Council Regulation (EC) No 436/2004 of 8 March 2004 amending Regulation (EC) No 1784/2000 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain malleable cast iron tube or pipe fittings originating in Brazil, the Czech Republic, Japan, the People's Republic of China, the Republic of Korea and Thailand
Date: 2004-03-08
Institutions: Council of the European Union
Subjects: anti-dumping duty, import, originating product, piping, third country

11.3.2004

EN

Official Journal of the European Union

L 72/15

COUNCIL REGULATION (EC) No 436/2004

of 8 March 2004

amending Regulation (EC) No 1784/2000 imposing a definitive anti-dumping duty and collecting
definitively the provisional duty imposed on imports of certain malleable cast iron tube or pipe
fittings originating in Brazil, the Czech Republic, Japan, the People's Republic of China, the
Republic of Korea and Thailand

THE COUNCIL OF THE EUROPEAN UNION,

(3)

Having regard to the Treaty establishing the European Com-
munity, and in particular Article 133 thereof,

The Reports requested the European Communities to
bring the measure into conformity with the WTO Agree-
ment on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (‘ADA’) as regards
the following aspects:

Having regard to Council Regulation (EC) No 1515/2001 of 23
July 2001, on the measures that may be taken by the Com-
munity following a report adopted by the WTO Dispute Settle-
ment
anti-subsidy
matters (1),

anti-dumping

concerning

Body

and

(i) Article 2.4.2 of

the ADA:
dumping margins in its dumping determination.

in ‘zeroing’ negative

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 (‘the Basic
Regulation’) (2),

Having regard to the proposal made by the Commission after
consultation of the Advisory Committee,

Whereas:

(1)

A. EXISTING MEASURES

The Council, by Regulation (EC) No 1784/2000 of 11
August 2000 imposed a definitive anti-dumping duty on
imports of certain malleable cast
iron tube or pipe
fittings originating in Brazil, the Czech Republic, Japan,
the People's Republic of China, the Republic of Korea
and Thailand (the ‘Definitive Regulation’) (3). The Defini-
tive Regulation was preceded by Commission Regulation
(EC) No 449/2000 of 28 February 2000 imposing a
provisional anti-dumping duty on imports of certain
malleable cast iron tube or pipe fittings originating in
Brazil, the Czech Republic, Japan, the People's Republic
of China,
the Republic of Korea and Thailand and
accepting an undertaking offered by an exporting
producer in the Czech Republic (the ‘Provisional Regu-
lation’) (4).

B. REPORTS ADOPTED BY THE DISPUTE SETTLEMENT

BODY OF THE WTO

(2)

On 18 August 2003,
the Dispute Settlement Body
(‘DSB’) of the World Trade Organisation (‘WTO’) adopted
an Appellate Body report (‘ABR’) and a Panel report
(‘PR’) as modified by the ABR on the case ‘European
Communities (EC) — anti-dumping duties on malleable
cast iron tube or pipe fittings from Brazil’ (5) (the ABR
and PR are hereinafter referred to as the ‘Reports’).

(1) OJ L 201, 26.7.2001, p. 10.
(2) OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation

(EC) No 1972/2002 (OJ L 305, 7.11.2002, p. 1).

(3) OJ L 208, 18.8.2000, p. 8.
(4) OJ L 55, 29.2.2000, p. 3.
(5) Document WT/DS219/10 of 27 August 2003.

(4)

(5)

(ii) Articles 12.2 and 12.2.2 of the ADA:

failure to
make directly discernible, from the published provi-
sional or definitive determinations, that the Euro-
pean Communities addressed, or explained the lack
of significance, of the following injury factors listed
in Article 3.4 of
the ADA: wages, productivity,
return on investments, cash flow, ability to raise
capital and magnitude of
the actual margin of
dumping.

(iii) Article 6.2 and 6.4 of the ADA: failure to disclose
to the interested parties during the anti-dumping
investigation the information on injury factors listed
above under point (ii).

The Commission reassessed the findings by taking into
account the recommendations set out in the Reports on
information which was collected in the
the basis of
investigation which took place in 1999/2000.
original
Unless otherwise stated,
the assessment made in the
Definitive Regulation remains valid. The reassessment
shows that injurious dumping still exists although at a
slightly lower level.

C. PROCEDURE

i.e.

in this proceeding,

Following the adoption of the ABR by the DSB the inter-
ested parties
the Brazilian
exporting producer and the Community industry (‘CI’),
received disclosure of the facts and considerations on the
dumping calculation and the injury factors mentioned
under recital 3(ii). All parties were informed of the essen-
tial facts and considerations on the basis of which it was
intended to amend and confirm the Definitive Regu-
lation. They were also granted a period within which to
make representations subsequent to this disclosure. All
interested parties were granted an opportunity to be
heard by the Commission. However, no such hearing
was requested by any interested party.

(6)

(7)

(8)

L 72/16

EN

Official Journal of the European Union

11.3.2004

All comments submitted by the interested parties were
considered and, where appropriate,
reflected in the
amended findings.

It is recalled that the investigation of dumping covered
the period from 1 April 1998 to 31 March 1999 (inves-
tigation period ‘IP’). The investigation relating to the
trends relevant in the context of the injury assessment
covered the period from 1 January 1995 up to the end
of the IP (i.e. 31 March 1999). This period will be
referred to as ‘the period considered’.

(14)

The revised dumping margin expressed as a percentage
of the cif import price at the Community frontier is:

Indústria de Fundição Tupy Ltda: 32 %.

(15)

The level of cooperation was high. Consequently, the
revised residual dumping margin is set at the same level
as for Indústria de Fundição Tupy Ltda, i.e. 32 %.

D. AMENDED AND CONFIRMED FINDINGS

(16)

1. PRODUCT

UNDER

CONSIDERATION
PRODUCT

AND

LIKE

The product concerned is threaded malleable cast iron
tube or pipe fittings which are joined by a screwing
joining system, falling within CN-code ex 7307 19 10
(TARIC code 7307 19 10 11 and 7307 19 10 19). The
Reports do not affect the findings set out in the Defini-
tive Regulation as regards the product under considera-
tion and like product.

2. DUMPING

2.1. Introduction

(9)

The following will detail the reassessed findings based on
the recommendations in the Reports concerning the
practice of
‘zeroing’ when establishing the weighted
average dumping margin.

(10) All other calculation methods applied are those used in
the original investigation. For further details, reference is
made to the Provisional and Definitive Regulation.

2.2. Brazil

2.3. Disclosure

The above revised findings on dumping were disclosed
to all interested parties subject to the present investiga-
tion which were granted the possibility to present their
views and comments and to be heard by the Commis-
sion.

(17) None of the parties concerned objected to the Commis-

sion findings on dumping.

3. DEFINITION OF THE COMMUNITY INDUSTRY

(18)

the CI,
The findings concerning the definition of
summarised in recitals 65 to 68 of the Definitive Regu-
lation remain unaffected by the recommendations and
conclusions set out in the Reports.

4. INJURY

4.1. Imports from the countries concerned and

price undercutting

(19)

The findings set out in recitals 69 to 94 of the Definitive
Regulation remain unaffected by the recommendations
in the Reports.

(11)

It is recalled that during the original investigation Indús-
tria de Fundição Tupy Ltda was
the only known
exporting producer of the product concerned in Brazil.

4.2. Situation of the Community industry

4.2.1. Preliminary remark

(12) As to the findings concerning normal value, the export
price and adjustments made in accordance with Article
2(10) of the Basic Regulation, no changes have been
necessary. For further details, reference is made to reci-
tals 20 to 31 and 35 to 49 of the above mentioned
Provisional and to recitals 24 to 27, 30, 31, 38 to 43,
46 to 48 and 51 to 54 of the Definitive Regulation.

(20)

(13) As in the Provisional and Definitive Regulations, the
weighted average normal values of each type of the
product concerned exported to the European Com-
munity were compared to the weighted average export
price of each corresponding type of
the product
concerned. In compliance with the recommendations of
the Report, no ‘zeroing’ was applied in calculating the
overall dumping margin.

This part sets out the reassessed findings based on the
recommendations in the Reports concerning the injury
analysis. The Reports conclude that
the Community
acted inconsistently with Articles 12.2 and 12.2.2 of the
ADA by failing to make directly discernible from the
published provisional or definitive determinations that
the European Community addressed or explained the
lack of significance of the following injury factors listed
in Article 3.4 of the ADA: wages, productivity, return
on investments, cash flow, ability to raise capital and
magnitude of the actual margin of dumping. It is recalled
that these injury factors have been examined during the
original investigation. However, as they were at the time
considered not to be significant, and were therefore not
included in the analysis made available to the public,
they were only laid down in an internal note to the file.

11.3.2004

EN

Official Journal of the European Union

L 72/17

4.2.2. Situation of the Community industry as set out in the Provisional and Definitive Regulations

(21)

It is recalled that in recitals 160 and 161 of the Provisional Regulation it was concluded that the CI
suffered material injury within the meaning of Article 4(1) of the Basic Regulation. It was found that
the situation of the CI deteriorated during the IP, in particular because of a decline in production,
production capacity, sales and market share. Moreover, the CI suffered a significant loss of employ-
ment and a decline in investments, as well as an increase of stocks. As to the capacity utilisation, its
increase is explained by the reduced production capacity.

4.2.3. Re-examination of the injury findings in the light of the recommendations and ruling of the DSB

(22)

In addition to the injury factors as set out in recitals 150 to 159 of the Provisional Regulation, i.e.
production, production capacity, capacity utilisation, sales volume, market share, sales prices, stocks,
profitability, employment and investments,
the following injury factors were analysed, and,
following the Reports recommendations, are now set out in detail below.

4.2.3.1. Wa g e s

(23) Wages, expressed as the total annual labour cost for the production of the product concerned devel-

oped as follows:

Table 1

Wages

Total annual labour costs
(EUR '000)

1995

1996

1997

1998

IP

44 730

48 479

48 375

46 995

47 132

Index

100

108

108

105

105

Source: Annual accounts of the CI.

(24) Wages increased by around 5 % between 1995 and the IP. When taking 1996 as a starting point,

the wages decreased by around 3 %.

(25)

This factor follows roughly the general development of wages in the sector and the movements in
employment observed for the CI. Between 1996 and the IP this factor declined by 3 %, which was
in line with the developments of employment mentioned at recital (158) of the Provisional Regu-
lation (decrease of 6 % between 1995 and IP, slight decline of around 1 % between 1996 and IP).

4.2.3.2. Pr odu ct i vi ty

(26)

Productivity, measured as the output of persons employed, developed as follows:

Table 2

Productivity

Production in tonnes per employee

21,58

19,47

19,76

20,84

20,82

1995

1996

1997

1998

IP

Index

100

90

92

97

96

Source: Verified questionnaire replies of the CI.

L 72/18

EN

Official Journal of the European Union

11.3.2004

(27)

Productivity fluctuated over the period examined but an overall fall of 4 % was experienced over the
period 1995 to the IP. Productivity increased by around 7 % between 1996 and the IP. This factor is
in line with employment and production figures which were already mentioned at recitals 150 and
158 of the Provisional Regulation.

4.2.3.3. R e tu r n on i nv e stme nts (‘R O I’)

(28)

ROI, which is calculated by dividing the CI financial result (profit or loss) by the amount of invest-
ments, developed as follows:

Table 3

ROI

ROI

– 6,55 %

3,72 %

– 2,78 %

– 0,70 %

– 2,72 %

1995

1996

1997

1998

IP

Source: Verified questionnaire replies of the CI and their annual accounts.

(29)

ROI developed from -6,55 % to -2,72 % between 1995 and the IP. However it is recalled, that, as
explained at recital 157 of the Provisional Regulation, the financial result of the CI was negatively
affected, in an exceptional way, by costs associated with a plant closure in 1995. Moreover, that
year was also marked by restructuring efforts of two producers included in the definition of the CI,
in particular with the aim of production rationalisation and of investments required to implement
the Community's environmental legislation. This also had a negative impact on the financial result
of the CI. On this basis, it is considered that the year 1995 was unrepresentative of the situation of
the CI and cannot be considered as a meaningful basis for analysing trends on ROI.

(30)

This remark also applies to other injury factors which include the financial results of the CI, e.g.
cash flow as explained at recital 33 below.

(31) When comparing the year 1996 to the IP, ROI decreased by 6,4 percentage points, from 3,72 % to
-2,72 %. The negative development of ROI was broadly in line with the negative development of
profitability, which decreased by 2,3 percentage points during the same period.

4.2.3.4. Ca sh flow

(32)

Cash flow developed as follows:

Table 4

Cash flow

Cash flow
(EUR '000)

Index

Index

Source: Annual Accounts of the CI.

1995

1996

1997

1998

IP

10 522

12 799

19 339

12 236

12 205

100

122

100

184

151

116

96

116

96

11.3.2004

EN

Official Journal of the European Union

L 72/19

(33)

It should be noted that the turnover of the product concerned has always represented over 50 % of
the total turnover of all the activities of the CI, as reported in the audited accounts. The above table
shows the cash flow for the product concerned calculated on the basis of a turnover allocation for
the years from 1995 to 1998. Given that audited accounts were not available for the IP, cash flow
was calculated on the basis of the total turnover and the turnover for the product concerned verified
during the investigation. As explained in recital (29), the financial result achieved by the CI in 1995
was negatively affected in an exceptional way by costs associated with a plant closure and restruc-
turing and therefore that year cannot be considered as a meaningful representative basis for
analysing trends on cash flow. Between 1995 and 1998 cash flow increased by around 16 % and
remained stable during the IP. When taking 1996 as a starting point cash flow decreased by around
4 % up to the end of the IP. It was found, that the negative development of cash flow was broadly
in line with the negative development of profitability.

4.2.3.5. A bi li t y to r a i se ca p i ta l

(34) During the original

investigation there was no claim from the CI (nor any indication), that it
encountered problems to raise the capital needed for its activity. However, it is clear that the signifi-
cant deterioration in the financial situation of the CI (see in particular profitability, cash flow and
ROI), may negatively affect the ability to raise capital in the near future.

4.2.3.6. M a g ni tu de of t h e a c tu a l ma r g i n of du mp i ng

(35) As concerns the impact on the CI of the magnitude of the actual margin of dumping, given the
volume and the prices of the imports from the countries concerned, this impact cannot be consid-
ered negligible. This finding remains valid notwithstanding the reduction of the dumping margin for
one of the exporters as explained in recital 14.

(36)

(37)

The Brazilian exporting producer objected to the Commission's finding that the impact of the
magnitude of the actual dumping margin on the Community industry was not negligible. According
to the Brazilian producer, the difference of almost 50 % between the dumping margin and the
underselling margin was evidence of a very large difference in the cost of production of the Com-
munity producers on the one hand and the Brazilian exporter on the other hand. Therefore, it was
claimed that even if dumping were totally eliminated the imports from Brazil would still substan-
tially undercut the non-injurious price of the Community industry. The Brazilian exporting producer
argued finally that in the context of a highly sensitive price market, the impact of the actual margin
of dumping would thus clearly be negligible, contrary to the Commission's findings.

In this context,

It has to be recalled that according to Article 3(5) of the Basic Regulation, the factor ‘magnitude of
the actual margin of dumping’ is examined in the framework of the analysis of the state of the
domestic industry.
it is the Community's consistent practice to set the actual
dumping margin in relation to the state of the domestic industry taking into account the volume
and the prices of the imports from the country concerned. An analysis as the one proposed by the
Brazilian exporter, i.e. a comparison of the dumping margin with the underselling margin leading to
conclusions with respect to a difference in cost of production between exporting producers and the
Community industry would by far exceed the framework set by Article 3(5) of the Basic Regulation
and would bring in an element of causal link into such an analysis. This is clearly not required by
Article 3(5) of the Basic Regulation and would wipe out the distinction between the analysis of the
state of the Community industry on the one hand and the causal link between dumping and injury
on the other hand, which is in any event considered separately. In this context it should be also
noted that the underselling margin is calculated for the purpose of applying the ‘lesser duty rule’
according to which the anti-dumping duty is set at the level of either the dumping or the injury
margin whichever is lower. It has to be underlined that the application of the ‘lesser duty rule’ and
thus the calculation of the underselling margin is not a WTO obligation. Even assuming — for the
sake of argument and without recognising the substance of the Brazilian exporter's claim — that a

L 72/20

EN

Official Journal of the European Union

11.3.2004

comparison between the cost of production of the exporting producer and Community producers
were warranted in this context, such an analysis could only be based on a comparison of the
dumping margin with the undercutting (not the underselling) margin. The levels of both margins
are however comparable. Therefore, without dumping, the price difference between imports from
Brazil and the sales of the Community industry would be minimal.

(38)

Therefore, the argument had to be rejected.

4.2.4. Comments of the exporting producer on certain injury factors

(39)

(40)

(41)

The Brazilian exporting producer claimed that for certain injury factors (profitability, ROI, cash
flow, ability to raise capital) the year 1995 had not been considered for the trend's analysis. It was
claimed that 1995 was disregarded for those factors which otherwise would have demonstrated a
positive development. According to the Brazilian exporting producer this constitutes an inconsistent
and discriminatory approach and does not fulfil the requirement of an objective and unbiased exam-
ination contrary to Articles 3.1 and 17.6 (i) of the ADA.

Firstly it should be noted, that with regard to profitability, no new determination has been made for
the purpose of implementing the Reports. It has to be recalled that in the framework of the dispute
settlement proceedings, Brazil put forward exactly the same arguments as the ones referred to above
concerning profitability. The arguments were turned down by the Panel and no recommendation at
all was made with regard to this factor. The factor ‘profitability’ has therefore not been reassessed.

Secondly, it should be noted that — in line with the original investigation — the trends with regard
to the injury indicators which had been analysed but which had not been made public during the
original investigation, have been analysed as from 1995. This also relates to the factor ‘ability to
raise capital’. In particular for two injury factors (ROI and cash flow) it has been considered that the
year 1995 was an exceptional year and could thus not be considered meaningful for the reasons set
out in detail at recitals 29 and 33. In fact it is recognised by several Panel and AB reports that the
assessment of the injury factors is not limited to a rigid comparison of the beginning and the end of
the years of the period considered. It should also be noted that the Brazilian exporting producer has
not contested the substance of the reasoning set out in recital 29.

(42) As to the alleged inconsistency of the approach, the following has to be noted. It is precisely for
reasons of consistency with the analysis of the original investigation, that it is necessary — for the
purpose of implementing the Reports — to analyse cash flow and ROI, which are directly derived
from profitability, on the same basis as profitability in the original investigation for which 1995
could reasonably be excluded from the trend analysis according to the conclusions of the Reports.
The approach chosen by the EC authorities was therefore consistent and objective.

(43)

Therefore, the arguments had to be rejected.

4.2.5. Conclusion on injury

(44)

Based on the above analysis, it is concluded that the findings in respect of wages, productivity,
return on investments and cash flow were in line with certain other factors analysed and made
public during the original investigation. As regards the ability to raise capital, there was no claim
that the CI encountered any difficulty to raise the capital needed for its activity. This factor,
however, should be seen in the light of the continuous degradation of the financial situation of the
CI. As regards the margin of dumping, it is concluded that, given the volume and the prices of the
imports from the countries concerned, its impact cannot be considered negligible.

(45)

Based on the above, it is confirmed that the Community industry suffered material injury during the
period considered.

11.3.2004

EN

Official Journal of the European Union

L 72/21

5. CAUSATION

(46)

(47)

The contents and conclusions reached in recitals 101 to 114 of the Definitive Regulation remain
unaffected by the Reports and the re-examined injury analysis.

The Brazilian exporter contended that the injury of the Community industry was not caused by
dumped imports, but by the lack of productivity of the Community industry as evidenced by the
almost 50 % difference between the dumping margin and the underselling margin and by the fact
that the Community industry had undergone restructuring efforts in 1995 with the aim of rationa-
lising production. The similarity of this argument with the one made with regard to the magnitude
of the dumping margin referred to above at recital 36 is evident. The Brazilian exporter claimed in
addition that while the Commission had analysed the difference in cost of production,
it had
however limited this analysis to differences regarding energy consumption linked to the difference
of quality and production processes between black heart and white heart fittings.

(48)

It has to be recalled that in the framework of the dispute settlement proceedings, Brazil put forward
exactly the same arguments as the ones referred to above. The arguments were turned down by the
Panel and the Appellate Body and no recommendation at all was made with regard to the causal
link analysis.

(49)

Therefore, the arguments mentioned in recital 47 had to be rejected.

6. COMMUNITY INTEREST

(50)

The contents and conclusions reached in recitals 178 to 186 of the Provisional Regulation and 115
to 117 of the Definitive Regulation remain unaffected by the Reports and the re-examined injury
analysis.

7. AMENDED MEASURES

(51) As shown above, a full examination of the facts established and the conclusions reached in the
original investigation, taking account of the recommendations and rulings set out in the Reports,
demonstrates that imports from Brazil were still injuriously dumped, although at a slightly lower
level,

HAS ADOPTED THIS REGULATION:

Article 1

The table in Article 1(2) of Regulation (EC) No 1784/2000 is hereby amended as follows for products
originating in Brazil:

Country

Brazil

Definitive duty
(%)

32,0

Article 2

TARIC additional code

—

This Regulation shall enter into force on the day following its publication in the Official Journal of the Euro-
pean Union.

L 72/22

EN

Official Journal of the European Union

11.3.2004

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

Done at Brussels, 8 March 2004.

For the Council

The President

D. AHERN