anti-
dumping  proceeding  which  led  to  the  imposition  of  the  anti-dumping  measures  on
imports of CD-Rs originating in Taiwan was the year 2000, given that the provisional
anti-dumping duties were only imposed in December 2001, it cannot be excluded that
imports from Taiwan were also dumped in 2001 until December and therefore caused
part of the injury suffered by the Community industry between 2000 and part of the IP.

(117)  It has been alleged by the Indian co-operating exporting producer that the price on the
Community market is set by the Taiwanese producers, and that the Indian company is
forced  to  follow.  However,  Indian  import  prices  decreased  to  such  an  extent  that
Indian imports were not only able to face the Taiwanese competition but also to gain
more  than  8%  market  share  between  2000  and  the  IP  and  to  take  over  part  of  the
market  share  lost by  Taiwan  between  2001  and  the  IP.  In  a  market  characterized  by
transparency  and  price  elasticity,  low  prices  of  Indian  imports  had  a  significant
influence  on  the  price  setting  in  the  Community.  Therefore,  although  imports  from
Taiwan have influenced the Community market during the period considered, at least
until  December  2001,  they  were  not  such  as  to  break  the  causal  link  between  the
subsidised  imports  from  India  and  the  resulting  injury  suffered  by  the  Community
industry.

(118)  The same company also claimed that the price decrease in 2001 would be the effect of
imports of huge volumes of Taiwanese CD-Rs in the last quarter of 2001, on the one
hand because of the prospect of likely imposition of anti-dumping duties on Taiwanese
imports, and on the other hand because the Taiwanese exporters would have shipped
big volumes of CD-Rs which due to their low technical characteristics were about to
become obsolete.

This  issue  was  examined  and  the  Eurostat  monthly  statistics  were  used  as  a  basis.

24

On  the  basis  of  Eurostat  figures  in  tonnes,  the  volumes  imported  each  month  from
Taiwan  between  September  and  December  2001  were  twice  as  large  as  the  monthly
volumes  imported  during  the  five  prior  months,  i.e.  from  April  to  August  2001.

On the basis of Eurostat figures converted into numbers of units, the number of CD-Rs
imported  into  the  Community  from  Taiwan  per  month  was  72%  higher  between
September  and  December  2001  than  between  April  and  August  2001.  However,  the
unit  price  per  piece  was  found  to  be  on  average  15%  higher  during  the  last  four
months of 2001 than between April and August 2001. Therefore, although the volumes
increased from September to December 2001, these imports were also made at higher
prices. This particular increase in volume between September and December 2001 is
therefore  not  such  as  to  break  the  causal  link  between  the  subsidised  imports  from
India and the injury suffered by the Community industry.

lower  unit  prices.  However, 

The Indian co-operating producer also alleged that the product mix of the Taiwanese
imports had suddenly changed as from September 2001 and that the proportion of bulk
product  had  more  than  doubled  to  the  detriment  of  packed  products,  thus  leading  to
even  higher  volumes  and 
is
unsubstantiated  since  it  has  been  alleged  by  the  same  company  that  this  increase  in
Taiwanese  imports  has  been  made  in  order  to  liquidate  stocks  of  product  likely  to
become  obsolete.  Consequently  these  products  must  have  been  produced,  and
accordingly sold, before September 2001 and if a change in the pattern of packaging
really occurred, this is therefore likely  to have started  few  months  before  September
2001. Most importantly, however, no proof has been provided to confirm this change
in the export pattern. The argument was therefore rejected.

this  assumption 

(ii) Other third countries

(119)  As  to  countries  other  than  Taiwan  and  India,  their  import  volume  only  slightly
increased  between  1998  and  the  IP  (+3%).  Apart  from  India  and  Taiwan,  the  other
main  exporting  countries  are  Japan,  Hong  Kong,  Switzerland,  China  and  Singapore
which all together held only a 10% market share during the IP.

(120)  In  particular,  imports  from  Japan,  which  traditionally  have  been  important  given  the
fact  that  two  Japanese  companies  (Sony  and  Tai  Yuden)  invented  the  production
process of CD-Rs (together with Philips), decreased by 20% and became only the third
most important origin of imports into the Community market during the IP. They were
far below the level of Taiwanese and Indian imports.

25

Imports (in ‘000 units)

1998

1999

2000

2001

IP

Taiwan  (covered  by  Council
Regulation N° 1050/2002)

111.447

612.539

1.248.133

1.545.258

1.262.327

Index

100

550

1120

1387

1133

Other third countries

227.330

296.673

702.865

220.675

233.546

Index

Of which

Japan

Index

Hong Kong

Index

Switzerland

Index

China

Index

Singapore

Index

100

131

309

97

103

80.089

128.640

195.903

59.549

63.916

100

2.414

100

5.086

100

845

100

161

6.536

271

8.204

161

3.746

443

53.267

71.220

100

134

245

8.678

359

18.139

357

12.352

1461

56.863

107

74

29.457

1220

40.874

804

25.208

2982

29.587

56

80

42.210

1748

39.316

773

33.793

3998

20.248

38

(121)  The market share of imports originating in third countries other than Taiwan and India
decreased by 39 percentage points between 1998 and the IP where they were found to
be  11%.  Therefore,  imports  from  these  countries  could  not  break  the  causal  link
between the subsidised imports and the injury suffered by the Community industry.

Market shares

Taiwan (covered by Council
Regulation N° 1050/2002)

Index

Other third countries

Index

Of which

Japan

Index

Hong Kong

Index

Switzerland

Index

China

Index

Singapore

Index

1998

24%

100

50%

100

1999

52%

215

25%

51

2000

62%

255

35%

70

17%

11%

10%

56

0%

82

1%

81

1%

333

3%

24

63

1%

106

1%

63

0%

173

6%

52

100

1%

100

1%

100

0%

100

12%

100

26

2001

63%

259

9%

18

2%

14

1%

228

2%

150

1%

556

1%

10

IP

57%

234

11%

21

3%

17

2%

362

2%

160

2%

827

1%

8

The  prices  of  imports  originating  in  third  countries  not  covered  by  anti-dumping
measures decreased  by  22% between 1998  and  the  IP  even  if  the  trend  is  different
from  one  country  to  another.  Although  the  average  price  of  certain  third  countries
appear to be lower than the Indian prices,  Indian import prices are on average 34%
below the average price of imports originating in third countries other than Taiwan.
Regarding more particularly the average prices of imports originating in Hong Kong,
Switzerland and China which were found to be lower than  Indian prices during  the
IP,  it  should  be  noted  that  Indian  imports  are  5  to  6  times  larger  in  volume  than
imports  from  each  of  these  3  countries.  In  addition,  it  is  recalled  that  those  latter
countries  had  small  market  share  during  the  whole  period  considered  and
individually held a market share of 2% during the IP, which is in view of the import
volumes from Taiwan and India not significant enough to influence the Community
market.

import  price

Average 
(Euro/ 000 units)
Taiwan  (covered  by  Council
Regulation N° 1050/2002)

Index

Other third countries

Index

Of which

Japan

Index

Hong Kong

Index

Switzerland

Index

China

Index

Singapore

Index

1998

1999

2000

2001

563

436

312

246

100

653

100

1.196

100

387

100

643

100

928

100

388

100

78

623

95

886

74

606

157

538

84

694

75

353

91

55

210

32

421

35

528

137

261

41

296

32

278

72

44

544

83

1.149

96

132

34

205

32

205

22

378

98

IP

258

46

507

78

999

84

146

38

212

33

218

23

511

132

(c) Export activity of the Community industry

1998

1999

2000

2001

IP

(in 

‘000

5.246

15.332

27.739

28.678

28.180

100

292

529

547

537

Exports 
units)

Index

(122)  The volume of exports increased over the period considered. However, since 2000 it
remained stable. Since exports of CD-Rs to third countries remained a relatively minor
activity  for  the  Community  industry  (during  the  IP  it  represented  9%  of  its  sales  to
unrelated customers in the Community of own produced CD-Rs), it is considered that

27

the  export  activity  is  unlikely  to  have  contributed  to  the  injury  suffered  by  the
Community industry.

(d) Purchases from other third countries

(123)  It is recalled that the Community industry did not import the product concerned from

India during the period considered.

(124)  The  investigation showed  that  during  the  period  considered  the  Community  industry
purchased  CD-Rs  from  other  sources  in  order  to  respond  to  market  demand.  Total
purchases represented 40% of total sales in 1998 but decreased to represent only 31%
in the IP.

(125)  It was also found that the volume  of  purchased  CD-Rs decreased when  compared to
the  Community  industry’s  own  production.  In  addition,  both  self-produced  and
purchased CD-Rs being sold at the same price by the Community industry, and given
that  there  was  no  indication  that  the  purchase  price  to  the  Community  Industry  was
higher  than  the  costs  of  production,  the  fact  that  some  CD-R  had  previously  been
purchased  as  opposed  to  own-produced  could  not  have  materially  contributed  to  the
injury suffered by the Community industry.

(126)  The  purchases  were  mainly  made  to  face  gaps  in  production  capacity  at  particular
periods of time especially because one of the company included in the definition of the
Community industry entered on the CD-Rs market only in 2000 and had to fulfil the
demand  with  purchased  products  prior  to  the  production  facilities  being  fully
operational.  Purchases  should  also  be  seen  as  the  consequence  of  the  shareholdings
relationships between some of the Community industry companies and companies in
third countries.

(127)  In view of the above, purchases by the Community industry from countries other than
India  were  not  such  as  to  not  break  the  causal  link  between  the  subsidised  imports
from India and the injury suffered by the Community industry.

(128)  The  Indian  exporting  producer  argued  that  the  fact  that  the  Community  industry
purchased  31%  of  total  sales  is  inconsistent  with  the  claim  that  the  Community
industry is viable. He recalled that in the anti-dumping investigation on Taiwan, this
proportion was found to be only 22.1% in 2000.

(129)  However,  it  is  recalled  that  the  scope  of  the  Community  industry  is  not  the  same  in
this investigation than it was in the investigation  on  Taiwan. Two  companies  having
shareholdings relationships with foreign companies belong to the Community industry
whereas they did not during the investigation on Taiwan. Moreover, it is also recalled
that in the investigation on Taiwan, this proportion rose to 44% in 1998 and was 33%
as  an  average  between  1997  and  2000.  Therefore,  the  level  of  the  purchases  in  the
current investigation is of the same magnitude as the one found in the investigation on
Taiwan.

(130)  In any case, as already explained above, purchased products are sold at the same price
as  own-produced  CD-Rs  and  cannot  have  contributed  to  the  injury  suffered  by  the
Community industry.

28

(e) Competition of other data storage media

(131)  The investigation has shown that the competition of other data media storage such as
DVD and/or CD-RW was still very limited during the IP and thus had no significant
influence on the sales prices of the product concerned.

(f) World-wide overcapacity

(132)  It was also analysed whether the world-wide overcapacity could have caused injury to
the Community industry. Although it is recognised that the supply of CD-Rs over the
period considered exceeded the demand on  a world-wide basis, it is recalled  that  the
Community  industry  was  still  mainly  oriented  to  the  Community  market  where  the
capacity was still below demand. Hence, world-wide overcapacity is unlikely to have
caused  injury  to  the  Community  industry.  However,  should  it  nevertheless  be
considered  as  a  cause  of  the  injury  suffered  by  the  Community  industry,  the
investigation has also shown that the world-wide overcapacity existed already in 1999,
2000  and  2001  when  the  Indian  company  entered  the  market  by  installing  huge
capacity  and  starting  production.  Therefore,  the  impact  of  huge  additional  Indian
imports on the Community market in such circumstances worsened the situation on the
Community market.

(g) State aid repayment

(133)  It has been alleged by the Indian exporting producer that the lack of  profitability for
one  applicant  could  stem  from  its  obligation  to  repay  state  aid  following  the
Commission’s Decision of 21 June 20009. However, it should be noted that the figures
provided  in  recital  (91)  and  used  for  the  analysis,  are  not  influenced  by  this
Commission  decision.  Should  the  state  aid  repayment  be  taken  into  account,  the
financial situation of the company concerned would have been worse.

(h) Royalties

(134)  Being an element of the cost of production, royalties have accordingly an influence on
the profitability of all producers of CD-Rs. However, first of all it should be noted that
both  the  exporting  producer  and  the  producers  of  the  Community  industry  are  duly
licensed by the patent owners and have to pay the royalties. Therefore, this cannot in
itself explain the difference in price between the Indian CD-Rs and those produced by
the Community industry, nor the financial losses incurred by the Community industry.
Secondly, the Community industry’s profitability was around 20% in 1999, at a period
of  time  when  the  royalties  were  already  payable,  but  before  the  exporting  producer
commenced  its  exports  to  the  Community.  Accordingly,  the  royalties  cannot  have
caused  injury  as  such.  Finally,  like  any  other  costs  associated  with  the  CD-R
production,  the  fact  that  subsidised  imports  were  putting  a  downward  pressure  on
prices  could  have  prevented  the  Community  industry  from  passing  on  the  costs  of
royalties to consumers. But in this case, this was en effect of injury and not a cause of
it. As a result,  the payment of  royalties could not be  considered  to  break  that  causal
link  between  the  subsidised  imports  and  the  injury  suffered  by  the  Community
industry.

9

OJ L 318, 16. 12. 2000, p. 62

29

                                                
(i) Other factors

(135)  Some  parties  claimed  that  injury  could  stem  from  an  alleged  abuse  of  a  dominant
position.  However,  this  allegation  has  not  been  confirmed  by  any  formal  decision
further to an investigation led by the competition authorities and can therefore not be
accepted.

(136)  It has been argued by the Indian exporting producer that CD-R production is not viable
in the Community because of high cost of production and especially because of higher
labour costs. It is recalled that the unit cost of production of the Community industry
decreased  by  59%  between  1998  and  the  IP  and  that  the  Community  industry  was
profitable in 1999 at a time when the Indian company was not yet on the Community
market and despite the Community industry cost of production still being 68% higher
at that time than during the IP.

Moreover, it is recalled that the production process is the same in the Community and
in India especially since the Indian producer uses European machinery and also some
raw materials imported from the Community.

As  concerns  the  difference  in  labour  costs,  the  investigation  showed  that  CD-Rs
production is  capital intensive and, being fully automated,  not  very  labour  intensive.
Indeed  only  the  very  last  stage  of  the  production  process  i.e.  the  packaging  requires
labour, but only to a limited extent. Moreover, it is recalled that the productivity of the
Community industry employees doubled during the period under consideration.

Finally, it should be noted that some Taiwanese companies started to produce CD-Rs
in  the  Community  recently,  which  tends  to  demonstrate  that  such  production  in  the
Community  is  likely  to  be  viable  and  profitable  notwithstanding  the  labour  cost,
should  a  fair  competition  be  restored  on  the  Community  market.  Therefore  the
argument was rejected.

It  was  also  alleged  by  the  same  company  that  the  price  decrease  on  the  Community
market is due to the fact that the CD-R life cycle reached a mature stage characterised
by decreasing prices and the decreasing cost of production and additional competitors
on the market.

Although the life cycle of CD-Rs may explain part of the price decrease, it appeared
during  the  investigation  that  low  prices  of  Indian  imports  have  had  a  significant
influence in a market characterized by transparency and price elasticity.

(137)  The Indian co-operating exporting producer also claimed that the Community industry
entered the CD-Rs market too late at a time when sales prices already declined.

It is recalled that the Indian exporting producer itself started the CD-Rs production far
later than the Community industry and should logically have encountered even worse
difficulties to enter the market during a period when prices were already low and when
all competitors had finished their start-up period. The argument was therefore rejected.

(138)  The same Indian company argued that the Community industry is too fragmented and
is  not  able  to  achieve  economies  of  scale  because  of  small  production  units.  It  is
however noteworthy that one of the two companies considered by the Indian producer
in  its  submission  as  being  the  largest  companies  and  thus  able  to  reach  sufficient

30

economies  of  scale  on  their  own,  supported  the  complaint,  co-operated  in  the
investigation and was found to suffer injury like the other producers which are part of
the Community industry. As regards more particularly economies of scale and/or the
better  conditions  which  the  Indian  exporting  producer  would  allegedly  be  able  to
obtain  for  their  purchases  of  raw  material,  this  could  not  be  confirmed  by  the
information  provided  by  the  suppliers  of  raw  material  and/or  machinery  during  the
verification visits. The argument of economies of scale was therefore rejected.

(139)  In  addition,  it  is  recalled  that  the  Community  industry  is  recent  since,  as  already
established  in  Commission  Regulation  (EC)  N°2479/2001,  it  only  started  production
in  1997.  Since  the  beginning,  it  has  suffered  injury  caused  first,  by  the  dumped
imports from Taiwan as stated in the Regulation mentioned above, and more recently
it had to face price pressure exerted by Indian imports.

4.

Conclusion on causation

(140)  In  view  of  the  above  it  is  concluded  that  the  material  injury  of  the  Community
industry,  which  is characterised by  a decrease of sales prices, investments,  return  on
investments  and  cash  flow  as  well  as  by  significant  losses  was  caused  by  the
subsidised imports concerned. Indeed, the effect of other factors such as imports from
Taiwan  or  of  the  life  cycle  of  the  product  concerned,  on  the  Community  industry’s
negative  developments  in  terms  of  sales  prices  was  only  partial  and  not  such  as  to
break  the  causal  link  between  the  subsidised  imports  from  India  and  the  injury
suffered by the Community industry thereof.

(141)  Given the above analysis which has properly distinguished and separated the effects of
all  the  known  factors  on  the  situation  of  the  Community  industry  from  the  injurious
effects of the subsidised imports, it is hereby concluded that these other factors as such
do  not  reverse  the  fact  that  the  injury  assessed  must  be  attributed  to  the  subsidised
imports.

G. COMMUNITY INTEREST

1.

Preliminary remark

(142)  It  was  examined  whether,  despite  the  conclusion  on  the  existence  of  injurious
subsidisation, compelling reasons existed that could lead to the conclusion that it is not
in the Community interest to adopt measures in this particular case. For this purpose,
and in accordance with Article  31(1) of the  basic  Regulation,  the  impact  of  possible
measures on all interests  concerned  by  this proceeding and  also  the  consequences of
not taking measures were considered on the basis of all evidence submitted.

(143)  In order to assess the likely impact of the imposition or non-imposition of measures,
information was requested from all interested parties. Questionnaires were sent to the
five applicant Community  producers, 18  other companies  known as producers in  the
Community, one consumers association and nine companies belonging to the upstream
industry  (‘suppliers’).  In  addition  to  the  five  applicant  Community  producers,  four
other  producers  submitted  satisfactory  replies.  Four  suppliers  replied  to  the
questionnaire and the consumers association sent a submission.

(144)  In view of the large number of importers in the Community and in order to enable the
Commission  to  decide  whether  sampling  is  necessary,  all  unrelated  importers,  or

31

representatives  acting  on  their  behalf,  were  requested  to  make  themselves  known
within  15  days  of  the  initiation  of  the  proceeding  and  provide  basic  information  on
their imports into and resales made in the Community market. Two  companies came
forward  and  provided  the  requested  information.  Questionnaires  were  sent  for
completion to these two companies. However, none of them submitted  a response to
the questionnaire.

(145)  These replies and submissions formed the basis for the Community interest analysis.

2.

Interest of the Community industry

(146)  It should be recalled that the Community producers were materially injured already in
the  past  by  imports  of  CD-Rs  originating  in  Taiwan,  as  described  in  the  Council
Regulation  (EC)  No  1050/2002.  In  2000,  five  European  producers  completely
abandoned CD-Rs production, and two others did the same in 2001.

(147)  The Community industry used to be viable and is capable of supplying a larger part of
the market for a product which constitutes the basic storage device for a large number
of computer users.

(148)  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 CD-Rs 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  CD-Rs  sector  is  the  economic  basis  for  participating  in  the  growing  market  of
other storage media. There are indeed  important  synergies in terms  of  sales  between
the  product  concerned  and  other  data  storage  media  products  such  as  CD-RW  and
DVD.  Therefore  it  is  very  important  for  the  Community  industry  to  propose  the
product concerned to its customers and to widen the range of its products.

(149)  In  view  of  the  conclusions  on  the  situation  of  the  Community  industry  set  out  at
recitals (102) to (105), especially in terms of its losses incurred, it is considered that, in
the  absence  of  measures  against  injurious  subsidisation,  the  Community  industry  is
likely  to  experience  a  worsening  of  its  financial  situation  and  it  is  likely  that  the
production  in  the  Community  will  decrease  and  that  the  users/consumers  will  be
significantly and increasingly dependant upon imports.

(150)  Failure  to  take  definitive  measures  in  the  present  proceeding  would  aggravate  the
already  deteriorating  situation  of  the  Community  industry,  marked  by  losses  and  a
consequential slowdown of investment.  It  would also undermine  the  effectiveness of
the  anti-dumping  measures  imposed  on  imports  of  the  same  product  originating  in
Taiwan.  This  has  put  the  continued  existence  of  this  industry  at  considerable  risk.
Should  this  industry  be  forced  to  cease  production,  the  Community  would  become
almost  wholly  dependent  on  third-country  sources  of  supply  in  a  rapidly  developing
area  of  increasing  technological  significance.  Since  the  objective  of  the  adoption  of
countervailing measures is to re-establish fair competition in the Community market, it
would be in the interest of the Community industry, since it has, in spite of the injury
suffered, proved to be viable in principle.

32

(151)  Finally, the countervailing duties associated with its continuing effort to reduce its cost
of  production,  can  only  help  the  Community  industry  to  recover  from  the  financial
losses, a prerequisite for participating in the growing market of other storage media.

3.

Interests of other Community producers

(152)  The  three  Community  producers,  who  were  not  considered  to  belong  to  the

Community industry, were nevertheless in favour of countervailing duties.

4.

Interests of Community suppliers

(153)  As  already  explained  in  recital  (143),  nine  companies  which  supplied  an  Indian
exporting producer and/or the Community industry sent letters to the Commission and
argued  that  any  measures  would  be  against  their  own  interest.  They  were  sent  a
questionnaire  in  order  to  assess  deeper  the  likely  impact  of  the  measures  on  their
business.  Only  four  companies  replied  and  argued  against  the  imposition  of
countervailing duties.

(154)  However,  the  investigation  showed  that  the  proportion  of  the  European  CD-Rs
manufacturers  in  the  turnover  of  the  co-operating  suppliers  was  nevertheless
significant. Therefore, it is likely that any further shrinking and/or deterioration of the
Community industry would not only have negative implications for employment and
investment in  the  Community  industry  itself  but  may  have  a  knock-on  effect  among
the industry's suppliers of raw materials and machinery. In addition, the investigation
has  shown  that  the  impact  of  the  anti-dumping  measures  imposed  on  the  product
concerned  originating  in  Taiwan  and  which  were  around  twice  higher  than  the
proposed countervailing duties in the present investigation, have not had a significant
impact on the suppliers.

(155)  It  was  also  argued  by  the  exporting  producer  that  the  subsidy  targeted  by  this
Regulation  benefited  the  European  suppliers  of  capital  goods.  According  to  this
company, should countervailing measures be imposed, orders would be cancelled with
serious consequences on the European suppliers of machinery.

(156)  In  this  respect,  it  is  recalled  that  when  final  findings  were  disclosed  to  all  parties
concerned  none  of  the  co-operating  suppliers  contested  the  conclusion  explained
above i.e. that the proportion of the European CD-Rs manufacturers in the turnover of
the  co-operating  suppliers  was  significant,  and  that  it  is  likely  that  any  further
shrinking and/or deterioration of the Community industry may have a knock-on effect
among the industry's suppliers of raw materials and machinery. As explained above on
the other hand, the impact of a countervailing duty is not likely to have a significant
direct effect on the suppliers’ activities.

5.

Interest of importers

(157)  No unrelated importer cooperated with the investigation.

(158)  The  absence  of  cooperation  of  importers  in  this  case  leads  to  the  conclusion  that
should  any  measures  be  imposed,  they  will  not  have  any  significant  impact  on  the
situation of unrelated importers and traders of CD-Rs in the Community.

33

6.

Interest of users and consumers

(159)  Major users of CD-Rs include duplicators and final consumers. Duplicators have not
made representations in this investigation. It is therefore, considered that an increase in
costs,  if  any,  applicable  to  this  sector  when  compared  to  overall  costs  can  be
considered as negligible.

(160)  Moreover the non-imposition 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.

(161)  As to consumers, the European Consumers’ organisation (‘BEUC’) was contacted and
sent a submission. Although this organisation was against the imposition of duties, no
element  showing  that  the  anti-dumping  duties  imposed  on  CD-Rs  originating  in
Taiwan had a major effect on consumers was provided. Even based on the worst case
assumption that the countervailing duties will  be passed on in full to the consumers,
this would lead to an increase of less than 3 Euro cents per CD-R originating in India.
Even under this scenario, given the decrease in price on the Community market since
1998 and the level of the measures proposed, no major effects on the final consumer
are foreseen.

(162)  It should be also noted that there is no indication that the re-establishment of open and
fair market conditions will prevent producers in third countries from competing in the
Community market or, consequently, reduce quality and diversity of supply. While it
is true that production in the Community is, at present, insufficient to meet demand for
the product concerned, countervailing measures would merely remove the distortion of
competition  arising  from  subsidies  and  not,  therefore,  represent  an  obstacle  to
satisfying the gap in demand with supplies from third countries at fair prices. Indeed,
where  the  level  of  the  countervailing  measures  is  equal  to  the  subsidy  margin,  but
lower than the amount required to remove fully the injury, it is only the unfair element
of the exporters' price advantage which will be eliminated.

(163)  In addition, the product concerned can still be imported from other countries. It should
also  be  noted  that  the  market  share  held  by  countries  not  covered  by  countervailing
measures  could  increase  in  future  due  to  the  fact  that  the  supply  of  CD-Rs  to  the
Community market by non subsidising countries was in the past less attractive owing
to the strong price pressure exerted by India and Taiwan. It is therefore highly likely
that, should fair competition be re-established, non-subsidising countries will increase
their presence on the Community market.

(164)  This seems to indicate that neither users nor consumers would be unduly affected by

the imposition of measures.

7.

Conclusion on Community interest

(165)  On  the  basis  of  the  above,  it  is  concluded  that  the  imposition  of  definitive

countervailing measures would not be against the Community interest.

34

H. DEFINITIVE COUNTERVAILING MEASURES

1.

Injury elimination level

(166)  In  view  of  the  conclusions  reached  with  regard  to  subsidy,  injury,  causation  and
Community  interest,  definitive  measures  should  be  taken  in  order  to  prevent  further
injury being caused to the Community industry by the subsidised imports.

(167)  For the purpose of establishing the level of the definitive measures, account has been
taken  of  both  the  subsidy  margin  found  and  the  amount  of  injury  sustained  by  the
Community industry.

(168)  The definitive measures should be imposed at a level sufficient to eliminate the injury
caused  by  these  imports  without  exceeding  the  subsidy  margin  found.  When
calculating  the  amount  of  duty  necessary  to  remove  the  effects  of  the  injurious
subsidies, it was considered that any measures should allow the Community industry
to  cover  its  costs  and  obtain  overall  a  profit  before  tax  that  could  be  reasonably
achieved  under  normal  conditions  of  competition,  i.e.  in  the  absence  of  subsidised
imports, on the sales of the like product in the Community. The pre-tax profit margin
used  for  this  calculation  was  the  same  as  in  the  anti-dumping  proceeding  against
Taiwan, i.e. 8% of turnover.

(169)  The necessary price increase was then determined on the basis of a comparison of the
weighted  average  import  price,  as  established  for  the  undercutting  calculations,  with
the non-injurious price of the different models sold by the Community industry on the
Community market.  The  non-injurious  price  per  model  has  been  obtained  by  adding
the above mentioned profit margin of 8% to the cost of production per model. The cost
of production has been reconstructed model by model, on the basis of the sales price to
which the losses have been added. Any difference resulting from this comparison was
then expressed as a percentage of the total CIF import value. These differences were in
all cases above the subsidy margin found.

2.

Definitive measures

(170)  As  the  injury  elimination  level  is  higher  than  the  subsidy  margin  established,  the
definitive  measures  should  be  based  on  the  latter.  As  co-operation  was  high,  and  in
order  not  to  undermine  the  effectiveness  of  the  measure,  the  rate  of  the  definitive
countervailing duty for India should be set at 7,3%.

HAS ADOPTED THIS REGULATION:

Article 1

1. 

2. 

A definitive countervailing duty is hereby imposed on imports of recordable compact
disks  (CD-Rs),  currently  classifiable  within  CN  code  ex  8523  90  00  (TARIC  code
8523 90 00 10), originating in India.

The rate of the definitive duty applicable to the net free-at-Community-frontier price,
before duty, shall be 7,3%.

35

3. 

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

Article 2

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

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

Done at Brussels,

For the Council

The President

36