Council Regulation (EC) No 960/2003 of 2 June 2003 imposing a definitive countervailing duty on imports of recordable compact disks originating in India
Date: 2003-06-02
Institutions: Council of the European Union
Subjects: India, countervailing charge, import, originating product, record

5.6.2003

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Official Journal of the European Union

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I

(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 960/2003

of 2 June 2003

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 Community (1) and in
particular Article 15 thereof,

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

Whereas:

A. PROCEDURE

1. Present proceeding

(1)

(2)

(3)

(4)

On 17 May 2002,
the Commission announced, by
notice published in the Official Journal of the European
Communities (2),
anti-subsidy
initiation
proceeding with regard to imports into the Community
of recordable compact disks (‘CD-Rs’) originating in India
and commenced an investigation.

the

an

of

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 Communities (3), 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
complaint
Community production of CD-Rs. The
contained evidence of
the product
concerned and of material
injury resulting therefrom,
which was considered sufficient to justify the initiation
of a proceeding.

subsidisation of

The Commission officially advised the complainant
Community producers, as well as the other known
Community producers, the exporting producer, impor-
ters and users association known to be concerned and

(1) OJ L 288, 21.10.1997, p. 1. Regulation as amended by Regulation

(EC) No 1973/2002 (OJ L 305, 7.11.2002, p. 4).

(2) OJ C 116, 17.5.2002, p. 4.
(3) OJ C 116, 17.5.2002, p. 2.

(5)

(6)

(7)

(8)

the representatives of
the
India of
proceeding. Interested parties were given the opportu-
nity to make their views known in writing and to
request a hearing within the time limit set in the notice
of initiation.

the initiation of

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 Regula-
tion’) 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, there-
fore, 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 representa-
tivity 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 coop-
erated in this investigation. The mere fact
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-Rs. The argument was therefore rejected.

that

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Official Journal of the European Union

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(9)

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,
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:

injury and Community interest.

4. Measures in force on imports of CD-Rs originating in

Taiwan

(13)

In June 2002, by Regulation (EC) No 1050/2002 (1) the
imposed a definitive anti-dumping duty on
Council
imports of CD-Rs originating in Taiwan.

(a) Exporting producer in India

— Moser Baer India Ltd, New Delhi, India;

(b) Producers in the Community

B. PRODUCT UNDER CONSIDERATION AND LIKE

PRODUCT

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

1. Product under consideration

— 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

— TDK Recording Media Europe S.A., Bascharage,

Luxembourg

— Prime Disc Technologies GmbH, Wiesbaden,

Germany

— IMAG Optical Storage Ltd, Limerick, Ireland

— Multimedia
Ireland;

Info-Tech Ltd, Belfast, Northern

(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 (‘investiga-
tion 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
countervailing duties were

subsidy, no provisional
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.

(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.

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

the reflective metal

layer

The product is also sold in different qualities and comes
on the market in different types of packaging of which
frequently encountered are regular or slim
the most
jewel cases containing one CD-R, shrink-wrapped spin-
dles of 10 to 100 CD-Rs, cake-boxes of 10 to 100 CD-
Rs, envelopes containing one CD-R packed in cello-
phane, 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 signifi-
cant differences in the basic physical and technical char-
acteristics of
types. They are therefore
considered as one product for the purpose of this inves-
tigation.

the different

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 Commu-
nity market have similar basic physical and technical
characteristics and uses as compared to those exported
to the Community from the country in question.

(1) OJ L 160, 18.6.2002, p. 2.

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(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.

dures governing India's foreign trade policy in the ‘Hand-
book of Procedures for Exports and Imports 1.4.1997-
31.3.2002’ (Volume 1).

Inc ome T a x E xe mpti on S ch eme (IT ES )

(a) Legal basis

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.

C. SUBSIDIES

(20)

1. Introduction

(18) On the basis of

the information contained in the
complaint and the replies to the Commission's question-
naires, the following schemes, which allegedly involved
the granting of export subsidies, were investigated:

(i) — Income Tax Exemption Scheme;

(b) Eligibility

(ii) — Export Processing Zones/Export Oriented Units

(EPZ/EOU) scheme.

(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.

(19)

for

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 subsi-
dies
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 cooperated 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.

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 docu-
ment 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 proce-

(22)

(23)

(c) Practical implementation

To benefit
from the abovementioned 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

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 contri-
bution would confer a benefit on the recipient by redu-
cing its income tax liability.

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(24)

The subsidy is contingent in law upon export perfor-
mance 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.

(28)

shown that

the
The situation outlined above has
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.

(e) Calculation of the subsidy amount

(29)

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

(25)

(26)

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
for
noted that
the company operates other units
the
different products outside the EOU. However,
computations of the income tax in the tax return made
by the company and the attached specifications showed
that
fixed
the company increased its depreciation of
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.

for

(applicable

The Commission considered the reclassification of assets
for taxation purposes to be legally questionable, in parti-
cular 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
accounting
purposes) and the Indian Income Tax Act (applicable for
taxation) provide the same depreciation rate for the cate-
gory in which the assets were reclassified for taxation
purposes. For this reason,
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 neces-
sary 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 investiga-
tion, 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
reclassification of assets was
obtained through this
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 question-
able reclassification of assets.

(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.

(31)

(32)

(b) Eligibility

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 produc-
tion on the domestic market under certain conditions.

(c) Practical implementation

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
If the authorities accept the
indigenous requirements.
and conditions
the
application,
company's
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.

terms

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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 consum-
ables) 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;

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

(v) possibility of 100 % foreign equity ownership;

E xe mpti on fr om i mpor t du ti e s on r a w ma ter i a ls

(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.

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.

(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 produc-
tion 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.

They must also ensure minimum foreign exchange earn-
ings 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.

(37)

(d) Conclusions on EPZ/EOU

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 exam-
ined the countervailability of these concessions. In this
regard, the exemption from customs duties on raw mate-
rials 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

In view of the above, it was concluded that the exemp-
tion 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.

E xe mpti on fr om i mpor t du ti e s on c ap ital 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 goods by spreading this amount across
accounting
a
purposes.

depreciation

applicable

period

for

(33)

(34)

(35)

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(39)

(40)

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 addi-
tion, it commented that in other anti-subsidy investiga-
tions 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
‘there
of experts on subsidies, which indicated that
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.

there is
The investigation has, however, shown that
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
the
assets as moulds also for accounting purposes,
existing period of depreciation for machines,
i.e. 13
years, could not have been applied. In fact, the period
would have been either six 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
Indian legislation which provides consistent
relevant
classification for both taxation and accounting purposes.

(42)

the company applied for

In this case,
taxation a
declining balance method which resulted in approxi-
mately 80 % of the assets being depreciated in the first
the remaining question is to
three years. Therefore,

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.

(43)

(44)

In this respect, two choices were considered both of
which are specified as possible options under the Indian
Companies Act, i.e. a six 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.

In this respect, it was concluded that the most reason-
able 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 inves-
tigation 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 six 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 abovementioned average.
it was considered appropriate to apply a
Therefore,
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 allows 30 % faster depreciation than the
equivalent straight-line method over a representative
period of six years applicable when using the straight-
line method. This corresponds to a period of 4,2 years
as compared to six 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 commer-
cial interest rate during the IP in India was considered
appropriate. The amount of subsidy has then been allo-
cated over the total export turnover of the EOU.

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Official Journal of the European Union

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(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 cooperated in the proceeding,

— four non-complainant producers who supported the complaint and who cooperated in the

proceeding,

— two non-complainant producers who supported the complaint but who failed to sufficiently

cooperate in the investigation,

— one non-complainant producer who supported the complaint and provided some general infor-

mation to the Commission,

— other non-complainant producers who did not cooperate in the proceeding.

(50)

The fact that several non-complainant Community producers have cooperated 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 cooperating 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. There-
fore, there were no reasons to exclude those companies from the definition of Community produc-
tion.

(51) On the above basis, it was considered that the CD-Rs produced by all the abovementioned compa-
nies constitute the Community production within the meaning of Article 9(1) of the basic Regula-
tion.

2. Definition of the Community industry

(52) As mentioned in recital 49, nine Community producers, who supported the complaint fully coop-
erated 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 Article 9(1) and Article 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 cooperate 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 cooperating 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-cooperating Community producers based on information
collected by the Commission when considering the acceptability of the complaint.

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(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 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

712

60

2000

2001

IP

18 462

179 904

196 091

1 559

15 196

16 563

(56)

(57)

(58)

(59)

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.

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 the
Indian 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

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.

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 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 (EUR/'000 units)

Index

Index base 100 in 2000

1998

126

100

1999

1 227

975

2000

823

654

100

2001

285

226

35

IP

334

265

41

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(60)

The cooperating 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 develop-
ment. 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 1997
March 1998

April 1998
March 1999

April 1999
March 2000
Financial year
2000

April 2000
March 2001
Financial year
2001

IP

Volumes

100

711

2 829

Market shares

0 %

0 %

0 %

5 %-10 %

10 %-15 %

Unit price

100

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 Euro-
stat 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. Neverthe-
less, 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.

(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.

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(67)

Based on the questionnaire replies, different product families of CD-Rs could be defined for compar-
ison 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 characteris-
tics 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 under-
selling 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 Equip-
ment 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 CD-
Rs and which resell these CD-Rs 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) Ef fe ct of pa st du mp i n g

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 (EC) No 1050/2002 (1) imposing
definitive measures against imports from Taiwan has only recently entered into force (in June 2002),
the Community industry has not yet been able to recover fully.

(ii) B eg i nni ng of the CD-R s' pr odu c ti on i n the Com mun i ty

(72) As mentioned in Commission Regulation (EC) No 2479/2001 of 17 December 2001 imposing a
provisional anti-dumping duty on imports of recordable compact disks originating in Taiwan (2)
dealing with CD-Rs from Taiwan, the first wave of installation of new European facilities can be situ-
ated 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. More-
over, 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.

(1) OJ L 160, 18.6.2002, p. 2.
(2) OJ L 334, 18.12.2001, p. 8.

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(b) Production, capacity and capacity utilisation

Production (in '000 units)

75 765

172 113

298 792

389 467

403 127

1998

1999

2000

2001

IP

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)

(74)

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 million 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 %).

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 impor-
tant 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 utilisa-

tion increased by less than 3 percentage points between 1998 and the IP.

(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

100

278

378

626

665

Market shares

9,7 %

10,6 %

8,4 %

11,4 %

13,4 %

Index

100

Sales price (EUR/'000 units)

997

Index

100

109

941

94

86

633

63

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 %.

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(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

1998

6 976

1999

2000

2001

IP

18 763

64 724

66 956

58 817

Index

100

269

928

960

843

(81)

(82)

(83)

(84)

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.

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 cooperate in
the investigation.

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.

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.

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(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)

(88)

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.

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 producer 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.

(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/
EUR per CD)

1998

1,01

1999

0,75

2000

0,64

2001

0,47

IP

0,45

Index

100

75

63

47

45

Profitability

– 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/
EUR)

29 410

58 666

34 586

12 710

14 317

Index

Return on investment

100

– 1 %

199

27 %

118

43

49

– 1 %

– 19 %

– 18 %

Cash flow (in '000 ECU/
EUR)

8 983

38 643

20 510

6 667

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.

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(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)

(95)

(96)

(97)

(98)

(99)

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 EUR 14 million 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 EUR 17 million during the IP.

Firstly, it is recalled that a difference exists between investment and production evolution since a
time-span of several months elapses between the purchase of the 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 another due to technical problems and/or management decisions based on market
projections, without having any impact on the number of machinery.

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 manufac-
turers but also to other types of producers of optical disks customers.

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.

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.

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

1998

409

100

30

100

Employment

Index

employment

Average
cost
per employee (in '000 ECU/
EUR)

Index

Productivity
employee)

(CDs

per

185

1999

658

161

33

108

262

2000

885

216

34

114

338

2001

967

236

34

114

403

IP

984

241

39

129

410

Index

100

141

182

217

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.

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(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.

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 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.

the Indian imports and the decline of

the increase of

(103) Some economic indicators pertaining to the situation of the Community industry, such as produc-
tion 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 consid-
ered. Nevertheless, these positive developments were more than offset by a number of other indica-
tors 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 compen-
sate 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 subsi-
dised 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 provi-
sional 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.

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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 consider-
able reduction, which even taking into account
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 two years.

the significant expansion of

(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 underesti-
mated 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
percentage 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 alter 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-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.

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(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 Regulation (EC) No
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 cooperating 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 characterised by transparency and price elasticity, low prices of Indian imports had a signifi-
cant 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.

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.

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The Indian cooperating 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 lower unit
prices. However, this assumption 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.

(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.

Imports (in '000 units)

1998

1999

2000

2001

IP

Taiwan (covered by Regula-
tion (EC) No 1050/2002)

111 447

612 539

1 248 133

1 545 258

1 262 327

Index

100

550

1 120

1 387

1 133

Other third countries

227 330

296 673

702 865

220 675

233 546

Index

Of which

Japan

Index

Hong Kong

Index

100

131

309

97

103

80 089

128 640

195 903

59 549

63 916

100

161

245

74

80

2 414

100

6 536

271

8 678

29 457

42 210

359

1 220

1 748

Switzerland

5 086

8 204

18 139

40 874

39 316

Index

China

Index

Singapore

Index

100

845

100

161

357

804

773

3 746

12 352

25 208

33 793

443

1 461

2 982

3 998

53 267

71 220

56 863

29 587

20 248

100

134

107

56

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.

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Official Journal of the European Union

L 138/19

Market shares

Taiwan (covered by Regula-
tion (EC) No 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

17 %

100

1 %

100

1 %

100

0 %

100

12 %

100

1999

52 %

215

25 %

51

11 %

63

1 %

106

1 %

63

0 %

173

6 %

52

2000

62 %

255

35 %

70

10 %

56

0 %

82

1 %

81

1 %

333

3 %

24

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 appears 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 origi-
nating 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 three 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.

Average import price (EUR/
'000 units)

Taiwan (covered by Regula-
tion (EC) No 1050/2002)

Index

Other third countries

Index

Of which

Japan

Index

1998

563

100

653

100

1 196

100

1999

436

78

623

95

886

74

2000

312

55

210

32

421

35

2001

246

44

544

83

1 149

96

IP

258

46

507

78

999

84

L 138/20

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5.6.2003

Average import price (EUR/
'000 units)

1998

1999

2000

2001

Hong Kong

Index

Switzerland

Index

China

Index

Singapore

Index

387

100

643

100

928

100

388

100

606

157

538

84

694

75

353

91

528

137

261

41

296

32

278

72

132

34

205

32

205

22

378

98

IP

146

38

212

33

218

23

511

132

(c) Export activity of the Community industry

Exports (in '000 units)

1998

5 246

1999

2000

2001

Index

15 332

27 739

28 678

28 180

Index

100

292

529

547

537

(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 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.

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Official Journal of the European Union

L 138/21

(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.

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.

(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 investiga-
tion on Taiwan, this proportion was found to be only
22,1 % in 2000.

(133)

(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
relationships with foreign companies
shareholdings
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 propor-
tion 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.

(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) Worldwide overcapacity

(132)

It was also analysed whether the worldwide 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,
worldwide overcapacity is unlikely to have caused injury
to the Community industry. However, should it never-
theless be considered as a cause of the injury suffered by
the Community industry,
the investigation has also
shown that the worldwide overcapacity existed already
in 1999, 2000 and 2001 when the Indian company
huge
entered

installing

market

the

by

(g) State aid repayment

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 2000/796/EC of 21 June 2000
on State aid granted by Germany to CDA Compact Disc
Albrechts GmbH, Thuringia (1). However,
it should be
noted that the figures provided in recital 91 and used for
the analysis, are not influenced by this Commission deci-
sion. Should the state aid repayment be taken into
account,
company
concerned would have been worse.

situation of

financial

the

the

(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 produ-
cers 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 subsi-
dised imports and the injury suffered by the Community
industry.

(i) Other factors

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

(1) OJ L 318, 16.12.2000, p. 62.

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Official Journal of the European Union

5.6.2003

(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 Commu-
nity 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 investiga-
tion 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.

started to produce CD-Rs

Finally, it should be noted that some Taiwanese compa-
nies
in the Community
recently, which tends to demonstrate that such produc-
tion in the Community is likely to be viable and profit-
able notwithstanding the labour cost, should a fair
competition be restored on the Community market.
Therefore the argument was rejected.

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 suffi-
cient economies of scale on their own, supported the
complaint, cooperated in the investigation and was
found to suffer injury like the other producers which are
part of the Community industry. As regards more parti-
cularly 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 Regulation (EC) No
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 Regula-
tion mentioned above, and more recently it had to face
price pressure exerted by Indian imports.

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 charac-
terised by decreasing prices and the decreasing cost of
production and additional competitors on the market.

(140)

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 influ-
ence in a market characterised by transparency and price
elasticity.

(137) The Indian cooperating 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 Commu-
nity industry and should logically have encountered even
worse difficulties to enter the market during a period

4. Conclusion on causation

In view of the above it is concluded that the material
injury of the Community industry, which is characterised
investments, return on
by a decrease of sales prices,
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 distin-
guished and separated the effects of all
the known
factors on the situation of the Community industry from
the injurious effects of
is
hereby concluded that these other factors as such do not
reverse the fact that the injury assessed must be attrib-
uted to the subsidised imports.

the subsidised imports,

it

5.6.2003

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Official Journal of the European Union

L 138/23

G. COMMUNITY INTEREST

(148)

1. Preliminary remark

(142)

(143)

(144)

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 parti-
cular case. For this purpose, and in accordance with
Article 31(1) of
the impact of
the basic Regulation,
interests concerned by this
possible measures on all
proceeding and also the consequences of not
taking
measures were considered on the basis of all evidence
submitted.

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.

In view of the large number of importers in the Commu-
nity and in order to enable the Commission to decide
whether sampling is necessary, all unrelated importers,
or representatives acting on their behalf, were requested
to make themselves known within 15 days of the initia-
tion 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 Regulation
(EC) No 1050/2002. In 2000, five European producers
completely abandoned CD-Rs production, and two
others did the same in 2001.

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
sales between the product
synergies
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.

in terms of

(149)

the conclusions on the situation of

the
In view of
Community industry set out at recitals 102 to 105, espe-
cially in terms of its losses incurred, it is considered that,
in the absence of measures against injurious subsidisa-
tion, 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 origi-
nating 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-estab-
lish 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.

(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

(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.

(152) The three Community producers, who were not consid-
ered to belong to the Community industry, were never-
theless in favour of countervailing duties.

L 138/24

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Official Journal of the European Union

5.6.2003

4. Interests of Community suppliers

6. Interest of users and consumers

(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
replied and argued
business. Only four companies
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 cooperating 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 invest-
ment 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
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 investiga-
tion, have not had a significant impact on the suppliers.

shown that

impact of

the

the

(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 the

In this respect, it is recalled that when final findings were
disclosed to all parties concerned none of the coop-
erating suppliers contested the conclusion explained
above i.e. that the proportion of the European CD-Rs
the cooperating
manufacturers
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 indus-
try'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.

turnover of

(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 negli-
gible.

(160) Moreover the non-imposition of the measures would
the Community
seriously threaten the viability of
the disappearance of which would reduce
industry,
supply and competition, to the detriment of duplicators
and consumers.

showing that

(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
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 origi-
nating 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)

countries

in third

It should be also noted that there is no indication that
the re-establishment of open and fair market conditions
will prevent producers
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, insuffi-
cient to meet demand for the product concerned, coun-
tervailing 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
lower than the amount
to the subsidy margin, but
required to remove fully the injury, it is only the unfair
element of the exporters' price advantage which will be
eliminated.

5. Interest of importers

(157) No unrelated importer cooperated with the investiga-

tion.

(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.

(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 counter-
vailing 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.

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Official Journal of the European Union

L 138/25

7. Conclusion on Community interest

(165) On the basis of the above, it is concluded that the impo-
sition of definitive countervailing measures would not be
against the Community interest.

H. DEFINITIVE COUNTERVAILING MEASURES

1. Injury elimination level

(166)

In view of
the conclusions reached with regard to
subsidy, injury, causation and Community interest, defi-
nitive 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 cooperation 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

A definitive countervailing duty is hereby imposed on
1.
imports of recordable compact disks (CD-Rs), currently classifi-
able within
code
8523 90 00 10), originating in India.

ex 8523 90 00

CN code

(TARIC

The rate of the definitive duty applicable to the net free-

2.
at-Community-frontier price, before duty, shall be 7,3 %.

Unless otherwise

3.
concerning customs duties shall apply.

specified,

the provisions

in force

Article 2

This Regulation shall enter into force on the day of its publica-
tion 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 Luxembourg, 2 June 2003.

For the Council

The President

K. STEFANIS