Commission Regulation (EC) No 1008/2004 of 19 May 2004 imposing a provisional anti-subsidy duty on imports of certain graphite electrode systems originating in India
Date: 2004-05-19
Institutions: European Commission
Subjects: India, countervailing charge, electrical equipment, import, originating product

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COMMISSION REGULATION (EC) No 1008/2004

of 19 May 2004

imposing a provisional anti-subsidy duty on imports of certain graphite electrode systems origi-
nating in India

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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), as last amended by Regulation (EC)
No 461/2004 of 8 March 2004 (2) (‘the basic Regulation’), and in particular Article 12 thereof,

After consulting the Advisory Committee,

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

A. PROCEDURE

1. GENERAL
On 21 August 2003, the Commission announced, by a notice (‘notice of initiation’) published in the
Official Journal of the European Union (3), the initiation of an anti-subsidy proceeding with regard to
imports into the Community of certain graphite electrode systems originating in India.

The proceeding was initiated as a result of a complaint lodged in July 2003 by the European Carbon
and Graphite Association (ECGA), acting on behalf of producers representing a major proportion, in
this case more than 50 %, of the total Community production of certain graphite electrode systems.
The complaint contained evidence of subsidisation of the said product and of material injury resulting
there from, which was considered sufficient to justify the initiation of an anti-subsidy proceeding.

Prior to the initiation of the proceeding, and in accordance with Article 10(9) of the basic Regulation,
the Commission notified the Government of India (‘GOI’) that it had received a properly documented
complaint alleging that subsidised imports of certain graphite electrode systems originating in India
were causing material injury to the Community industry. The GOI was invited for consultation with
the aim of clarifying the situation as regards the contents of the complaint and arriving at a mutually
agreed solution. Whilst no request for consultations was made by the GOI, due note was taken of
written comments made by the GOI with regard to the allegations contained in the complaint
regarding subsidised imports and material injury being suffered by the Community industry.

The initiation of a parallel anti-dumping proceeding concerning imports into the Community of the
same product originating in India was announced by a notice published in the Official Journal of the
European Union (4) on the same date.

The Commission officially advised the complainant and other known Community producers,
exporting producers,
importers, users and suppliers known to be concerned of the initiation of
the proceeding. The parties directly concerned were given an opportunity to make their views
known in writing and to request a hearing within the time limit set in the notice of initiation.

The two exporting producers in India,
the GOI, as well as Community producers, users and
importers/traders 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 an opportunity to be heard.

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 77, 13.3.2004, p. 12.
(3) OJ C 197, 21.8.2003, p. 5.
(4) OJ C 197, 21.8.2003, p. 2.

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2. SAMPLING

(7)

(8)

(9)

In view of the large number of unrelated importers in the Community, it was considered appropriate,
in conformity with Article 27 of the basic Regulation, to examine whether sampling should be used.
In order to enable the Commission to decide whether sampling would indeed be necessary and, if so,
to select a sample, all known unrelated importers were requested, pursuant to Article 27(2) of the
basic Regulation, to make themselves known within 15 days of the initiation of the proceeding and
to provide the Commission with the information requested in the notice of initiation, for the period
from 1 April 2002 to 31 March 2003. Only two unrelated importers agreed to be included in the
sample and provided the requested basic information within the deadline. Accordingly, sampling was
not considered necessary in this proceeding.

3. QUESTIONNAIRES

The Commission sent questionnaires to all parties known to be concerned, to the two unrelated
importers referred to above and to all other companies who made themselves known within the
deadlines set in the notice of initiation, as well as to the GOI.

Replies were received from two Indian exporting producers, from the two complainant Community
producers, from eight user companies and from the two unrelated importers referred to above. In
addition, one user company made a written submission containing some quantitative information
and two users’ associations provided the Commission with written submissions.

(10)

The Commission sought and verified all the information it deemed necessary for the purpose of a
provisional determination of subsidisation, resulting injury and Community interest. Verification visits
were carried out at the premises of the following companies:

Community producers:

— SGL Carbon GmbH, Wiesbaden and Meitingen, Germany;

— SGL Carbon SA, La Coruña, Spain;

— UCAR SNC, Notre Dame de Briançon, France (including its related company, UCAR SA, Etoy,

Switzerland);

— UCAR Electrodos Ibérica SL, Pamplona, Spain;

— Graftech SpA, Caserta, Italy.

Unrelated importers in the Community:

— Promidesa SA, Madrid, Spain;

— AGC-Matov allied graphite & carbon GmbH, Berlin, Germany.

Users:

— ISPAT Hamburger Stahlwerke GmbH, Hamburg, Germany;

— ThyssenKrupp Nirosta GmbH, Krefeld, Germany;

— Lech-Stahlwerke, Meitingen, Germany;

— Ferriere Nord, Osoppo, Italy.

Exporting producers in India:

— Graphite India Limited (GIL), Kolkatta;

— Hindustan Electro Graphite (HEG) Limited, Bhopal.

(11)

The investigation of subsidisation and injury covered the period from 1 April 2002 to 31 March
2003 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of
injury covered the period from 1999 to the end of the IP (‘the period considered’).

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B. PRODUCT CONCERNED AND LIKE PRODUCT

1. PRODUCT CONCERNED

(12)

The product concerned is graphite electrodes and/or nipples used for such electrodes, whether
imported together or separately. A graphite electrode is a ceramic-moulded or extruded column of
graphite. At both ends of this cylinder, threaded tapered ‘sockets’ are machined so that two or more
electrodes can be joined to build a column. A connecting part, also in graphite, is used to join two
sockets. This part is called a ‘nipple’. Both the graphite electrode and the nipple are usually supplied
pre-set as a ‘graphite electrode system’.

(13) Graphite electrodes and nipples used for such electrodes are produced using petroleum coke, a by-
product of the oil industry; and coal tar pitch. The manufacturing process has six steps; namely
forming, baking, impregnation, rebaking, graphitising and machining. During the graphitising phase
the product is heated electrically to over 3 000 oC and is physically transformed into graphite, the
crystalline form of carbon: a unique material with low electrical but high heat conductivity; and high
strength and performance at high temperature; that makes it suitable for use in electric arc furnaces.
The processing time for a graphite electrode system is approximately two months. There are no
product substitutes for graphite electrode systems.

(14) Graphite electrode systems are used by steel producers in electric arc furnaces; also referred to as
‘mini mills’; as current carrying conductors to produce steel from recycled scrap. Graphite electrodes
and nipples used for such electrodes covered by this investigation are only those with an apparent
density of 1,65 g/cm3 or more and an electrical resistance of 6,0 μΩ.m or less. Graphite electrode
systems which meet these technical parameters can carry a very high rate of power feed.

(15) One Indian exporter stated that, in some cases, he produced the product concerned without using
‘premium needle coke’, a top quality petroleum coke which, according to this company, was
considered by the complainants to be indispensable for producing the product within the specifi-
cations as mentioned in recitals 12 to 14. This exporter therefore claimed that graphite electrodes,
and nipples used for such electrodes, made without ‘premium needle coke’ should be excluded from
the scope of the investigation. Indeed, different qualities of petroleum coke can be used for producing
graphite electrode systems. However, it is the basic physical and technical characteristics of the end
product and its end uses,
irrespective of the raw materials used, which determine the product
definition.
If graphite electrodes and nipples used for such electrodes originating in India and
imported into the Community meet the basic physical and technical characteristics as described in
the product definition, they are considered product concerned. Therefore, the claim was rejected.

2. LIKE PRODUCT

(16)

The product exported to the Community from India, the product produced and sold domestically in
India as well as the one manufactured and sold in the Community by the Community producers were
found to have the same basic physical and technical characteristics as well as the same uses and are
therefore considered as like products within the meaning of Article 1(5) of the basic Regulation.

C. SUBSIDISATION

1.

INTRODUCTION

(17) On the basis of the information contained in the complaint and the replies to the Commission’s
questionnaire, the following five schemes, which allegedly involve the granting of export subsidies by
the GOI, were investigated:

(i) Duty Entitlement Passbook (DEPB) Scheme

(ii) Export Promotion Capital Goods (EPCG) Scheme

(iii) Advance Licence Scheme (ALS)

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

(v)

Income Tax Exemption.

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(18)

(19)

(20)

Schemes (i), (ii), (iii), and (iv) specified above are 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 authorises the GOI to issue notifications regarding the export and
import policy, summarised in the ‘Export and Import Policy’ documents, which are issued by the
Ministry of Commerce every five years and updated regularly. The Export and Import Policy
document relevant to the IP of this case is the five-year plan for the period 1 April 2002 to 31
March 2007. In addition, the GOI also sets out the procedures governing India’s foreign trade policy
in the ‘Handbook of Procedures — 1 April 2002 to 31 March 2007’ (Volume 1), and which is also
updated on a regular basis.

It is clear from the Export and Import Policy covering the period 1 April 2002 to 31 March 2007
that licences/certificates/permissions issued before the entry into force of this Policy shall continue to
be valid for the purpose for which such licence/certificate/permission was issued, including during the
IP, unless otherwise stipulated.

Subsequent references in this text to the legal basis for the above-mentioned investigated schemes (i)
to (iv) are hereinafter made in relation to the Export and Import Policy covering the period 1 April
2002 to 31 March 2007 and to the ‘Handbook of Procedures — 1 April 2002 to 31 March 2007’
(Volume 1).

(21)

The Income Tax Exemption specified under (v) above is based on the Income Tax Act of 1961,
which is amended annually by the Finance Act.

(22) Article 14(5)(b) of the basic Regulation provides that the 3 % de minimis subsidy threshold applying
to imports from certain developing countries, i.e. developing countries which are members of the
WTO and which are mentioned in Annex VII of the Agreement on Subsidies and Countervailing
Measures (‘ASCM’) as well as for developing countries which are members of the WTO and which
have completely eliminated export subsidies, shall expire eight years after the entry into force of the
WTO Agreement. Given that the said Agreement entered into force on 1 January 1995, this subsidy
threshold no longer applies. The de minimis threshold now applying to imports from all developing
countries is 2 % as provided for in Article 14(5)(a) of the basic Regulation. In parallel with the
application of the 3 % de minimis threshold which applied to countries mentioned in Annex VII of
the ASCM, the EC practice had been to apply to said countries, a de minimis threshold of 0,3 % per
individual subsidy scheme. As the specific de minimis threshold which had applied to countries
mentioned in Annex VII of the ASCM is no longer applicable, it is considered that the threshold
for individual schemes should no longer apply either.

(23)

(24)

2. DUTY ENTITLEMENT PASSBOOK SCHEME (‘DEPB’)

(a) Legal Basis

The DEPB entered into force on 1 April 1997 by means of Customs Notification 34/97. Paragraphs
4.3.1 to 4.3.4 of the Export and Import Policy, and paragraphs 4.37 to 4.53 of the Handbook of
Procedures contain a detailed description of the scheme. The DEPB is the successor to the Passbook
Scheme which was terminated on 31 March 1997. From the outset, there were two types of the
DEPB, DEPB on pre-export basis and DEPB on post-export basis.

The GOI stressed that the DEPB on pre-export basis was abolished on 1 April 2000 and therefore the
scheme is not relevant for the IP. It was established that none of the companies availed of any benefit
under the DEPB on pre-export basis, and it is, therefore, not necessary to establish the counter-
vailability of DEPB on pre-export basis. The following analysis of this scheme is thus based on the
DEPB on post-export basis only.

(b) Eligibility

(25)

The DEPB on post-export basis is available to manufacturer-exporters or merchant-exporters (i.e.
traders).

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(c) Practical implementation of DEPB on post-export basis

(26) Under the scheme, any eligible exporter can apply for credits, which are calculated as a percentage of
the value of exported finished products. Such DEPB rates have been established by the Indian
authorities for most products,
including the product concerned, on the basis of Standard Input-
Output Norms (‘SION’). A licence stating the amount of credit granted is issued automatically upon
receipt of the application.

(27) DEPB on post-export basis allows for the use of such credits to offset applicable customs duties on
any subsequent imports, except for goods subject to import restrictions or prohibitions. Goods
imported against such credits can then be sold on the domestic market (subject to sales tax) or
otherwise used.

(28) DEPB licences are freely transferable and, as a consequence, are frequently sold. The DEPB licence,
which is subject to an application fee of 0,5 % of the credit received, is valid for a period of 12
months from the date of issue. Accordingly, licences issued during the two-year period 01 April
2001 to 31 March 2003 were available during the IP either to be sold or to be used to off-set import
duties.

(29)

Prior to the IP, i.e. until 31 March 2002, the presentation of a DEPB licence allowed for an off-setting
of normal import duty up to the face value of the licence. In addition, the DEPB licence also allowed
for an exemption from another duty, the Special Additional Duty (‘SAD’). The SAD is set at 4 % ad
valorem of the duty inclusive customs value of most goods imported into India,
including the
product concerned. Whilst the exemption from the SAD under this scheme was contingent upon
the presentation of a DEPB licence, the amount of SAD saved was not deducted from the amount of
credit granted in the licence. In effect, therefore, an additional benefit, beyond the face value of the
DEPB licence, accrued under the DEPB scheme.

(30) As from the beginning of the IP, i.e. 1 April 2002, the GOI abolished the exemption from SAD
under the DEPB scheme. Therefore, during the IP any off-setting of SAD was directly deducted from
the credit on the DEPB licence presented by the importer. To take account of this change to the
to compensate exporters for the benefits previously available through
scheme; and,
in effect,
increased the DEPB rates from 1 April 2002 by way of an
the GOI
exemption from SAD;
amendment to the SION for the product concerned. The GOI also issued upon request, supple-
mentary credits for extant licences issued prior to 1 April 2002 to increase the credit granted up to
the level of the revised DEPB rate.

(d) Conclusions on DEPB on post-export basis

(31) When a company exports goods, it is granted a credit which can be used either to offset customs
duties due on future imports of various goods or can simply be sold on the open market.

(32)

The amount of credit is automatically calculated on the basis of SION rates, irrespective of whether
inputs have been imported, duty has been paid on them or whether the inputs were actually used for
export production and in what quantities. Indeed, a company can claim a licence on the basis of past
exports irrespective of whether it makes any imports or purchases goods from other sources. The
DEPB credits are considered to be a financial contribution because they are a grant. They involve a
direct transfer of funds, as they can either be sold and converted into cash, or used to offset import
duties, thus causing the GOI to forego revenue which is otherwise due.

(33) Article 2(1)(a)(ii) of the basic Regulation provides for an exception for,

inter alia, drawback and
substitution drawback schemes which conform to the strict rules laid down in Annex I item (i),
Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution
drawback).

(34)

In this case, the exporter is under no obligation to actually consume the goods imported free of duty
in the production process and the amount of credit is not calculated in relation to actual inputs used.

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(35)

(36)

(37)

(38)

(39)

(40)

Furthermore, there is no system or procedure in place to confirm which inputs are consumed in the
production process of the exported product or whether an excess payment of import duties occurred
within the meaning of item (i) of Annex I and Annexes II and III of the basic Regulation.

Lastly, exporters are eligible for the DEPB benefits regardless of whether they import any inputs at all.
In order to obtain the benefit,
it is sufficient for an exporter to simply export goods without
demonstrating that any input material was imported. Thus, even exporters which procure all of
their inputs locally and do not import any goods to be used as inputs are still entitled to the
DEPB benefits. Hence, the DEPB on post-export basis does not fulfil the criteria of Annexes I to
III of the basic Regulation.

In the absence of (i) a requirement that imported inputs be consumed in the production process; and
(ii) a system of verification as required under Annex II of the basic Regulation, the DEPB on post-
export basis cannot be considered as a permitted drawback or substitution drawback scheme (Annex
III) under Article 2(1)(a)(ii) of the basic Regulation.

Since the above exception to the subsidy definition for drawback and substitution drawback schemes,
referred to in recital (33), therefore does not apply, the issue of excess remission does not arise and
the countervailable benefit is the remission of total import duties normally due on all imports.

Therefore, since the financial contribution by the GOI confers a benefit upon the DEPB holder and
since government revenue, which is otherwise due, is foregone, the scheme constitutes a subsidy. It is
a subsidy contingent in law upon export performance within the meaning of Article 3(4)(a) of the
basic Regulation because, as explained above, it can only be obtained by exporting. It is therefore
deemed to be specific and thus countervailable.

(e) Calculation of the subsidy amount for DEPB post-export basis

The benefit for the companies was calculated on the basis of the amount of credit granted in the
licences, which have been utilised or transferred (sold) during the IP. In order to determine as
is necessary to draw a distinction
accurately as possible the amount of revenue foregone it
between those licences issued and utilised during the IP,
those licences issued and transferred
during the IP, those licences issued prior to the IP and utilised during the IP, and those licences
issued prior to the IP and transferred during the IP.

(41) Where a DEPB licence was issued and used during the IP by the co-operating exporting producer to
import goods without payment of applicable duties (including SAD), the benefit was calculated on
the basis of total import duties foregone, as deducted from the credit balance on the relevant DEPB
licence.

(42) Where the DEPB licence was issued and transferred (sold) during the IP, the benefit was calculated on
the basis of the amount of credit granted in the licence (face value), regardless of the sales price of the
licence, since the sale of a licence is a pure commercial decision which does not alter the amount of
benefit (equivalent to the GOI’s transfer of funds) received from the scheme.

(43) Where the DEPB licence was issued prior to the IP and used during the IP by the co-operating
exporting producer to import goods without payment of applicable duties, the benefit was calculated
on the basis of total import duties foregone (including SAD), as deducted from the credit balance on
the relevant licence. The supplementary licences issued for the increased DEPB credits, as outlined
above, to the extent that they had been used to offset the duties, were also taken into account to
determine the amount of revenue foregone by the GOI.

(44) Where the DEPB licence was issued prior to the IP and transferred (sold) during the IP, it was found
that these licences were sold for a price which exceeded their nominal face value. This premium is
explained by the additional exemption from SAD allowed by these licences, as explained above.
Without knowing the products which were imported by the purchasers of these licences, it is not
possible to determine the full amount of revenue foregone by the GOI. However, as a conservative
estimate, this amount must have been at least equivalent to the sales price of the licence, as it makes
no economic sense for the licence to sell for more than its true worth. The benefit was thus
calculated on the basis of the sales price of the licence.

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(45) As outlined in recital (26), the benefit under the DEPB scheme is based on the value of the exported
finished products, and is not granted by reference to the quantities manufactured, produced, exported
or transported. Therefore, the amount of subsidy calculated has been allocated over total export
turnover during the IP, in accordance with Article 7(2) of the basic Regulation. In calculating the
benefit, the fees necessarily incurred to obtain the subsidy were deducted, in accordance with Article
7(1)(a) of the basic Regulation.

(46)

The companies claimed that costs incurred by paying specialised agents, sales commissions and
various other expenses should be deducted when calculating the benefit under this scheme. In this
regard,
it should be noted that using third parties for buying and selling licences is a purely
commercial decision which does not alter the amount of credit granted in the licences. In any
event, only costs necessarily incurred in order to obtain a subsidy are deductible in accordance
with Article 7(1)(a) of the basic Regulation. Since the above costs are not necessary in order to
qualify for the subsidy, the claims were rejected.

(47)

The companies also claimed that the benefits from their DEPB licenses generated additional income,
and thereby increased their overall tax liability, most notably their company income tax. Therefore, it
was claimed that the benefit obtained from the DEPB scheme should be reduced by the amount of
income tax actually payable.

(48) How a company chooses to use the benefit conferred under a subsidy scheme, in this case by either
using the licenses to offset import duties or to sell the licenses, may have a different impact on the
taxation situation of the company. It is not for the investigating authority to examine the possible
effect such benefit will have on the taxation situation of that company. Consequently, the claim was
rejected.

(49)

Both co-operating companies benefited from this scheme during the IP and obtained subsidies
ranging from 14,5 % to 20,4 %.

3. EXPORT PROMOTION CAPITAL GOODS SCHEME (‘EPCG’)

(a) Legal basis

(50)

The EPCG Scheme was announced on 1 April 1992. During the IP the scheme was regulated by
Customs Notification No 28/97 and 29/97 which entered into force on 1 April 1997. Details of the
schemes are contained in Chapter 5 of the 2002/2007 Export and Import Policies and Chapter 5 of
the Handbook of Procedures.

(b) Eligibility

(51)

The scheme is available to manufacturers/exporters (i.e. every manufacturer in India which exports) or
merchants/exporters (i.e. traders) ‘tied’ to supporting manufacturers.

(52)

(53)

(54)

(c) Practical implementation

To benefit from the scheme, a company must provide to the relevant authorities details of the type
and value of capital goods, which are to be imported. Depending on the level of export commitment
which the company is prepared to undertake, the company will be allowed to import capital goods at
either a zero or reduced rate of duty. In order to meet the export obligation, the imported capital
goods must be used to produce exported goods. Upon application by the exporter, a licence
authorising the import at preferential rates is issued. An application fee is payable to obtain the
licence.

The EPCG licence holder can also source the capital goods indigenously. In such case, the indigenous
manufacturer of capital goods may avail of the benefit for duty free import of components required
for the manufacture of such capital goods. Alternatively, the indigenous manufacturer can claim the
benefit of deemed export in respect of the supply of capital goods to an EPCG Licence holder.

There is an export obligation in order to qualify for the EPCG Scheme. The export obligation must be
fulfilled by exporting goods manufactured or produced by means of the capital goods, and the value
of such exports must exceed the average level of exports of the same product achieved by the
company in the preceding three licensing years.

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(55)

(56)

(57)

Recently, there has been a change in the conditions of the scheme in respect of the calculation of the
export obligation. Under the new rules, the companies will have eight years to fulfil the export
obligation (the amount of exports must be at least six times the value of the total duty exemption for
imported capital goods). However, this change does not alter the fundamental operation of the
scheme.

(d) Conclusion on EPCG scheme

The payment by an exporter of a reduced or zero rate of import duty constitutes a financial
contribution by the GOI, since revenue otherwise due is foregone and a benefit is conferred on
the recipient by lowering or exempting the import duties normally payable. The licence cannot be
obtained without a commitment to export goods. As such, the EPCG Scheme is a subsidy contingent
in law upon export performance within the meaning of Article 3(4)(a) of the basic Regulation, and is
deemed to be specific and thus countervailable.

(e) Calculation of the subsidy amount

The benefit to the companies has been calculated on the basis of the amount of unpaid customs duty
on imported capital goods spread over a period which reflects the normal depreciation period of such
capital goods in the industry of the product concerned, pursuant to Article 7(3) of the basic
Regulation. In accordance with established practice, the amount of the benefit which is attributable
to the IP has been adjusted by adding interest during the IP in order to reflect the value of the benefit
over time and thereby establish the full benefit of this scheme to the recipient. Given the nature of
the subsidy, which is equivalent to a one-time grant, the company specific commercial interest rate
during the IP was considered appropriate. As outlined in recital (54), the benefit under the EPCG
scheme is dependant on the increased value of the exported finished products, and is not granted by
reference to the quantities manufactured produced, exported or transported. Therefore, the amount of
subsidy has been allocated over total export turnover during the IP, in accordance with Article 7(2) of
the basic Regulation.

(58)

Both co-operating exporters benefited from the EPCG scheme during the IP and obtained subsidies
ranging from 0,1 % to 0,3 %.

(a) Legal basis

4. ADVANCE LLICENCE SCHEME (‘ALS’)

(59)

The ALS has been in operation since 1977-78. The scheme is specified in paragraphs 4.1.1 to 4.1.7
of the Export and Import Policy and parts of chapter 4 of the Handbook of Procedures.

(b) Eligibility

(60) Advance Licences are available to exporters, manufacturer-exporters or merchant-exporters ‘tied to’
supporting manufacturer(s) for the duty-free import of inputs used in the production of goods for
export.

(c) Practical implementation

(61)

The volume of imports allowed under this scheme is determined as a percentage of the volume of
exported finished products. The advance licences measure the units of authorised imports in terms of
their quantity as well as in terms of their value. In both cases, the rates used to determine the
allowable duty free purchases are established for most products, including the product concerned, on
the basis of SION. The input items specified in the advance licences are items used in the production
of the relevant finished products.

(62) Advance licences can be issued for:

(i)

Physical exports: Advance Licences may be issued to a manufacturer exporter or merchant
exporter ‘tied to’ supporting manufacturer(s) for import of inputs required in the manufacture
of products for export.

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Intermediate supplies: Advance Licences may be issued for intermediate supply to a manu-
facturer-exporter for the inputs required in the manufacture of goods to be supplied to the
ultimate exporter/deemed exporter holding another Advance Licence. The Advance Licence
holder intending to source the inputs from indigenous sources,
in lieu of direct import, has
the option to source them against Advance Licences for intermediate supplies. In such cases, the
quantities purchased on the domestic market are written off from the Advance Licences, and an
intermediate Advance Licence is issued to the benefit of the domestic supplier. The holder of
such intermediate Advance Licence is entitled to the benefit of importing duty free the goods
needed to produce those inputs delivered to the final exporter.

(iii) Deemed exports: Advance Licences can be issued for deemed export to the main contractor for
import of
inputs required in the manufacture of goods to be supplied to the categories
mentioned in paragraph 8.2 of the Export and Import Policy. According to the GOI, deemed
exports refers to those transactions in which the goods supplied do not leave the country. A
number of categories of supply is regarded as deemed exports provided the goods are manu-
factured in India, e.g. supply of goods to Export Oriented Units, supply of capital goods to
holders of licences under EPCG.

(iv) Advance Release Orders (‘ARO’): The Advance Licence holder intending to source the inputs
from indigenous sources, in lieu of direct import, has the option to source them against AROs.
In such cases, the Advance Licences are validated as AROs and are endorsed to the supplier upon
delivery of the items specified therein. The endorsement of the ARO entitles the supplier to the
benefits of deemed exports drawback and refund of terminal excise duty. In a way, the ARO
mechanism refunds taxes and duties to the manufacturer supplying the product,
instead of
refunding the same to the exporter in the form of drawback/refund of duties. The refund of
taxes/duties is available both for indigenous inputs as well as imported inputs.

(63)

It was established during the verification that only the ALS referred to under (i) above (physical
exports) was used by one manufacturing-exporter during the IP. It is therefore not necessary to
establish the countervailability of the above-mentioned categories (ii), (iii) and (iv) of the ALS in the
context of this investigation.

(d) Conclusions on the scheme

(64) Only exporting companies are granted licences which can be used to offset amounts of customs

duties on imports. In this regard, the scheme is contingent upon export performance.

(65) As mentioned above, it was established that the ALS, in respect of ‘physical exports’, was used by one
investigated company during the IP. The company used the ALS for duty-free imports of inputs for
exported goods.

(66)

The GOI claimed that the ALS is a quantity based scheme, and that the inputs allowed under this
licence are with reference to the quantity of exports. It was also submitted that whatever inputs are
imported under the ALS, the same inputs have to be used in the manufacturing of the exported
inputs used in the products already exported.
products or for replenishment of
According to the GOI, the imported inputs have to be used by the exporter and no such inputs
are allowed to be sold or transferred.

the stock of

(67) However, it was noted that there was no system or procedure in place to confirm whether and which
inputs are consumed in the production process of exported goods. The system only shows that the
goods imported duty-free have been used in the production process, with no distinction between the
destination of the goods (domestic or export market).

(68) Article 2(1)(a)(ii) of the basic Regulation provides for an exception for,

inter alia, drawback and
substitution drawback schemes which conform to the strict rules laid down in Annex I item (i),
Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution
drawback) of the basic Regulation.

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(69)

In the absence of a system or procedure in place to confirm which inputs are consumed in the
production process of the exported product or whether an excess payment of import duties occurred
within the meaning of item (i) of Annex I and Annexes II and III of the basic Regulation, the ALS
cannot be considered as a permitted drawback or substitution drawback scheme under Article 2(1)(a)
(ii) of the basic Regulation.

(70)

Since the above exception to the subsidy definition for drawback and substitution drawback schemes
referred to in recital 68 does not apply, the issue of excess remission does not arise and the
countervailable benefit is the remission of total import duties normally due on all imports.

(e) Calculation of the subsidy amount

(71)

The benefit for the company was calculated on the basis of the amount of credit granted in the
licences, which has been utilised during the IP. As outlined in recital 61, the benefit under the ALS
scheme is based both on the quantity and on the value of the exported finished products. Therefore,
the amount of subsidy calculated has been allocated over total export turnover during the IP, in
accordance with Article 7(2) of the basic Regulation. In calculating the benefit, the fees necessarily
incurred to obtain the subsidy were deducted, in accordance with Article 7(1)(a) of the basic Regu-
lation. On this basis, the subsidy obtained was 0,2 %.

5. EXPORT PROCESSING ZONES (‘EPZ’) / EXPORT ORIENTED UNITS (‘EOU’)

(72)

It was verified that neither exporting producer is located in either an EPZ or an EOU. Accordingly, no
further analysis of this scheme was considered necessary for the purposes of this investigation.

(73)

(74)

(75)

(a) Legal basis

6.

INCOME TAX EXEMPTION

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

(b) Practical implementation

The GOI stated that the Income Tax Exemption was abolished as of 31 March 2003 and provided
evidence to that effect. While the scheme may have conferred benefits on the exporters concerned
during the IP, the scheme will not confer any benefits to exporting companies after that date. In these
circumstances, and in accordance with Article 15(1) of the basic Regulation, it is not necessary to
establish the countervailability of the Income Tax Exemption.

7. AMOUNT OF COUNTERVAILABLE SUBSIDIES

The amount of countervailable subsidies in accordance with the provisions of the basic Regulation,
expressed ad valorem, for the investigated exporting producers are 14,6 % and 20,9 %. Given that the
level of the overall co-operation for India was high (100 % of the exports of the product concerned
from India to the Community), the residual subsidy margin for all other companies was set at the
level for the company with the highest individual margin, i.e. 20,9 %.

Type of subsidy

DEPB

EPCGS

ALS

EPZ/EOU

ITE

TOTAL

Graphite India Limited (GIL)

14,5 %

0,1 %

Hindustan Electro Graphite (HEG)
Limited

20,4 %

0,3 %

0,2 %

All others

14,6 %

20,9 %

20,9 %

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D. COMMUNITY INDUSTRY

1. TOTAL COMMUNITY PRODUCTION

(76) Within the Community, the like product is manufactured by SGL AG (‘SGL’) and several subsidiaries
of UCAR SA (‘UCAR’), namely UCAR SNC, UCAR Electrodos Ibérica SL and Graftech SpA, on behalf
of which the complaint was lodged. Production facilities of SGL and UCAR are located in Austria,
Belgium, Germany, France, Italy and Spain.

(77)

In addition to the two complainant Community producers, SGL and UCAR, the like product was
manufactured in the Community by two other producers during the period 1999-IP. One of these
two other producers went into insolvency and had to ask for judicial protection under the German
bankruptcy law. This latter company stopped producing the like product as of November 2002.
the complaint but declined the
These two companies expressed their support
Commission’s invitation to co-operate actively in the investigation.
It is concluded that all the
above four producers constitute the Community production within the meaning of Article 9(1) of
the basic Regulation.

in respect of

2. DEFINITION OF THE COMMUNITY INDUSTRY

(78)

The two complainant Community producers properly replied to the questionnaire and fully co-
operated in the investigation. During the IP, they represented more than 80 % of the Community
production.

(79)

They are deemed to constitute the Community industry within the meaning of Article 9(1) and
Article 10(8) of the basic Regulation and will hereafter be referred to as the ‘Community industry’.

E. INJURY

1. PRELIMINARY REMARK

(80) Given that there are only two Indian exporting producers of the product concerned, and given that
the Community industry also comprises only two producers, data relating to either imports of the
product concerned into the Community originating in India, or to the Community industry had to be
indexed in order to preserve confidentiality pursuant to Article 29 of the basic Regulation.

2. COMMUNITY CONSUMPTION

(81)

Community consumption was established on the basis of the sales volumes of the Community
industry on the Community market, the sales volumes of the other Community producers on the
Community market estimated on the basis of best available evidence, the sales volumes of the two
Indian co-operating exporting producers on the Community market, the sales volumes imported
from Poland obtained from the co-operation of SGL, and Eurostat data for the remaining imports in
the Community, duly adjusted where appropriate.

(82) On this basis, between 1999 and the IP, Community consumption of the product concerned
increased by 9 %. Specifically, it increased by 14 % between 1999 and 2000, declined by 7 percentage
points in 2001, by a further 1 percentage point in 2002, before increasing by 3 percentage points in
the IP. As the product concerned is primarily used in the electric steel industry, the development of
consumption has to be seen against the economic trends of this particular sector, which displayed a
sharp acceleration in 2000, followed by a downturn from 2001 onwards.

1999

2000

2001

2002

IP

Total EC consumption (tonnes)

119 802

136 418

128 438

126 623

130 615

Index (1999 = 100)

100

114

107

106

109

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(a) Volume

3.

IMPORTS FROM THE COUNTRY CONCERNED

(83)

The volume of imports of the product concerned from India into the Community increased by 76 %
between 1999 and the IP. In detail, imports from India increased by 45 % between 1999 and 2000,
by a further 31 percentage points in 2001 and remained almost stable at this level in 2002 and the
IP.

1999

2000

2001

2002

IP

Volume of subsidised imports (tonnes)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

145

176

176

176

Market share of subsidised imports

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

127

164

166

161

(b) Market share

(84)

The market share held by exporters in the country concerned increased by 3,4 percentage points (or
61 %) during the period considered to reach a level of 8 to 10 % during the IP. It first rose by 1,5
percentage point between 1999 and 2000, by a further 2 percentage points in 2001 and stayed
relatively stable at this level through 2002 and the IP. It should be noted that over the period 1999
to the IP, the increase in imports and market shares from the country concerned coincided with an
increase in consumption of 9 %.

(c) Prices

(i)

P r i c e e v o l u t i o n

(85)

Between 1999 and the IP, the average price of imports of the product concerned originating in India
increased by 2 % in 2000, by a further 8 percentage points in 2001 and then declined by 9
percentage points in 2002, a level at which it stabilised in the IP. In the IP, the average import
price of the product concerned originating in India was 1 % higher than in 1999.

1999

2000

2001

2002

IP

Prices of subsidised imports

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

102

110

101

101

(ii) P r i c e u n d e r c u t t i n g

(86) A comparison for comparable models of the product concerned was made between the exporting
producers' and the Community industry's average selling prices in the Community. To this end,
Community industry’s ex-works prices to unrelated customers, net of all rebates and taxes have
been compared with the CIF Community frontier prices of exporting producers of
India, duly
adjusted for post
importation costs. The comparison showed that during the IP the product
concerned originating in India sold in the Community undercut the Community industry's prices
by between 6,5 % and 12,2 %.

(87)

It should be noted that these price undercutting margins do not fully illustrate the effect of the
subsidised imports on prices of the Community industry, given that both price depression and price
suppression were observed, as evidenced by the relatively low profitability reached by the Community
industry during the IP, whilst it could have expected a reasonably higher profit in the absence of
subsidisation.

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4. SITUATION OF THE COMMUNITY INDUSTRY

(88)

Pursuant to Article 8(5) of the basic Regulation, the Commission examined all relevant economic
factors and indices having a bearing on the state of the Community industry.

(a) Preliminary remarks

(89)

In order to make a meaningful assessment of certain injury indicators, it was necessary to consolidate
adequately some data pertaining to UCAR together with those of its production subsidiaries in the
Community (see recital 76 above).

(90)

The Commission paid particular attention to all possible consequences on injury indicators arising
from the past anti-competitive behaviour of
the two complainant Community producers. The
Commission notably ensured that the starting point for injury assessment (1999) was free from
any anti-competitive practise (see recitals 121, 122, 125 below). Additionally, when establishing costs
and profitability for the Community industry, the Commission explicitly requested and verified that
the direct cost of the payments, or any indirect costs (including the financing charges) thereof, linked
to penalties imposed by competition authorities were clearly excluded, so as to provide a profit
picture excluding any of these extraordinary expenditures.

(91)

(b) Production
Community industry’s production increased by 14 % in 2000, declined by 16 percentage points in
2001, declined by a further 4 percentage points in 2002 and increased by 5 percentage points in the
IP. The sharp increase observed in 2000 was due to the good economic climate, which also translated
into a rising capacity utilisation rate that year.

1999

2000

2001

2002

IP

Production (tonnes)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

114

98

94

99

(c) Capacity and capacity utilisation rates

(92)

The production capacity decreased in 2000 by around 2 % and stayed at this level in 2001. In 2002
and the IP, production capacity further decreased by respectively 5 percentage points and 2
percentage points. In the IP, production capacity was 9 % lower than in 1999, principally as a
result of the mothballing of a facility of a Community producer, effective during the whole IP.

(93)

Capacity utilisation started from a level of 70 % in 1999, before increasing to 81 % in 2000 driven by
strong demand, in particular from the electric steel industry. In 2001 and 2002, it fell back to a level
of 70 % before rising to 76 % in the IP.

(94)

The investigation found that there are several causes at the root of the economic problems facing the
above mentioned mothballed facility, amongst which the two most noticeable are: (i) high production
costs linked to the price of electricity in this particular country, and (ii) the competition from
subsidised imports originating in India. Given the difficulty to disentangle one cause from the
other, the Commission examined what would have been the trends for capacity and capacity utili-
sation in 2002 and the IP if this facility had not been mothballed. The volume of production was left
unchanged in this simulation as other production facilities of this Community producer raised their
output in order to fill the gap. As shown in the table below, if this facility had not been mothballed,
both production capacity and capacity utilisation for the Community industry as a whole would have
reached in the IP a level very close to that of 1999.

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1999

2000

2001

2002

IP

Production capacity (tonnes)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

Capacity utilisation

Index (1999 = 100)

100

70 %

100

1999

98

81 %

115

2000

98

70 %

99

2001

93

70 %

100

2002

91

76 %

108

IP

Production capacity (tonnes) without
mothballing

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

98

98

100

101

Capacity
balling

utilisation without moth-

Index (1999 = 100)

70 %

100

81 %

115

70 %

99

65 %

93

69 %

98

(d) Stocks

(95) During the IP, inventories of finished products represented around 3 % of Community industry’s total
production volume. The level of closing stocks of the Community industry increased globally during
the period considered and was around five times higher in the IP compared to 1999. However, the
investigation found that the development of
inventories is not regarded a particularly relevant
indicator of
the Community industry, as Community producers
generally produce to order and therefore stocks are usually goods awaiting dispatch to customers.

the economic situation of

1999

2000

2001

2002

IP

Closing stock (tonnes)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

235

700

663

515

(e) Sales volume

(96)

Sales by the Community industry of its own production on the Community market to unrelated
customers declined by 1 % between 1999 and the IP. More specifically, they rose sharply by 16 % in
2000, dropped by 17 percentage points in 2001 and by a further 5 percentage points in 2002,
before rising again by 5 percentage points in the IP. The development of sales volume mirrors closely
economic trends in the electric steel industry, which after the boom observed in 2000, suffered a
downturn in 2001 and 2002.

1999

2000

2001

2002

IP

EC sales volume to unrelated customers
(tonnes)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

116

99

94

99

(f) Market share

(97) After a small initial gain of one percentage point in 2000, the market share held by the Community
industry declined substantially until 2002. The Community industry lost 6,5 percentage points of
market share in 2001 and further 2,8 percentage points in 2002, before recovering 1,9 percentage
points during the IP. Compared with 1999, the market share held by the Community industry during
the IP was 6,3 percentage points lower or 9 % in terms of indices.

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1999

2000

2001

2002

IP

Market share of Community industry

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

102

93

89

91

(g) Growth

(98)

Between 1999 and the IP, when Community consumption increased by 9 %, the sales volume of the
Community industry on the Community market declined by 1 %. The Community industry lost 6,3
percentage points of market share, as seen above, whereas subsidised imports gained 3,4 percentage
points of market share during the same period.

(h) Employment

(99)

The employment level of the Community industry decreased by around 17 % between 1999 and the
IP. The workforce declined by 1 % in 2000 and by 5 percentage points in 2001. In 2002 and the IP,
drops of respectively 9 percentage points and 3 percentage points occurred, principally caused by the
mothballing of a facility of a Community producer, and the re-allocation of part of the workforce to
more profitable business segments.

1999

2000

2001

2002

IP

Employment

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

99

95

86

83

(i) Productivity

(100) Productivity of the Community industry's workforce, measured as output per person employed per
year, first increased strongly by 15 % from 1999 to 2000, dropped by 12 percentage points in 2001,
increased again by 5 percentage points in 2002 and by a further 11 percentage points during the IP.
At the end of the period considered, productivity was 19 % higher than that observed at the start of
the period, which reflects rationalisation efforts undergone by the Community industry in order to
stay competitive. As a comparison, average labour productivity growth in the Community economy
at large (all economic sectors) was just 1,5 % per year during the same period.

1999

2000

2001

2002

IP

Productivity (tonnes per employee)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

115

103

108

119

(j) Wages

(101) Between 1999 and the IP, the average wage per employee increased by 13 %. This figure is slightly
below the rate of increase of the average nominal compensation per employee (14 %) observed
during the same period in the Community economy at large (all sectors).

1999

2000

2001

2002

IP

Annual
(000 EUR)

labour

cost per

employee

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

104

105

111

113

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(k) Sales prices

(102) Unit prices for Community sales to unrelated customers of Community industry’s own production
decreased by 6 % between 1999 and 2000, rose by 9 percentage points in 2001, declined by 12
percentage points in 2002, and edged up by 1 percentage point in the IP. Altogether, between 1999
in unit sales prices amounted to 8 %. This relatively uneven development is
and the IP, the fall
explained by the following.

(103) Prices are driven by two major forces: the costs of production (‘COP’) and the supply and demand
situation on the market. Whilst unit sales prices decreased by 8 % between 1999 and the IP, unit
costs of production increased by 2 %. This relatively flat development of costs hides a jump by 10
percentage points observed in 2001, due to the lagged consequence of the 2000 increase in raw
material prices. The two principal raw materials in the manufacturing of graphite electrode systems,
namely petroleum coke and pitch, account for around 34 % of total costs of production. Energy,
whose price is also very much linked to oil price fluctuations, represents a further 13 % of total
production costs. Altogether, these three key cost items with a price directly influenced by oil price
variations, account for close to 50 % of total costs of production of the like product. As Community
industry’s prices could not match increases in costs of production, because of the price suppression
linked to subsidised imports, the Community industry experienced a drop in profitability.

1999

2000

2001

2002

IP

Unit price EC market (EUR/tonne)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

94

103

91

92

Unit COP (EUR/tonne)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

101

111

101

102

(l)

Factors affecting Community prices

(104) The investigation showed that subsidised imports were undercutting the depressed average sales price
of the Community industry by 6 to 12 % on average in the IP (see recital 86 above). However, on a
type-by-type basis it was found that in some instances prices offered by the exporting producers
concerned were significantly lower than the above, average undercutting of the Community industry’s
prices. The combination of this undercutting established on a more individual product type level,
together with the growing market share held by subsidised imports certainly affected the domestic
prices of the Community industry.

(m) Profitability and return on investments

(105) During the period considered, profitability of sales in the Community of own production to unrelated
customers in terms of return on net sales before taxes decreased by 50 % in 2000, by a further 3
percentage points in 2001, by a further 18 percentage points in 2002 and finally recovered by 4
percentage points during the IP. Between 1999 and the IP, the decline in profitability amounts to
66 %, i.e. from a range of 12 to 15 % in 1999 to a range of 3 to 6 % in the IP.

(106) The return on investments (ROI), expressed as the profit in percent of the net book value of
investments, broadly followed the above profitability trend over the whole period considered. It
declined by 34 % in 2000, by 23 percentage points in 2001, by 26 percentage points in 2002
and by a further 8 percentage points in the IP. Compared with the situation prevailing in 1999, ROI
had declined by around 90 % in the IP, i.e. from a range of 45 to 55 % in 1999 to a range of 3 to
10 % in the IP.

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(107) The Commission isolated the impact of

the above mothballing (see recital 94 above) on the
Community industry’s aggregated profitability during the IP.
It was found that the Community
industry’s profitability would have been higher by 0,8 percentage points in 2002 and by 0,5
percentage points in the IP, which would not have substantially altered the trend of profitability
since 1999.

1999

2000

2001

2002

IP

Profitability of EC sales to unrelated (%
of net sales)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

51

48

30

ROI (profit in % of net book value of
investments)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

66

43

17

Profitability of EC sales to unrelated (%
of net sales) without mothballing

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

51

48

35

34

9

39

(n) Cash flow and ability to raise capital

(108) The net cash flow from operating activities declined in 2000 by 40 %, recovered by 24 percentage
points in 2001, declined again by 12 percentage points in 2002 and declined further by 7 percentage
points in the IP. Cash flow was 35 % lower in the IP than at the start of the period considered.

1999

2000

2001

2002

Cash flow (000 EUR)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

60

84

72

IP

65

(109) Both complainant Community producers have been fined by various national and regional compe-
tition authorities in the world for price and market fixings in the 1990s. In addition to these
penalties, the two complainant Community producers have incurred further charges linked on the
one hand to the settlement of class action lawsuits with customers and stockholders in the US and
Canada, and on the other hand to the financing of these extraordinary expenses. As a result, the
indebtedness of the two groups has dramatically increased and both their credit ratings and ability to
raise capital have deteriorated. The practical consequence of
this situation is that no distinct
assessment,
in respect of the ability to raise capital that would be limited to the scope of the
sector manufacturing and selling the like product is possible in isolation of the anti-trust background.
However, the evidence gathered above in respect of profitability, ROI and cash flow and below in
respect of investments, which are relevant for the sole scope of the like product and for which any
effects of this anti-competitive behaviour have been carefully eliminated, may certainly be regarded as
an aggravating element, on top of the above, already tight, financial situation.

(o)

Investments

(110) The Community industry's annual investments in the product concerned declined by around 50 %
between 1999 and the IP. Specifically, it declined by 27 % in 2000, recovered by 4 percentage points
in 2001, declined again by 18 percentage points in 2002 and decreased further by 8 percentage
points during the IP.

1999

2000

2001

2002

Net investments (000 EUR)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

73

77

59

IP

51

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(p) Magnitude of countervailing margin

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

(q) Recovery from past subsidisation or dumping

(112)

In the absence of any information on the existence of subsidisation or dumping prior to the situation
assessed in the present proceeding, this issue is considered irrelevant.

5. CONCLUSION ON INJURY

(113) Between 1999 and the IP, the volume of the subsidised imports of the product concerned originating
in India increased significantly by 76 % and its share of the Community market increased by 3,4
percentage points. The average prices of subsidised imports from India were consistently lower than
those of the Community industry during the period considered. Moreover, during the IP, the prices of
the imports from the country concerned undercut those of the Community industry. On a weighted
average basis, price undercutting was in the IP around 6 to 12 % on average, while on the basis of
individual product types, price undercutting was in some cases significantly higher.

(114) A deterioration in the situation of

the Community industry has been found over the period
considered. Between 1999 and the IP, virtually all injury indicators developed negatively: production
volume declined by 1 %, production capacity declined by 9 %, sales volumes in the Community
decreased by 1%, and the Community industry lost 6,3 percentage points of market share. The
unit sales price declined by 8 % while the unit cost of production increased by 2 %, the profitability
declined by 66%, the return on investments and the cash-flow from operating activities followed the
same negative trend. Employment decreased by 17 %, investment declined by 50 %.

(115) Some indicators experienced apparent positive developments: over the period considered wages
increased by 13 %, which can be regarded as a normal rate of increase and productivity increased
by 19 %. Together with the decrease in employment mentioned above, the latter illustrate the effort
undergone by the Community industry to stay competitive in spite of competition from subsidised
imports from India.

(116)

In the light of the foregoing it is provisionally concluded that the Community industry has suffered
material injury within the meaning of Article 8 of the basic Regulation.

F. CAUSATION

1.

INTRODUCTION

(117)

In accordance with Article 8(6) and (7) of the basic Regulation, the Commission examined whether
subsidised imports 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.

2. EFFECTS OF THE SUBSIDISED IMPORTS

(118) The significant increase in the volume of the subsidised imports by 76 % between 1999 and the IP,
and of its corresponding share of the Community market, i.e. by around 3,5 percentage points, as
well as the undercutting found (around 6 to 12 % on average during the IP) coincided with the
deterioration of the economic situation of the Community industry. During the same period, the
Community industry experienced a loss in sales volumes (- 1 %), in market shares (- 6,3 percentage
points) and a deterioration of profitability (- 8,7 percentage points). This development should be seen
against the background of the growing Community market during the years 1999-IP. In addition,
subsidised prices were below those of the Community industry throughout the period considered and
exerted a pressure on them. The resulting drop in Community industry's prices (by 8 %), at a time
when the costs of production increased by almost 2 % triggered the observed drop in profitability. It
is therefore provisionally considered that the subsidised imports had a significant negative impact on
the situation of the Community industry.

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(a) Decline in demand linked to the slowdown in the steel market

3. EFFECTS OF OTHER FACTORS

(119) Two interested parties claimed that any injury felt by the Community industry was linked to the
downturn experienced in 2001 and early 2002 by the primary consumer of the like product, namely
the steel industry.

(120) The 2001-2002 downturn in the steel industry is acknowledged and is indeed confirmed by the
consumption trend of the product concerned and like product, which peaked in 2000, and subse-
Indeed, the profitability of the Community industry
quently declined in both 2001 and 2002.
declined steadily in the years 2000 to 2002. However, the argument has certainly no relevance
regarding 2000, a year during which the Community industry could not benefit from the boom in
the steel market, as witnessed by the major drops in sales price and profitability observed that year.
The same year, by contrast, import volumes from India increased sharply by 45 % and their market
share rose by 1,5 percentage point. It is also noted that consumption was from 2000 until the IP
significantly above the 1999 level. Thus, a downturn in the steel industry did not translate into an
overall reduced demand for the product concerned and the like product; although obviously the
outstanding 2000 level was not reached in subsequent years. It is therefore provisionally concluded
that the decline in demand linked to the slowdown in the steel market does not provide a satisfactory
explanation for the injury felt by the Community industry, and only contributed to the injury
suffered by the Community industry to a very limited extent, if at all. The effect was consequently
not such as to alter the provisional finding that there is a genuine and substantial causal link between
the subsidised imports from the country concerned and the material
injury suffered by the
Community industry.

(b) Return to normal competition conditions after the dismantling of a cartel

(121) Several interested parties claimed that any injury felt by the Community industry was merely the
consequence of the return to normal competition conditions on the Community market for graphite
electrode systems. More precisely, the said parties attribute the drop in Community industry’s prices
and profitability from 1999 onwards to the fact that the starting point was artificially high due to the
existence of a cartel.

(122)

In decision 2002/271/EC of 18 July 2001 (1), the Commission found that the two complainant
Community producers had, together with other producers, practised a cartel between May 1992
and March 1998. The IP set in the present anti-subsidy proceeding covers the period from 1 April
2002 to 31 March 2003, whilst the period relevant for the assessment of injury trends covers the
period starting on 1 January 1999 until the end of the IP. Therefore, both the IP and the period
considered are substantially posterior to the operation of the cartel. The investigation has found that,
although different kinds of agreements and contracts exist, the largest volumes of transactions are
typically covered by an annual contract whereby a certain number of deliveries are guaranteed
through the year at a certain price. Negotiations of annual contracts typically take place in
October-November of the year preceding the entry into force of the contract. The investigation
has found that in the period 1998-1999, annual contracts covered around 40 % of the transactions,
six-month contracts covered around 35 % and three-month contracts or single orders covered around
25 %. Long-term contracts (e.g. three-year contracts) have been gaining ground relatively recently, but
were, in the years 1997-98, marginal, if not totally non-existent, as would logically be expected in a
market that was characterised by high prices. It was therefore found that virtually all the transactions
actually invoiced and paid in 1999, and the ensuing prices examined under recitals (102) and (103)
above result from agreements between sellers and purchasers set after the period during which
market and price fixings had been found.

(1) OJ L 100, 16.4.2002, p. 1.

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(123) As a supportive element to the above argument, the same interested parties drew the attention of the
Commission to the development of prices of large diameter electrodes (i.e. with a diameter above
700 mm), a segment that is allegedly not served by Indian exporting producers. The investigation
found that although the two Indian exporting producers did not export this range of product during
the IP to the Community, they developed their technical capability to produce this range of product.
The investigation further found that the Community industry’s prices for this particular range of
products had fallen relatively more between 1999 and the IP than the Community industry’s average
prices for the like product considered as a whole. This product range represents a limited share,
around 8 %, of the Community industry’s total sales volume on the Community market of the like
product. This particular market segment has two more features. First, it is a relatively recent and
growing market, which implies that this market has become increasingly competitive in the years
1999 to the IP. Second, it is characterised by the presence of a very small number of large customers,
who also purchase smaller diameter electrodes. As one would logically expect, these larger-than-
average customers use their leveraged purchasing power to obtain larger discounts than a ‘normal’
customer would obtain. The price trend for this particular segment is therefore distorted by the
growing predominance of the above large customers. Finally, although Indian producers did not
export this product range on a regular basis during the IP, the investigation found Indian price offers
for this product range, which Community customers used as a further bargaining tool
in their
negotiations with the Community industry.

(124) The Commission requested and obtained long term price series (since the mid 1980s) from the
Community industry, for representative sales of the like product on the Community market. This
series shows that prices increased gradually during the 1990s and reached a peak in 1998. Between
1998 and 1999, a sharp decline in price by 14 % was observed, which clearly mirrors the end of the
period of market and price fixing.

(125)

In addition, the argument of the return to normal competition conditions after dismantling of the
cartel provides no explanation for the loss in market share felt by the Community industry from
1999 until the IP, as symmetrically opposed to the gain in market share enjoyed by subsidised
imports.
the return to normal competition conditions after
dismantling the cartel might explain only a limited part of the injurious trend experienced by the
Community industry, and that its effect was consequently not such as to alter the provisional finding
that there is a genuine and substantial causal link between the subsidised imports from the country
concerned and the material injury suffered by the Community industry.

follows from the above that

It

(c) Performance of other Community producers

(126) No other Community producer not belonging to the Community industry co-operated in the inves-
tigation. It must be noted however that one of the two other known Community producers became
insolvent and stopped producing as of November 2002 (see recital 77 above). Based on available
evidence, the EC sales volume of the two other producers increased from around 15 000 tonnes in
1999 to around 21 000 tonnes in 2002, before declining to around 19 000 tonnes during the IP. As
it went from 12,5 % in 1999 to 16,6 % in 2002, before
far as their market share is concerned,
declining to 14,4 % during the IP. If the investigation had covered 2003 as a whole, the market share
of the sole remaining Community producer would have been 9,7 %. While it is true that the two
other Community producers gained 1,9 percentage points of market share between 1999 and the IP,
the fact that one producer became insolvent is, as with the Community industry, indicative of an
injurious situation. It is therefore provisionally concluded that the performance of other Community
producers only contributed to the injury suffered by the Community industry to a very limited extent,
if at all, and that its effect was consequently not such as to alter the provisional finding that there is a
genuine and substantial causal link between the subsidised imports from the country concerned and
the material injury suffered by the Community industry.

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(d)

Imports from other third countries

(127) According to the available information, the total import volume of the like product originating in
third countries other than India increased by 20 % from around 13 000 tonnes in 1999 to around
15 000 tonnes in the IP, and their market share increased from 10,7 % in 1999 to 11,8 % in the IP.
As regards the weighted average CIF prices of these imports, they decreased by 8 % between 1999
and the IP, from around 2 400 EUR/tonne in 1999 to around 2 200 EUR/tonne in the IP. It should
be noted that the prices of imports from third countries other than India remained substantially
higher than the prices of the imports from the country concerned throughout the period considered.

(128)

It was further found that only imports originating in three countries other than India had a share of
the Community market above 1 % during the IP, i.e. Japan, Poland and the USA. It was found that (i)
the market share of Japan rose from 2,1 % in 1999 to 2,6 % in the IP, (ii) the market share of Poland
increased from 3,3 % in 1999 to 4,4 % in the IP and (iii) the market share of the USA declined from
5,3 % in 1999 to 4,7 % in the IP. From these three origins, the CIF import prices of Japan and the
USA appear to undercut the Community industry’s prices, whilst prices of imports originating in
Poland were above the prices of the Community industry. In addition, CIF import prices of these
three countries have always been above those of the country concerned. Furthermore, no evidence is
available that would indicate that these imports were made at subsidised prices.

(129) The investigation established that

the two facilities producing the like product

in Poland and
exporting it into the Community are both subsidiaries of one complainant Community producer.
Therefore, all of the above import volumes from Poland during the IP have been made on behalf of
the aforementioned Community producer. The investigation also established that approximately 40 %
of the volumes of the like product imported from the USA have been actually imported by the other
complainant Community producer for final sale in the Community. No indication was found that the
these importing
corresponding re-sales were injurious to other Community producers or that
activities were made at the expense of own production in the Community. The two complainant
Community producers own other facilities producing the like product in other third countries,
however, the investigation established that these import volumes were individually and collectively
negligible, i.e. below 1 % of the Community consumption.

(130) The two complainant Community producers are large companies operating on a global level. Their
field of activity is not restricted to the Community alone. These companies not only import some
limited quantities of the like product for final sale in the Community, but also export a substantial
amount of their Community production outside the Community. The rationale behind these world
shipments is an increasing tendency to specialise the various facilities by dimensions and grades of
the like product, with the direct consequence that both complainant Community producers have, for
certain dimensions and grades, to resort to imports from non-EC facilities in order to complement
the range of products offered to the customer in the Community.

(131) Given the average prices, the small volume of these imports, their limited market share and the above
considerations in terms of product range, no indications could be found that these third country
imports, whether or not originating from facilities owned by the two complainant Community
producers, contributed to the injurious situation suffered by the Community industry notably in
terms of market shares, sales volumes, employment, investment, profitability, return on investment
and cash flow.

(132)

It was also claimed that this proceeding was discriminatory because it had overlooked the existence
of imports of the like product originating in the People’s Republic of China (‘PRC’), as allegedly
shown by relatively large import quantities from the PRC reported under CN code 8545 11 00. It
should be first highlighted that CN code 8545 11 00 covers not only the product concerned and the
like product, but also other items. It is therefore inappropriate to draw conclusions on the sole basis
of the above CN code. Special attention was however paid to this issue during verification visits
carried out at the premises of the co-operating users. Whilst several users had reported in their
questionnaire replies volumes of the like product imported from the PRC, the on spot verification
evidenced that none of these Chinese electrodes matched the parameters defining the product
concerned. In addition, one of the two users’ associations clearly stated in a written submission
that the PRC was not in a situation to produce and export the like product into the Community
during the period 1999-IP. The argument is therefore rejected.

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(e) Export performance of the Community industry

(133) Pointing at the sizeable drop in the export prices of the Community industry, one interested party
claimed that (i) this was indicative of the absence of causal link between subsidised imports and the
injury suffered by the Community industry in the Community market and (ii) this could be regarded
as self-inflicted injury.

(134) As explained above, the two complainant Community producers operate on a global

level. The
investigation found that the Community industry exports in volume some 15 % more than it sells
in the Community. Starting from a level of around 100 000 tonnes in 1999, the volume of sales
exported by the Community industry increased by 12 % in 2000, dropped by 20 percentage points in
2001, increased by 2 percentage points in 2002 and by a further 6 percentage points in the IP.
During the IP, the volume of export sales was very close to that observed in 1999, and therefore no
loss of economies of scale can be attributed to the export activity. The investigation found that prices
of export sales dropped by around 14 % between 1999 and the IP. However, taken in isolation from
other factors that might play a role at a world market level, this observation bears no relevance in
respect of the present proceeding, which concerns the Community market and not the world market.
It should also be noted that
the injury
the Community industry’s own
assessment
production. Although the profitability of export sales developed slightly worse than that of
Community sales, this fact is also regarded as irrelevant in respect of the present proceeding. It is
therefore considered that the export activity cannot have contributed in any way to the injury
suffered by the Community industry.

the profitability trend examined in the framework of

refers exclusively to sales in the Community of

1999

2000

2001

2002

IP

Export sales volume (tonnes)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

112

91

93

Export sales unit price (EUR/tonne)

cannot be disclosed (see recital 80 above)

Index (1999 = 100)

100

96

102

88

99

86

4. CONCLUSION ON CAUSATION

(135)

In conclusion, it is confirmed that the material injury of the Community industry, which is prin-
cipally characterised by the decline between 1999 and the IP in market share; by the decline in unit
sales price (by 8 %); by the unit cost of production increase by 2 %; by the ensuing drop in profit-
ability, return on investments, and cash-flow from operating activities; and by the decline in
investment and employment; was caused by the subsidised imports concerned.

(136)

Indeed, the effect of the decline in demand linked to the slowdown in the steel market, of the return
to normal competition conditions after dismantling of the cartel, of the performance of other
Community producers, of the imports from other third countries, of the export performance of
the Community industry was non-existent or only very limited and consequently not such as to alter
the provisional finding that there is a genuine and substantial causal link between the subsidised
imports from the country concerned and the material injury suffered by the Community industry.

(137)

It is therefore provisionally concluded that the subsidised imports originating in India have caused
material injury to the Community industry within the meaning of Article 8(6) of the basic Regu-
lation.

G. COMMUNITY INTEREST

(138) The Commission examined whether, despite the conclusions on subsidisation, injury and causation,
compelling reasons existed which would lead to the conclusion that it is not in the Community
interest to adopt measures in this particular case. For this purpose, and pursuant to Article 31(1) of
the basic Regulation, the Commission considered the likely impact of measures for all parties
concerned.

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1.

INTEREST OF THE COMMUNITY INDUSTRY

(139) The Community industry is composed of two groups of companies, encompassing a total of nine
production facilities spread over different Community countries, and 1 800 persons directly involved
in the production, sales and administration of the like product. Following an imposition of measures,
it is expected that both sales volumes and sales prices of the Community industry on the Community
market will rise. However, Community industry’s prices would certainly not increase by the level of
any countervailing duty since competition will still remain amongst Community producers, imports
originating in the country concerned made at non-subsidised prices and imports originating in other
third countries. In conclusion, it is expected that the increase in production and sales volume, on the
one hand, and the further decrease in unit costs, on the other hand, combined with a moderate price
increase, will allow the Community industry to improve its financial situation.

(140) On the other hand, should anti-subsidy measures not be imposed, it is likely that the negative trend
of the Community industry will continue. The Community industry will
likely continue to lose
market shares and to experience a deterioration of its profitability. This will in all likelihood lead
to cuts in production and investments, closure of certain production capacities and further job
reduction in the Community.

(141)

In conclusion, the imposition of anti-subsidy measures will allow the Community industry to recover
from the effects of the injurious subsidisation found.

2.

INTEREST OF UNRELATED IMPORTERS/TRADERS IN THE COMMUNITY

(142) During the IP, the two co-operating importers imported around 20 % of the EC total import volume
of the product concerned originating in the country concerned. From the co-operation of the two
it appears that the importers/traders in the Community (i.e. the two
Indian exporting producers,
above co-operating importers on the one hand, plus non-cooperating importers/traders on the other
hand) account for about 40 % of the EC total import volume of the product concerned originating in
India.

(143) Should countervailing measures be imposed, it is possible that the volume of imports originating in
the country concerned may decrease. Furthermore, it cannot be excluded that the imposition of anti-
subsidy measures may result in a moderate increase in the prices of the product concerned in the
Community, thus affecting the economic situation of
importers/traders. As far as the two co-
operating importers are concerned, the activity of trading of the product concerned originating in
India accounts for around 40 % of their total turnover. In terms of their workforce, out of a total of
10 employees, 4 are directly involved in the trading of the product concerned originating in India.
The effect on importers of the increase in the import price of the product concerned will depend also
on their ability to pass it on to their customers. The low proportion of the product concerned in
users’ total costs (see recital 147 below) might also make it easier for the importers to pass any price
increase on to users.

(144) On this basis, it is provisionally concluded that the imposition of anti-subsidy measures is not likely

to have a serious negative effect on the situation of importers in the Community.

3.

INTEREST OF THE USER INDUSTRY

(145) The principal user industry, accounting for around 80 % of the total EC consumption of the product
concerned and the like product, is the electric steel industry. During the IP, the eight co-operating
final users consumed around 27 % of the EC total import volume of the product concerned origi-
nating in the country concerned, imported either directly from the two Indian exporting producers or
via importers/traders. From the co-operation of the two Indian exporting producers, it appears that
final users in the Community (i.e. the eight above co-operating users on the one hand, plus non-
cooperating users on the other hand) account for about 56 % of the EC total direct import volume of
the product concerned originating in India. The remaining part (4 %) has been imported by the
Community industry.

(146) The co-operating users claim that the imposition of anti-subsidy measures would adversely affect
their financial situation, directly via the increased price of their consumption sourced in India, and
indirectly via the likely price increase implemented by Community producers for the share of their
consumption sourced from Community producers.

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(147) The investigation showed that consumption of the product concerned and like product represents on
average 1 % of total costs of production of co-operating users. The possible cost impact on users is as
follows. Should countervailing measures be applied, users’ costs of production would rise by between
0,15 % (based on a worst case scenario whereby prices of both product concerned and like product
would rise by the amount of the duty, irrespective of their origin) and 0,03 % (only the consumption
sourced from India is affected by the price increase). On balance,
it is estimated that the actual
outcome is likely to stand in the middle of these two scenarios, for the following reasons. The
Community industry might increase its prices to a certain extent, but it will also likely take advantage
of the relief in price pressure to regain lost market share by pricing competitively vis-à-vis Indian
prices. Spare capacities exist and the return to fair and more profitable market conditions would
certainly raise potential supply from all origins and foster new investments. In addition, some 15 % of
the EU consumption is sourced from alternative suppliers (i.e. other Community producers and
imports from third countries other than India). Therefore,
it is unlikely that a general price rise
will happen. Finally, of the above very limited likely impact on users’ costs of production, it might be
possible to pass on at least a part of it to downstream customers, which would thus result in an even
smaller final impact on users profits.

(148) The co-operating users also object to the imposition of countervailing measures on the ground that
this would raise an obstacle to a competitive market, and de facto help re-instate the cartel found in
2001 by the Commission.

(149) The two complainant Community producers, which had practised a cartel between May 1992 and
March 1998, were fined in 2001 by the Commission. The investigation confirmed that the two
producers composing the Community industry had ceased their past behaviour of price and market
fixing, and this point is not debated by any party. The situation at stake is to restore a level playing
field that has been distorted by the unfair trade practises of Indian exporters. The aim of anti-subsidy
measures is not to stop access to the Community of imports from the country concerned, but to
eliminate the impact of distorted market conditions arising from the presence of subsidised imports.
Restoring fair market conditions will not only benefit Community producers, but also alternative
supply sources like for example non-subsidised imports. The fact that the Community industry had
practised a cartel in the years 1992-98 should not deprive it of the right to obtain relief under the
basic Regulation against unfair trade practises.

(150)

In view of these findings,
it may be provisionally concluded that the imposition of anti-subsidy
measures (i) is unlikely to seriously affect the financial situation of the users; and (ii) is unlikely to
have any negative effect on the overall competition situation on the Community market.

4. CONCLUSION ON COMMUNITY INTEREST

(151) The effects of the imposition of measures can be expected to afford the Community industry with the
opportunity to regain lost sales and market shares and to improve its profitability. On the other
hand, in view of the deteriorating situation of the Community industry, there is a risk that in the
absence of measures, certain Community producers may close down production facilities and lay-off
part of their workforce. Whilst some negative effects are likely to result in the form of decrease in the
volumes imported and moderate price increases for the importers/traders and for the users, the extent
of these may be reduced by passing the increase on to downstream customers. In the light of the
above, it is provisionally concluded that no compelling reasons exist for not imposing measures in
the present case and that the application of measures would not be against the interest of the
Community.

H. PROPOSAL FOR PROVISIONAL COUNTERVAILING MEASURES

(152)

In view of the conclusions reached with regard to subsidisation, injury, causation and Community
interest, provisional measures should be taken in order to prevent further injury to the Community
industry by the subsidised imports.

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1.

INJURY ELIMINATION LEVEL

(153) The level of the provisional countervailing measures should be sufficient to eliminate the injury to the
Community industry caused by the subsidised imports, without exceeding the subsidy margins found.
When calculating the amount of duty necessary to remove the effects of the injurious subsidisation, it
was considered that any measures should allow the Community industry to obtain a profit before tax
that could be reasonably achieved under normal conditions of competition, i.e. in the absence of
subsidised imports.

(154) On the basis of the information available, it was preliminarily found that a profit margin of 9,4 % of
turnover could be regarded as an appropriate level which the Community industry could be expected
to obtain in the absence of injurious subsidisation. The complainant Community producers submitted
that they could reasonably expect a profit margin of 10 % to 15 % in the absence of subsidised
imports. The investigation found that the Community industry had reached a profit ranging between
12 to 15 % over turnover in 1999 (see recital 105 above), when the market share held by subsidised
imports was the lowest. The Commission examined whether 1999 market conditions could be
considered as representative of the normal conditions on the market for the product concerned.
The investigation established that the return to normal competition conditions after the end of the
price and market fixing period had an effect on prices and that the price of key raw materials had
increased substantially between 1999 and the IP. In these circumstances, it is considered that there
was no likelihood of the Community industry achieving a profitability ranging between 12 to 15 %
during the IP. Finally, the Commission looked at company balance sheet statistics by sectors collected
by the Central Banks of Germany, France, Italy, Japan and the USA. The database aggregating these
data is maintained by the Commission. This examination showed that companies belonging to the
nearest available sector in the above largest industrialised countries achieved on average a profit
before extraordinary items of 9,4 % in 2002. Taking all circumstances and elements into account, the
Commission considers that 9,4 % is a reasonable profit that the Community industry could achieve in
the absence of subsidised imports.

(155) The necessary price increase was then determined on the basis of a comparison, on a transaction by
transaction basis, of the weighted average import price, as established for the price undercutting
calculations, with the non-injurious price of the like product sold by the Community industry on the
Community market. The non-injurious price has been obtained by adjusting the sales price of the
Community industry in order to reflect the above mentioned profit margin. Any difference resulting
from this comparison was then expressed as a percentage of the total CIF import value.

(156) The above-mentioned price comparison showed the following injury margins:

Graphite India Limited (GIL)

Hindustan Electro Graphite (HEG) Limited

20,3 %

12,8 %

(157)

In the light of the foregoing,
it is considered that a provisional countervailing duty should be
imposed at the level of the subsidy margin found, but should not be higher than the injury
margin calculated above in accordance with Article 12(1) of the basic Regulation.

2. PROVISIONAL MEASURES

3. FINAL PROVISION

(158)

In the interest of 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 provisional and
may have to be reconsidered for the purposes of any definitive duty,

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HAS ADOPTED THIS REGULATION:

Article 1

1.
SA provisional countervailing duty is hereby imposed on imports of graphite electrodes of a kind used
for electric furnaces, with an apparent density of 1,65 g/cm3 or more and an electrical resistance of 6,0 μΩ.m
or less, falling within CN code ex 8545 11 00 (TARIC code 8545 11 00 10) and nipples used for such elec-
trodes, falling within CN code ex 8545 90 90 (TARIC code 8545 90 90 10), whether imported together or
separately originating in India.

The rate of the provisional countervailing duty applicable to the net free-at-Community-frontier price,

2.
before duty, for products produced by the companies listed below in India shall be as follows:

Company

Provisional duty

TARIC additional code

India

Graphite
Chowringhee
Road,
700016, West Bengal

Limited

(GIL), 31
–

Kolkatta

Hindustan
Limited,
Sector-1, Noida
Pradesh

Bhilwara

Electro Graphite

(HEG)
Towers, A-12,
– 201301, Uttar

All others

14,6 %

12,8 %

14,6 %

A530

A531

A999

3.

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

The release for free circulation in the Community of the product referred to above shall be subject to

4.
the provision of a security equivalent to the amount of the provisional duty.

Article 2

Without prejudice to Article 30 of Council Regulation (EC) No 2026/97, interested parties may request
disclosure of the essential facts and considerations on the basis of which this Regulation was adopted, make
their views known in writing and apply to be heard orally by the Commission within 15 days of the date of
entry into force of this Regulation.

Pursuant to Article 31(4) of Council Regulation (EC) No 2026/97, the parties concerned may comment on
the application of this Regulation within one month of the date of its entry into force.

Article 3

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 four months.

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

Done at Brussels, 19 May 2004.

For the Commission

Pascal LAMY
Member of the Commission