Commission Regulation (EC) No 1611/2003 of 15 September 2003 imposing provisional anti-dumping duties on imports of certain stainless steel cold-rolled flat products originating in the United States of America
Date: 2003-09-15
Institutions: European Commission
Subjects: United States, anti-dumping duty, flat product, import, originating product, steel

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Official Journal of the European Union

L 230/9

COMMISSION REGULATION (EC) No 1611/2003

of 15 September 2003

imposing provisional anti-dumping duties on imports of certain stainless steel cold-rolled flat
products originating in the United States of America

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 384/96 of 22
December 1995 on protection against dumped imports from
countries not members of the European Community (1), as last
amended by Regulation (EC) No 1972/2002 (2), and in parti-
cular Article 7 thereof,

After consulting the Advisory Committee,

Whereas:

concerned, as well as to all parties which made them-
selves known within the deadline set out in the notice of
initiation. Replies to these questionnaires were received
from six Community producers, one exporting producer,
six related importers and seven users of certain stainless
steel cold-rolled flat products. No unrelated importer or
provider of raw materials replied to the questionnaire.

(5)

The Commission sought and verified all the information
deemed necessary for the purpose of a provisional deter-
injury and Community interest.
mination of dumping,
Verification visits were carried out at the premises of the
following companies:

A. PROCEDURE

1. Present investigation

Initiation

Iron and Steel

On 4 November 2002 a complaint was lodged by the
European Confederation of
Industries
(Eurofer), on behalf of producers representing a major
proportion, in this case more than 80 %, of the Commu-
nity production of certain stainless steel cold-rolled flat
products. The complaint contained evidence of dumping
of the said product and of material injury resulting there-
to justify the
from, which was considered sufficient
initiation of a proceeding.

Consequently, on 17 December 2002, the Commission
announced by a notice (‘notice of initiation’) published
in the Official Journal of the European Communities (3) the
initiation of an anti-dumping proceeding with regard to
imports into the Community of certain stainless steel
cold-rolled flat products originating in the United States
of America (hereinafter, the USA).

(6)

(7)

Investigation

(1)

(2)

(3)

the

importers

The Commission officially advised the exporting produ-
cers,
and the users known to be
concerned, as well as the representatives of the exporting
country concerned and the complainant Community
producers, about the initiation of the proceeding. Inter-
ested parties were given the opportunity to make their
views known in writing and to request a hearing within
the time limit set out in the notice of initiation.

(4)

The Commission sent questionnaires to all Community
producers, all exporters/producers, all importers and all
users and providers of raw materials known to be

(1) OJ L 56, 6.3.1996, p. 1.
(2) OJ L 305, 7.11.2002, p. 1.
(3) OJ C 314, 17.12.2002, p. 3.

— Commu ni ty p r oduc e r s

— Ugine, SA, France

— ThyssenKrupp, Acciai Speciali Terni, SpA, Italy

— ThyssenKrupp Nirosta GmbH, Germany

— e x p or ti ng p r odu ce r s

— AK Steel Corporation, Middletown, Ohio, United

States of America

— r e la te d i mp o r te r s

— AK Steel Limited, Hertfordshire, United Kingdom.

The investigation of dumping and injury covered the
period from 1 January 2002 to 31 December 2002 (‘the
investigation period’ or ‘the IP’). As for the trends rele-
vant
the Commission
analysed the period from 1999 to the end of the investi-
gation period (‘the period considered’).

the assessment of

injury,

for

Upon initiation, the Commission advised all parties that,
since initiation took place just before the end of the
calendar year, it was more appropriate to select an inves-
tigation period coinciding with the calendar year, rather
than the 12 months immediately prior to initiation, thus
facilitating both the reporting by companies and the
verification by the Commission. No party objected to
this decision.

2. Product concerned and like product

General

(8)

Cold-rolled flat products of ferritic stainless steels are
manufactured in stainless steel plants according to the
following process:

— melting of raw materials in electric furnace,

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(9)

(10)

— decarburation and adjustment of composition,

— continuous casting in slab form,

— hot rolling, annealing and pickling,

— cold rolling,

— annealing and pickling,

— slitting to width required,

— packing and delivery.

Cold-rolled flat products of ferritic stainless steels are
mainly used in silencers and exhaust-gas emission-
control systems by the automotive industry. Therefore,
the most important use of these products is related to
the manufacturing of exhaust-system components. Other
important uses of cold-rolled flat products of ferritic
stainless steel are household and automotive applications
other than the mentioned exhaust systems.

Product concerned

The product concerned by this proceeding is certain
stainless steel cold-rolled flat products,
i.e. chromium-
ferritic steel, containing less than 0,15 % of carbon and
10,5 % or more and 18 % or less of chromium, flat
rolled, not further worked than cold rolled, of stainless
steel containing by weight less than 2,5 % of nickel in
the standardised grades AISI 409/409L (EN 1.4512),
AISI 441 (EN 1.4509) and AISI 439 (EN 1.4510), origi-
nating in the United States of America. Due to its char-
acteristics, the product concerned is mostly used by the
the production of exhaust
automotive industry for
ex 7219 31 00,
systems.
ex 7219 34 90,
ex 7219 33 90,
ex 7219 32 90,
ex 7219 35 90,
ex 7220 20 39,
ex 7220 20 10,
ex 7220 20 59 and ex 7220 20 99. All product types
have the same basic physical, technical and chemical
characteristics and are therefore one product.

falls within CN codes

It

Like product

(11)

It is provisionally determined that the product produced
in the United States of America and sold to the first
independent customers in the Community has the same
basic physical, technical and chemical characteristics as
the product sold on both the USA domestic market and
that produced by Community producers and sold on the
Community market. All these products were therefore
provisionally considered to be alike within the meaning
of Article 1(4) of the basic Regulation.

B. DUMPING

(12) One company, representing more than 80 % of exports
to the Community of the product concerned originating
in the United States of America, replied to the question-

naire for exporting producers. Six companies in the
Community related to this exporting producer also
replied to the questionnaire for
related companies.
Another exporting producer informed the Commission
of its willingness to cooperate but did not provide a
reply to the questionnaire. It was therefore considered to
be non-cooperating.

1. Normal value

(13) As

as

far

the determination of normal value

is
concerned, the Commission first established whether the
cooperating exporting producer's total domestic sales of
certain stainless steel cold-rolled flat products were
representative in comparison with its total export sales
to the Community.

(14)

(15)

(16)

than 0,1 % of

The company reported domestic sales of the product
concerned made by two business locations (North and
South). However, it was found that most sales made by
South were not sales of the product concerned. In addi-
tion, the company did not supply cost information for
products sold by this location. Therefore, the few sales
of the product concerned by South which represented
the product
less
concerned sold domestically were disregarded.
Indeed,
the remaining domestic sales were largely representative
and, given their negligible volume, the inclusion of these
sales would not have had any impact on the dumping
and in accordance with
calculation. Consequently,
Article 2(2) of the basic Regulation, domestic sales were
considered representative since the total domestic sales
volume of the exporting producer was at least 5 % of its
total export sales volume to the Community.

total quantities of

The Commission subsequently identified those types of
certain stainless
sold
domestically by the company,
that were identical or
directly comparable with those types sold for export to
the Community.

steel cold-rolled flat products,

For each type sold by the exporting producer on its
domestic markets and found to be directly comparable
with the type sold for export to the Community, it was
established whether domestic sales were sufficiently
representative for the purposes of Article 2(2) of the
basic Regulation. Domestic sales of a particular type of
certain stainless steel cold-rolled flat products were
considered sufficiently representative when the total
domestic sales volume of that type during the IP repre-
sented 5 % or more of the total sales volume of the
comparable type of certain stainless steel cold-rolled flat
products exported to the Community.

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(17) An examination was also made as to whether

the
domestic sales of each type could be regarded as having
been made in the ordinary course of trade in accordance
with Article 2(4) of the basic Regulation, by establishing
the proportion of profitable sales to independent custo-
mers of the type in question. Where the sales volume of
certain stainless steel cold-rolled flat products, sold at a
net sales price equal to or above the calculated cost of
production, represented more than 80 % of the total
sales volume and where the weighted average price of
that type was equal to or above the cost of production,
normal value was based on the actual domestic price,
calculated as a weighted average of the prices of all
domestic sales made during the IP,
irrespective of
whether these sales were profitable or not. Where the
volume of profitable sales of certain stainless steel cold-
rolled flat products represented 80 % or less of the total
sales volume, or where the weighted average price of
that type was below the cost of production, normal
value was based on the actual domestic price, calculated
as a weighted average of profitable sales only, provided
that these sales represented 10 % or more of the total
sales volume.

(18)

In cases where the volume of profitable sales of any type
of certain stainless steel cold-rolled flat products repre-
sented less than 10 % of the total sales volume, it was
considered that this particular type was sold in insuffi-
cient quantities for the domestic price to provide an
appropriate basis for the establishment of the normal
value.

(19) Wherever domestic prices of a particular type could not
be used to establish normal value, another method had
to be applied. In view of the fact that no other exporting
producer decided to cooperate in this proceeding, no
information was available to the Commission regarding
the domestic prices of another producer. Consequently,
and in the absence of any other reasonable method,
constructed normal value was used.

(20)

In all cases where constructed normal value was used
and in accordance with Article 2(3) of the basic Regula-
tion, normal value was constructed by adding to the
manufacturing costs of
the exported types, adjusted
where necessary, a reasonable percentage for selling,
general and administrative expenses (‘SG&A’) and a
reasonable margin of profit.

(21)

To this end,
the Commission examined whether the
SG&A incurred and the profit realised by the exporting
producer concerned on the domestic market constituted
reliable data. Actual domestic SG&A expenses were
considered reliable since the domestic sales volume of

the company concerned could be regarded as representa-
tive. The domestic profit margin was determined on the
basis of domestic sales made in the ordinary course of
trade.

2. Export price

(22) All export

sales of

in turn,

the product concerned to the
Community were made via a related importer, which
resold the product to both related and unrelated custo-
mers. Those related customers,
resold the
product concerned to other
independent customers.
Consequently, pursuant to Article 2(9) of the basic Regu-
lation, the export price was constructed on the basis of
the price at which the imported products were first
resold to an independent buyer. Adjustments were made
for all costs incurred between importation and resale by
those importers, including SG&A costs, and assuming a
reasonable profit margin, in accordance with Article 2(9)
of the basic Regulation.
In the absence of any other
more reliable information, the reasonable profit margin
was provisionally estimated at 5 %. This was considered
appropriate for this type of business.

3. Comparison

(23)

For the purpose of ensuring a fair comparison between
the normal value and the export price, due allowance in
the form of adjustments was made for differences
affecting price comparability in accordance with Article
2(10) of the basic Regulation. Appropriate adjustments
were granted in all cases where they were found to be
reasonable, accurate and supported by verified evidence.

(24) Adjustments to the normal value were claimed for
after-sales
rebates,
inland freight,
discounts,
expenses,
indirect
technical support, customer R&D,
selling expenses and differences in variable costs of
manufacturing.

credit,

(25)

for

the

technical

allowances

Regarding
support,
customer R&D and indirect selling expenses, it could not
be concluded, on the basis of the information made
available, that these factors affected price comparability,
in particular the claim that customers consistently paid
different prices due to these factors. In addition, it could
not be demonstrated that these expenses related exclu-
sively to sales of the product concerned in the domestic
market and that they did not benefit other products and/
or other markets. On the basis of the above the allow-
ances claimed had to be provisionally rejected, since they
did not meet the requirements of Article 2(10).

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(26)

The company also claimed an allowance for differences
in variable costs of manufacturing between domestic and
export products. It should be noted that the comparison
between domestic and export prices was made on the
basis of identical or comparable types, i.e. on the basis
of the same product characteristics. Consequently, this
allowance was found to be unjustified and is thus provi-
sionally rejected.

(27) Adjustments to the export price were made for ocean

freight, inland freight and credit.

4. Dumping margin

(28) According to Article 2(11) of the basic Regulation, the
weighted average normal value by type was compared
with the weighted average export price. The provisional
dumping margin expressed as a percentage of the cif
import price at the Community border is:

— AK Steel Corporation, Middletown, Ohio, United

States of America: 69,7 %.

For those producers in the United States of America
which neither replied to the Commission's questionnaire
nor otherwise made themselves known, a ‘residual’
dumping margin was determined in accordance with
Article 18 of the basic Regulation, on the basis of the
facts available.

In this case, since one company deliberately refrained
from cooperating,
the residual dumping margin was
determined on the basis of the highest dumped export
sales to the Community made in representative quanti-
ties. This approach was considered necessary in order to
avoid giving a bonus for non-cooperation. On this basis,
the residual provisional dumping margin, expressed as a
percentage of the cif import price at the Community
border, is 128,7 %.

C. INJURY

1. Introduction

For the purpose of establishing whether or not
the
Community industry had suffered injury and for deter-
mining consumption and the various economic indica-
tors relating to the situation of the Community industry,
it was examined whether, and to what extent, the subse-
quent use of the Community industry's production of
the product concerned had to be taken into account in
the analysis.

(29)

(30)

(31)

(32)

concerned for

further processing
the product
according to the needs of the first independent customer
whilst not transforming it into a different product alto-
gether (‘service centres’).

its

(33)

(34)

(35)

In this context, sales of the product concerned for use as
raw material to manufacture other products for compa-
nies in the same group shall be considered as ‘captive
use’, in so far as at least any of the following two condi-
tions occur: (i) sales are not made at market prices or (ii)
the customer within the same group of companies does
not have a free choice of supplier. On the other hand,
sales to unrelated customers are provisionally considered
to form the ‘free market’. In the course of the investiga-
tion it was provisionally found that sales to related enti-
ties which purchase the product concerned as raw mate-
for manufacturing a different product had to be
rial
considered as captive sales; indeed although sales may be
made at arms'
it was found that
pursuant to the commercial policy of the companies,
these related entities did not have a free choice of
supplier.

length conditions,

This distinction is relevant for the injury analysis, as
products destined for captive use were found to be only
indirectly affected by imports, as sales to captive custo-
mers are not exposed to direct competition with the
USA imports. By contrast, in the case of the free market,
sales were found to be in direct competition with
imports of the product concerned.

In order to provide as complete a picture as possible of
the situation of
the Community industry, data were
obtained and analysed, to the extent possible, for the
captive and free market taken together, and it was subse-
quently determined whether products were destined for
captive use or for the free market. Indeed, production,
capacity, capacity utilisation rates,
investments, prices,
profitability, cash flow, return on capital employed,
ability to raise capital, stocks, employment, productivity,
wages and magnitude of
the dumping margin were
analysed according to the complete activity regarding
the product concerned. On the basis of the investigation,
it was provisionally found that
the abovementioned
economic indicators could best be analysed by reference
to both the free and captive markets, as in the present
proceeding, the evolution of said indicators will not be
affected by the fact that sales are addressed to either the
free or the captive market.

Indeed, the product concerned is sold by the Community
industry to both (a) unrelated entities and (b) to entities
in the same group of companies (‘related entities’). As
concerns related entities, there are two different cate-
gories: (i) entities which purchase the product concerned
and use it as raw material for manufacturing a different
product (mainly tubes), and (ii) entities which purchase

(36) However, as regards the other injury indicators relating
to the Community industry (i.e. sales, market shares and
consumption) it was provisionally found that a mean-
ingful analysis was possible only in respect of the situa-
tion on the free market, as these indicators can only be
analysed in a meaningful way in a competitive environ-
ment.

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2. Definition of the Community industry

(37) Of the six European Community producers of the product concerned, the following three have

supported the complaint:

— Ugine, SA, France (UGINE),

— ThyssenKrupp Acciai Terni, SpA, Italy (TKAST),

— ThyssenKrupp Nirosta GmbH, Germany (TKN).

(38) As these three complainant cooperating Community producers represented 85 % of the Community
production of the product concerned, they constitute the Community industry within the meaning
of Articles 4(1) and 5(4) of the basic Regulation.

3. Community consumption

(39)

Community consumption was established by adding together the volumes of sales on the free
Community market of the Community industry, the sales volume of the remaining producers on the
Community market, as contained in the responses to the questionnaires supplied by said producers
and the volume of imports. The volume of imports was determined on the basis of Eurostat figures
corresponding to the relevant CN codes in the present proceeding. Taking into account that these
CN codes also include products other than the one concerned, in certain instances an apportionment
of the import data on the basis of criteria set out in the complaint was made.

(40) Apart from the companies which constitute the Community industry and the other Community
producers, the most significant players in the EU market for the product concerned are USA and
Japanese companies. Imports from Japan represented 3 % of the free market during the IP.

(41) On this basis, Community consumption has increased from 157 099 tonnes in 1999 to 182 679

tonnes in the IP, i.e. an increase of 16 %.

4. Imports from the country concerned

Volume and market share (1)

(42)

Imports of the product concerned originating in the USA significantly increased in volume by 95 %
throughout the period concerned. Sharp increases in imports in 2000 and 2001 were registered
(85 % for 2000 and 43 % for 2001). In the IP imports decreased by 14 % but still represented more
than the double of the 1999 volume. As a result, the share of the free market increased to 12-14 %
over the same period.

Table 1

1999

2000

2001

IP

Market Share USA Imports

4 to 6 %

9 to 11 %

15 to 17 %

12 to 14 %

Index

Prices

100

154

251

195

(43)

The weighted average price of imports originating in the USA increased by 19 % between 1999 and
the IP.

Undercutting

(44)

The Commission examined whether the cooperating exporting producer in the country concerned
undercut the prices of the Community industry during the IP.

(1) For reasons of confidentiality ranges are given.

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(45)

The comparison between Community industry prices and export prices was made on the basis of
sales transactions to the same clients at the same level of trade, i.e. Community industry delivered
prices were compared with prices made by importers, related to the USA exporting producer, as
indicated above in recital 22, to the first independent customer in the Community, including any
custom duties paid, on the basis of the matching product types. This approach was considered justi-
fied because of the particular characteristics of the market for this type of product, in particular the
fact that customers may easily shift from one supplier to another, the market is very transparent
and prices may move downwards quickly. As a consequence, where prices are being undercut by
the imports, this would normally only be identifiable for a very short time, since the prices of the
Community industry would have to follow the trend in order not to lose a customer. It therefore
seems appropriate to focus on the areas where direct competition took place. The only way to
achieve this is to focus on clients that buy from both the USA company and the Community
industry, so that price offers can be directly compared. In this sense, as developed below, it is highly
illustrative that during the period considered, certain users (1) increased their purchases from the sole
cooperating USA company considerably and reduced their purchases from the Community industry
to a negligible level.

(46)

Following this approach, it has been possible to make a price comparison based on 8 % of the
export volume by the USA company, taking into account the European and AISI standardised grade
designation, the thickness, the width, the edges and the finishing of the product concerned.

(47)

The undercutting margin provisionally found on this basis, and expressed as a percentage of the
Community industry's prices, amounts to 13,2 %.

5. Situation of the Community industry

Effects of past dumping or subsidisation

(48) No anti-dumping or countervailing duties were imposed on the product concerned during the

period under consideration. Therefore, this indicator is not relevant in the present case.

Production

(49)

Production for the total market (i.e. the free market and the captive market) increased from 188 633
tonnes in 1999 to 219 282 tonnes in the IP, i.e. by 16 %, with a dip in the year 2001.

Table 2

1999

2000

2001

IP

188 633

218 369

194 304

219 282

100

116

103

116

Production

Index

Capacity and capacity utilisation rates

(50)

Two of the Community producers used the same production lines for manufacturing the product
concerned and for the production of several other stainless steel products. One of these companies
is in the process of building new production facilities. The third company, which used one line of
production almost exclusively for the product concerned, has registered an increase in its production
capacity from an index of 100 during 1999 to 141 during the IP. The capacity utilisation rate for
this producer fell from around 75 % in 1999 to around 50 % in the IP. Whilst, on the basis of the
information available for the two producers, the capacity could not be allocated clearly to the
product concerned, the information contained no evidence which could invalidate the conclusion
that capacity utilisation had fallen.

(1) During the IP these represented 13 % of total consumption and 47 % of exports by the sole cooperating USA

company.

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Investments

(51)

The development of production capacity is mirrored by the development of investments. On this
basis, overall investments increased from EUR 55 million to EUR 125 million in 2001 and reached
EUR 79 million in the IP. Overall, they increased by 43 % throughout the period considered. Invest-
ments concerned mainly fixed assets such as new lines of production and a new mill, all aimed at
increasing production efficiency.

Sales and market share

(52)

Between 1999 and the IP the Community industry increased its sales to the free market in the
Community from 110 115 to 116 768 tonnes, or by 6 %. This increase in percentage is, however,
well below that of the increase in total consumption in the Community. Sales during the IP were
below the 2000 level. While sales in the free market increased by only 6 %, sales in the captive
market increased by 15 %. As captive customers have no choice of supplier, this increase appears to
mirror the potential increase in the free market in the absence of dumping.

Table 3

Sales free market

Sales on Community market (tonnes)

110 115

129 895

105 364

116 768

1999

2000

2001

IP

Index

100

118

96

106

Table 4

Captive sales

1999

2000

2001

IP

Sales on Community market (tonnes)

60 647

69 555

63 547

69 630

Index

100

115

105

115

(53)

The Community industry's share of the free market declined by six percentage points over the
period considered, from 70 % to 64 %, which shows that the Community industry could not benefit
fully from the positive development of the market. The loss of market shares corresponds to the
increase in market shares of the imports originating in the country concerned (see recital 42).

Table 5

1999

70 %

2000

69 %

2001

64 %

IP

64 %

Market share Community industry

Prices

(54)

The Community industry's average sales price to the total market (the free and the captive market)
increased by 12 % during the period concerned. While prices increased by 5 % in 2000 and 8 % in
2001, they remained stable and even decreased slightly between 2001 and the IP. Prices to the free
market and to the captive market were at the same level (see above, recital 33).

Profitability

(55)

The weighted average profitability of the Community industry increased from 4,4 % in 1999 to
7,5 % in the IP.

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(56) While the development of profitability looks at first sight to be positive, a closer examination reveals
that in fact profitability levels are indeed unsatisfactory. Attention must be paid to the peculiarities
of the product concerned. The product concerned belongs to a market where profits are usually
substantially higher than those obtained in the general stainless steel industry. The normally higher
levels of profitability for the product concerned are the result of the following.

— The market for which the product concerned is destined (mainly the automotive exhaust systems
market) is characterised by a largely stable demand and is shielded from the usual fluctuations of
the economic cycle. Indeed, the product concerned contains at maximum a very low addition of
nickel, which makes it cheaper than other stainless steel grades containing higher additions of
said alloy element. The low cost of the product concerned, as compared to other stainless steel
grades, makes the former an especially suitable substitution product during downwards periods
in the economic cycle. As the total automobile production in the European Union has stagnated
during the period considered (from 16 978 400 units produced in 1999 to 16 943 700 units
produced in 2002), consumption of the product concerned has increased by 16 %, as indicated
in recital 41. This arguably indicates that users of the product concerned, and their subsequent
customers, have increased their purchases of the product concerned, hence decreasing the
purchases of other more expensive stainless steel grades. This conclusion was confirmed by the
Community industry companies in the course of the investigation.

— As already mentioned, contrary to most other stainless steel products, the product concerned
contains at maximum a very low addition of nickel, a volatile cost element that fluctuates
substantially, potentially leading to lower profit margins.

(57)

The different pattern of profitability mentioned above is borne out by the current divergent trends
in profitability reported by the Community industry companies for general stainless steel production
on the one hand and for the product concerned on the other (see table 6 below).

Table 6

Average pre-tax profit margin on turnover
— total stainless steel production

1999

0,8 %

2000

5,6 %

2001

IP

- 2,1 %

3,4 %

Pre-tax profit margin on turnover (product
concerned)

4,4 %

3,2 %

6,4 %

7,5 %

(58)

The market for the product concerned is therefore characterised by much more robust profit and
price levels.

Cash flow, return on capital employed and ability to raise capital

(59)

The information on cash flow and return on investments was provided in respect of the total
production of the Community industry companies, as two of them were unable to allocate this data
to the product concerned.

(60) On this basis, aggregated net cash flow from operating activities has increased from minus

EUR 22 357 710 in 1999 to EUR 188 109 683 in the IP.

Cash flow

Index

Table 7

1999

2000

2001

IP

- 22 357 710

106 262 747

157 262 838

188 109 683

- 100

475

703

841

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(61)

This development was in line with the cash flow related to the product concerned that could be
isolated for one company. However, it is not possible to arrive at a meaningful conclusion on the
cash flow generated by the product concerned only, as two of the companies also use their produc-
tion lines for the manufacturing of a variety of other stainless steel products and the depreciation
cannot be allocated to each individual product. Average return on capital employed for the three
companies has increased from 3,6 % in 1999 to 6,9 % in the IP.

Return on capital employed

Table 8

1999

3,6 %

2000

20,5 %

2001

1,6 %

IP

6,9 %

(62)

Finally, with regards to the ability to raise capital, it should be noted that the Community industry
companies have been shown to rely on intra-group financing as their main source of debt finance,
which suggests that the possibility of raising capital is not directly linked with the yearly perfor-
mance of the companies and the resulting solvency situation. Therefore, the evolution of this indi-
cator is not relevant for the purposes of the injury analysis. With regard to equity as a source of
capitalisation for the company, it must be stated that none of the three companies is quoted on a
stock exchange or any other kind of secondary market.

Stocks

(63)

The evolution of stocks is not a meaningful injury indicator in the present proceeding. In fact,
Community industry companies have declared that they only manufacture the product concerned to
order, and thus do not maintain stocks, save for delivery or logistical reasons, and even then only in
negligible quantities. Therefore, any evolution in stocks is only for logistical reasons, rather than due
to market deterioration causes.

Employment and wages

(64)

Employment in the Community industry decreased by 12 % during the period considered. Total
wages increased by 5 % during the period concerned.

Productivity

(65)

Productivity for the total market has increased by 31 % during the period considered. It increased by
17 % in 2000, remained practically stable in 2001 and increased again by 14 % in the IP, mirroring
the substantial investment efforts made by the Community industry (see recital 49).

Growth

(66) Overall, it has to be noted that the Community industry's market shares in the free market fell by
6 %, which shows that its growth lagged significantly behind the growth of the overall market
(which grew by 16 %).

Magnitude of the dumping margin

(67) As concerns the impact on the Community industry of the magnitude of the actual margin of
dumping, given the volume and the prices of the imports from the country concerned, this impact
cannot be considered negligible.

6. Conclusion on injury

(68)

Imports from the USA have increased considerably, both in absolute terms and in terms of market
share. Indeed, during the period considered, they gained between six and eight percentage points in
market share. Moreover, these imports had a depressing effect on prices which is evident, inter alia,
from the significant price undercutting found in areas where both the USA exporter and the
Community industry competed for the same customers.

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(69) Whilst many of these economic indicators for injury show a positive trend (i.e. prices, profitability,
sales, investment, cash flow, return on investment, capacity, productivity), a more in-depth analysis
nevertheless points to a situation of material injury. First of all, the Community industry's position
in the market was significantly weakened, which is demonstrated by a substantial loss of market
share. Moreover, and as outlined above, the prices of the Community industry decreased between
2001 and the IP which in turn resulted in lower levels of profitability than found in 1997 in the
absence of dumping, despite substantial improvements in productivity which were achieved by a
reduction in staffing levels and by investments. Furthermore, the substantial dumping margin of
69,7 % shows that in order to eliminate the dumping, the exporting producer would have to
increase its export price by 69,7 %, which would result in a significant decrease in its market share.
It is reasonable to conclude that the Community industry would be able to fill in most, if not all, of
the market share left by the exporting producer. Finally, it should be pointed out that prices to the
captive market are likewise affected by dumped imports. Indeed the investigation has shown that
prices to captive customers are by contract fixed to reflect market conditions. Being part of the same
in order not to jeopardise overall group
group as the Community industry,
competitiveness, the Community industry would charge prices similar to those it charged to inde-
pendent customers.

it was found that,

(70)

Therefore, it is provisionally concluded that the Community industry has suffered material injury.

D. CAUSATION

1. Introduction

(71)

In accordance with Article 3(6) and (7) of the basic Regulation, the Commission has examined
whether the dumped imports of the product concerned originating in the country concerned have
caused injury to the Community industry to a degree that enables it to be classified as material.
Known factors other than the dumped 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 dumped imports.

2. Effect of the dumped imports

(72)

(73)

Imports from the USA have increased considerably during the period concerned, by 127 % in terms
of volume, and by between six and eight percentage points in terms of market share. Prices of
imports originating in the USA considerably undercut Community industry prices (see above, recital
44 and following) by 13,2 %.

The effects of dumped imports can also be illustrated by the decision of some users, representing
13 % of total consumption during the IP, to switch from the Community industry and purchase
from USA producers. Whilst these consumers used to purchase only marginal quantities from USA
producers at the beginning of the period considered, they now purchase up to 47 % of the exports
to the Community of the sole cooperating USA producer. This underlines the fact that over the
period considered, the USA producer increased its market share at the expense of the Community
industry.

(74) Overall, between 1999 and the IP, the Community industry's loss of market share of six percentage
points corresponds to the increase in market share of USA imports. In particular, in 2001, sales by
the Community industry decreased by five percentage points in terms of market share when
compared with the previous year, whereas at the same time imports from the USA increased by
between six and seven percentage points. Conversely, sales by the Community industry to captive
customers have remained stable since 2000.

(75)

The loss of market shares and insufficient price levels also coincided with the injurious situation of
the Community industry evidenced by the insufficient level of profitability and the unfavourable
development of wages and employment.

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3. Effect of other factors

Imports from other third countries

(76)

Import volumes from other third countries increased from 1 425 tonnes in 1999 to 5 893 tonnes
in the IP, their market share increasing from 0,9 % in 1999 to 3,2 % in the IP. Most of these imports
originated in Japan. However, on the basis of Eurostat data, the average prices of the product
concerned as imported from third countries were higher than the corresponding prices of imports
originating in the USA and European Union. Therefore, these imports cannot have caused any injury
to the Community industry.

Non-complainant Community producers

(77) Non-complainant Community producers of the product concerned held a market share of around
18 % during the IP. During the period concerned, their sales volume decreased by 4 % and their
market share fell by four percentage points. In addition, the average prices of non-complainant
producers are at the same level as the complainant producers' average prices. All this suggests that
they are in a similar situation to the Community industry, i.e. that they have suffered injury from
the dumped imports. Therefore, it cannot be concluded that other Community producers caused
material injury to the Community industry.

(78)

(79)

(80)

(81)

(82)

(83)

Quality and service advantages of the product concerned imported from the USA

The investigation showed that the product concerned imported from the USA had no substantial
quality or technical advantages.

In addition, as shown by the Community industry companies, the fact that the Community industry
does not hold stocks for the product concerned, as it manufactures the product concerned to order
within very short time, does not imply a slower delivery time, when compared with the USA
imports. Therefore, there are no indications that quality or service advantages could have caused
material injury.

4. Conclusion on causation

The coincidence in time, between the increase in USA export volumes and market shares and the
undercutting found on the one hand and the deterioration of the situation of the Community
industry on the other, leads to the provisional conclusion that the dumped imports originating in
the USA have caused the material injury suffered by the Community industry.

Furthermore, the insufficient development of the free market is not reflected in the captive market.
This has caused a subsequent stagnation of prices and a limitation of profitability ratios. Indeed, it is
in the free market, where the Community industry is in direct competition with imports of the
product concerned, that the injurious situation is evident. Indicators for the captive market, where
imports do not compete directly with the Community industry, show a positive trend.

The analysis of the purchases of two important users showed that during the period considered,
these companies have replaced their purchases from the Community industry with purchases from
the USA company.

It is also provisionally concluded that the non-complainant producers cannot have caused the
adverse evolution of the Community industry, as their responses to questions from the Commission
suggest that they have suffered injury from dumped imports. Finally, investigations showed that the
product concerned imported from the USA had no substantial quality or technical advantages
compared with the European product.

(84) No other factors that might explain such a deterioration in the situation of the Community industry

were found.

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(85)

Therefore, as the investigation by the Commission has properly distinguished and analysed all
known factors and provisionally found that the effects of none of them were such as to break the
causal link between dumping and injury, it is provisionally concluded that the dumped imports from
the country concerned caused the material injury suffered by the Community industry.

E. COMMUNITY INTEREST

1. Preliminary remark

(86)

(87)

In accordance with Article 21 of the basic Regulation, the Commission considered whether the
imposition of anti-dumping measures would be contrary to the interests of the Community as a
whole. The determination of the Community interest was based on an examination of all the various
interests involved, i.e. those of the Community industry, the importers and traders, and the users of
the product concerned.

In order to assess the likely impact of the imposition or non-imposition of measures, the Commis-
sion requested information from all interested parties which were either known to be concerned or
which made themselves known. On this basis, the Commission sent questionnaires to the Commu-
nity industry, three other Community producers, seven importers, 10 users and 16 suppliers of raw
materials. The three Community industry producers, three other Community producers, six related
importers and seven users replied.

(88) On this basis, it was examined whether, despite the conclusions on dumping, on the situation of the
Community industry and on causation, compelling reasons existed which would lead to the conclu-
sion that it was not in the Community interest to impose measures in this particular case.

2. Community industry

(89)

The Community industry has suffered material injury, as set out above in recital 68 and following.

(90)

The imposition of anti-dumping measures would allow the Community industry to reach the levels
of profitability which it would have been able to achieve in the absence of dumped imports, and to
take advantage of developments in the Community market.

(91) However, should no anti-dumping measures be imposed, it is likely that the negative trend of the
Community industry will continue: notably market shares would further decline and profitability
would remain below that attainable for the product concerned in the absence of dumped imports.

3. Users

(92) Users of the product concerned consist principally of producers of exhaust systems for the automo-
tive industry. They are located mainly in the United Kingdom, Italy, Germany, France, the Nether-
lands and Belgium. The cooperating users represented only 24 % of free market consumption in the
IP. Nevertheless, they accounted for 91 % of total imports from the USA during the IP. Thus, whilst
information from cooperating users was highly representative for the situation of users sourcing the
product from the USA,
it did not enable an accurate picture to be obtained in respect of the
remaining proportion of users which did not purchase the product from the USA to the same
extent. This analysis should therefore be seen in the light of this limitation.

(93) All cooperating users opposed the imposition of anti-dumping measures, by claiming that they
would incur losses and suggesting that they might be obliged to relocate their activities outside the
EU, in the event of anti-dumping duties being imposed.

(94)

The product concerned represents on average 15 % of the total cost of production of exhaust
systems. However, as stated in recital 42, imports from the USA during the IP represent a market
share of between 12 % and 14 %. Consequently, in a worst-case scenario, if importers passed on the
full amount of the duties in the form of a price increase, and taking into account the current market
share of the USA imports, the total cost of production of all exhaust systems users would increase
by about 0,4 %.

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(95)

In addition, the imposition of anti-dumping measures would not create a shortage of supply of the
product concerned to the users, as the purpose of said measures is not to stop imports of the
product concerned from the USA, but to re-establish fair trading conditions. In fact, as already
mentioned, the Community industry has increased its investments in plant and machinery related to
the product concerned by 43 %. One company in particular (the most representative one in terms of
sales volume) increased its production capacity by 41 % during the period considered. Furthermore,
even if USA producers decided to stop exporting the product concerned, Community producers are
the largest suppliers in the world for the product concerned and have historically generated enough
capacity to be able to cover any increase in demand.

4. Unrelated importers

(96) Questionnaires were sent to a number of allegedly unrelated importers. None of them replied. Given
the absence of cooperation, it is provisionally concluded that unrelated importers would not suffer
significant negative effects from the imposition of anti-dumping measures.

5. Competition and trade distorting effects

(97)

(98)

The US company submitted that the Community industry is highly concentrated and had a history
of anti-competitive conduct. However, the concentration level would not be modified as a conse-
quence of the imposition of anti-dumping measures. Furthermore, even if a company is holding a
strong position in the market, this does not automatically imply an abuse of it.

In addition, it must be underlined that through anti-dumping measures, it is intended to restore fair
trade conditions in the EU market, and not to exclude or limit the number of participants in the
market.

(99)

There are six Community producers of the product concerned in the Community:

— Ugine SA, France,

— Ugine & ALZ, Belgium, NV, Belgium,

— ThyssenKrupp Acciai Speciali Terni, SpA, Italy,

— ThyssenKrupp Nirosta GmbH, Germany,

— Acerinox SA, Spain,

— Avesta Polarit Oyj Abp, United Kingdom.

(100) Of the abovementioned companies, Ugine France, and Ugine ALZ Belgium, on the one hand, and
ThyssenKrupp Terni and ThyssenKrupp Nirosta, on the other hand, belong to the same group of
companies (Arcelor and Thyssen Krupp Steel, respectively).

(101) However, even assuming that there is no competition among companies integrated within the same
group, there is nevertheless a substantial degree of competition in the Community, as there are still
four suppliers of the product concerned who remain competitors.

(102) Even in the extreme case that the USA companies decided to stop exporting the product concerned
after the imposition of anti-dumping measures,
the level of competition among the different
Community producers would arguably still be sufficiently high as there would remain a considerable
number of sources of supply, and, more importantly, supplies from Japan could increase.

(103) Moreover, no evidence of any anti-competitive behaviour by Community industry companies was

submitted during the period considered.

6. Conclusion on Community interest

(104) Taking into account all of the above factors, it is provisionally concluded that there are no compel-

ling reasons not to impose anti-dumping measures.

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F. PROVISIONAL ANTI-DUMPING MEASURES

1. Injury elimination level

(105) The level of the provisional anti-dumping measures should be sufficient to eliminate the injury
caused to the Community industry by the dumped imports without exceeding the dumping margin
found. When calculating the amount of duty necessary to remove the effects of the injurious
dumping, it was considered that any measures should allow the Community industry to cover its
costs and obtain an overall profit before tax that could be reasonably achieved under normal condi-
tions of competition, i.e. in the absence of dumped imports.

(106) The investigation has shown that the stainless steel industry in the Community has achieved reason-
able levels of profitability due to the reduction in costs of production and the increase in produc-
tivity ratios during the last five years. In particular, the product concerned offers a profitability ratio
that is more stable and higher than the one normally found for the stainless steel sector, as explained
in recital 56.

(107)

It has been found that for periods where no dumped imports existed (i.e. 1997) a profit margin of
8,35 % for the product concerned was achieved by the Community industry. However, as described
in recital 51 above, after 1997 the Community industry made important investments in production
technology which have led to substantial cost reductions and a considerable increase in productivity
(+ 31 % over the period concerned).

(108) Due to the speciality of the product concerned and the market in which it is used, as stated in reci-
tals 56 and following, profits are usually higher than for other stainless steel products, which are
more subject to the economic cycle. In addition, as explained above under recital 69, it is reasonable
to conclude that, in the absence of dumping, the Community industry would have benefited from
increased sales and therefore increased output, further lowering its costs through economies of scale.

(109)

It has been found that for periods where no dumped imports existed (i.e. 1997) a profit margin of
8,35 % for the product concerned was achieved by the Community industry. However, after 1997
the Community industry carried out important investments, incorporating new production mills and
lines of production of high technology and achieved reductions in direct manufacturing costs and a
considerable increase in productivity as a result. As explained above in recital 65, the increase in
productivity amounted to 31 % over the period considered. Therefore, in the absence of dumping a
higher profit margin than the 8,35 % achieved in 1997 should be expected.

(110)

In view of the above, the Commission provisionally considers that a 9 % profit margin before tax
should be taken into account for the product concerned in view of the fact that in the absence of
dumping and before the substantial
investments the Community industry already managed to
achieve 8,35 %.

(111) The necessary price increase was then determined on the basis of a comparison, at the same level of
trade, of the weighted average import price, as established for the price undercutting calculations,
with the non-injurious price for the like product sold by the Community industry in the Community
market. As was the case for the undercutting calculation, the calculation of the injury margin was
made on the basis of comparable types sold to the same clients.

(112) The non-injurious price was obtained by adjusting the sales price of the Community industry to
reflect the abovementioned profit margin of 9 %. Any difference resulting from this comparison was
then expressed as a percentage of the total cif import value.

2. Provisional measures

(113)

In the light of the foregoing, it is considered that, in accordance with Article 7(2) of the basic Regu-
lation, a provisional anti-dumping duty should be imposed on imports of the product concerned
from the USA, at the level of the injury margin found, since it is lower than the dumping margin.

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(114) On the basis of the above, the provisional duty rates are as follows:

Company

AK Steel Corporation, Middletown, Ohio, USA

All other companies

Basis for ad duty
(%)

20,6

25,0

(115) The individual company anti-dumping duty rate specified in this Regulation was established on the
basis of findings of the present investigation. It therefore reflects the situation found during that
investigation with respect to this company. This duty rate (as opposed to the country-wide duty
applicable to ‘all other companies’) is thus applicable exclusively to imports of the product origi-
nating in the country concerned and produced by the company and thus by the specific legal entity
mentioned. Imported products produced by any other company not specifically mentioned in the
operative part of this Regulation with its name and address, including entities related to the one
specifically mentioned, cannot benefit from this rate and shall be subject to the duty rate applicable
to ‘all other companies’.

(116) Any claim requesting the application of this individual company anti-dumping duty rate (e.g.
following a change in the name of the entity or following the setting-up of new production or sales
entities) should be addressed to the Commission (1) forthwith with all relevant information, in parti-
cular any modification in the company's activities linked to production, domestic and export sales
associated with, for example, that name change or that change in the production and sales entities.
If appropriate, the Commission will, after consultation of the Advisory Committee, amend the Regu-
lation accordingly by updating the list of companies benefiting from individual duty rates.

G. FINAL PROVISION

(117)

In the interest of a sound administration, a period should be fixed within which the interested
parties which made themselves known within the time limit specified in the notice of initiation may
make their views known in writing and request a hearing. Furthermore, it should be stated that the
findings concerning the imposition of duties made for the purposes of this Regulation are provi-
sional and may have to be reconsidered for the purpose of any definitive measures,

HAS ADOPTED THIS REGULATION:

Article 1

1.
A provisional anti-dumping duty is hereby imposed on imports of certain flat rolled products of
stainless steel, not further worked than cold rolled, containing by weight less than 0,15 % of carbon,
10,5 % or more but not more than 18 % of chromium and less than 2,5 % of nickel, in the standardised
grades AISI 409/409L (EN 1.4512), AISI 441 (EN 1.4509) and AISI 439 (EN 1.4510), falling within CN
codes ex 7219 31 00 (TARIC code 7219 31 00 10), ex 7219 32 90 (TARIC code 7219 32 90 10),
7219 34 90 10),
(TARIC code
ex 7219 33 90
(TARIC code
ex 7219 35 90
7220 20 10 10),
(TARIC code
(TARIC code
ex 7220 20 39 (TARIC code 7220 20 39 10),
ex 7220 20 59 (TARIC code 7220 20 59 10) and
ex 7220 20 99 (TARIC code 7220 20 99 10), and originating in the United States of America.

7219 33 90 10),
7219 35 90 10),

ex 7219 34 90
ex 7220 20 10

(1) European Commission

Directorate-General Trade
J-79 05/16
Rue de la Loi/Wetstraat 200
B-1049 Brussels.

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The amount of the provisional anti-dumping duty, applicable to the product described in paragraph

2.
1 above, shall be as follows:

Manufacturer

Provisional anti-dumping duty

TARIC additional code

AK Steel Corporation
703 Curtis Street, Middletown, Ohio 45043
United States of America

All other companies

20,6 %

25,0 %

A470

A999

The release for free circulation in the Community of the product referred to in paragraph 1 shall be

3.
subject to the provision of a security, equivalent to the amount of the provisional duty.

Unless otherwise specified, the provisions of the Community Customs Code and its related legislation

4.
shall apply.

Article 2

1. Without prejudice to Article 20(1) of Regulation (EC) No 384/96, interested parties may request
disclosure of the essential facts and considerations on the basis of which this Regulation was adopted,
present their views in writing and request a hearing from the Commission within one month of the date of
the entry into force of this Regulation.

2.
Pursuant to Article 21(4) of Regulation (EC) No 384/96 the parties concerned may request a hearing
concerning the analyses of the Community interest and may comment on the application of this Regula-
tion within one month of the date of the entry in force of this Regulation.

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

Article 1 of this Regulation shall apply for a period of six months.

Article 3

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

Done at Brussels, 15 September 2003.

For the Commission

Pascal LAMY

Member of the Commission