Council Regulation (EC) No 1628/2004 of 13 September 2004 imposing a definitive countervailing duty and collecting definitively the provisional duty imposed on imports of certain graphite electrode systems originating in India
Date: 2004-09-13
Institutions: Council of the European Union
Subjects: India, countervailing charge, electrical equipment, import, originating product

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Official Journal of the European Union

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COUNCIL REGULATION (EC) No 1628/2004

of 13 September 2004

imposing a definitive countervailing duty and collecting definitively the provisional duty imposed
on imports of certain graphite electrode systems originating in India

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community,

establishing the European

duty on imports of certain graphite electrode systems
originating in India and the definitive collection of the
amounts secured by way of the provisional duty. They
were also granted a period within which to make repre-
sentations subsequent to the disclosure of the essential
facts and considerations.

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)
(the
basic Regulation), and in particular Article 15 thereof,

(5)

The oral and written comments
submitted by the
interested parties were considered and, where appro-
priate, the findings have been modified accordingly.

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

Whereas:

C. PRODUCT CONCERNED AND LIKE PRODUCT

(6)

Since no new comments were received regarding the
product concerned and the like product, recitals 12 to
16 of the provisional Regulation are hereby confirmed.

(1)

(2)

(3)

(4)

A. PROVISIONAL MEASURES

(the provisional Regulation),

On 19 May, the Commission, by Regulation (EC) No
1008/2004 (2)
imposed a
provisional countervailing duty on imports
into the
Community of certain graphite electrode systems origi-
nating in India.

(7)

B. SUBSEQUENT PROCEDURE

Subsequent to the disclosure of the essential facts and
considerations on the basis of which it was decided to
several
impose provisional
interested parties made written submissions making
their views known on the provisional
findings. The
parties who so requested were granted an opportunity
to be heard.

countervailing measures,

The Commission continued to seek and verify all infor-
mation it deemed necessary for the definitive findings.

All parties were informed of
facts and
considerations on the basis of which it was intended to
recommend the imposition of a definitive countervailing

the essential

(8)

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

lation (EC) No 461/2004 (OJ L 77, 13.3.2004, p. 12).

(2) OJ L 183, 20.5.2004, p. 35.

D. SUBSIDISATION

1. Duty entitlement passbook scheme (DEPB)

the DEPB on post-export basis

Following disclosure after the imposition of provisional
measures and subsequent to final disclosure, a number of
comments were received from the Government of India
(the GOI) and from the exporting producers. It was firstly
claimed that
is a
drawback scheme and, as a consequence, any benefit
under the scheme should be restricted to any excess
remission of import duties that may have been given.
the quantification of any
It was further claimed that
benefit should be based on the date of receipt of the
DEPB licences and not on the date of their utilisation
or sale, as was taken by the Commission. Finally,
it
was claimed that
the amount of benefit should be
reduced as it was alleged that the DEPB rate for the
product concerned was reduced from 19 to 11 % in
February 2004, namely after the IP.

In response to the first claim, it is noted in recital 33 of
‘the basic Regulation
the provisional Regulation that
inter alia, drawback and
provides for an exception for,
substitution drawback schemes which conform to the
strict rules laid down in Annex I item (i), Annex II (defi-
nition and rules for drawback) and Annex III (definition
and rules for substitution drawback)’.

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(9)

(10)

examination based on actual

In this context, it must be noted that the GOI did not
apply an effective verification system or procedure to
confirm whether and in what amounts inputs were
consumed in the production of the exported product
(Annex II(II)(4) of the basic Regulation and, in the case
of substitution drawback schemes, Annex III(II)(2) of the
basic Regulation). Additionally, the GOI did not carry out
a post-export
inputs
involved to determine whether an excess payment
occurred, although this would normally be required in
the absence of an effectively applied verification system
(Annex II(II)(5) and Annex III(II)(3) to the basic Regu-
lation). Furthermore in recital 37 of the provisional Regu-
lation it was considered that ‘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’. For these reasons, the
conclusion in recital 38 of the provisional Regulation,
is the remission of
that
total
is
hereby confirmed.

‘the countervailable benefit
import duties normally due on all

imports’

(12)

in advance of

To be eligible for benefits under this scheme, a company
must export goods. At the point in time of the export
transaction, a declaration must be made by the exporter
to the authorities in India indicating that the export is
taking place under the DEPB scheme. In order for the
the Indian customs authorities
goods to be exported,
issue,
the goods being exported, an
export shipping bill which shows, inter alia, the amount
of DEPB credit which is to be granted for that export
transaction. At this point in time of export, the company
knows the benefit
it will receive. Once the customs
authorities issue an export shipping bill, the GOI has
It
no discretion over the granting of a DEPB credit.
was also verified that any change to the DEPB rates
between the actual export and the issuance of a DEPB
licence will not affect the level of benefit granted. The
relevant DEPB rate is that which applied at the time the
export declaration is made. Therefore, there is no possi-
bility for a retroactive amendment to the level of the
benefit. Accordingly, the moment the export transaction
is made, the GOI is liable to forego the customs duties,
which constitutes a financial contribution within the
meaning of Article 2(1)(a)(i) of the basic Regulation.

In this

they are aware that

case, when exporters of

the imported goods are lower as a result of having
received subsidies and that such lower prices cause
injury.
graphite
electrode systems are negotiating prices for an export
that sale benefits from a
sale,
subsidy under the DEPB scheme. By virtue of the fact
that the exporters are aware that they will receive such
subsidy, and indeed benefits under other schemes, these
companies are already in a competitively more advan-
tageous position at the point in time when they are
negotiating prices, that is to say they can reflect the
subsidies through offering lower prices.

inter alia,

The Indian accounting standards provide for booking
credits, such as those received under the DEPB scheme,
on an accrual basis as income, once (i) such benefits have
been earned; and (ii)
it is reasonably certain that the
ultimate collection of the proceeds of the export trans-
action will be made. What is relevant here is the point at
which ‘benefits have been earned’. As stated in recital 10
above, once the customs authorities issue an export
shipping bill which shows,
the amount of
DEPB credit which is to be granted for that export trans-
action, the GOI has no discretion as to whether or not to
grant the subsidy and it has no discretion as to the
the subsidy. Also, as stated above in the
amount of
same recital, any change to the DEPB rates between the
actual export and the issuance of a DEPB licence has no
retroactive effect on the level of benefit granted. Finally,
as stated in recital 11 above, the prices of export trans-
actions are considered to reflect the subsidies (that is to
say through lower prices) from which they can benefit. In
these circumstances,
is considered that benefits are
earned when the export transaction is made. On this
in line with Indian accounting
basis, companies can,
standards, book the DEPB credit as income at the stage
of export transaction.

it

(11) Article 1(1) of the basic Regulation provides that a ‘coun-
tervailing duty may be imposed for the purpose of
offsetting any subsidy granted […] whose release for
free circulation in the Community causes injury’. The
rationale for imposing such a duty is that the prices of

(13)

In accordance with Articles 2(2) and 5 of the basic Regu-
lation, the amount of countervailable subsidies shall be
calculated in terms of
the benefit conferred on the
recipient, which is found to exist during the investigation
period. In light of the above, it is considered appropriate
to assess the benefit under this scheme as being the sum
of the credits earned on all export transactions made
under this scheme during the investigation period. This
differs from the approach followed in the provisional
Regulation where the sum of the credits utilised was
assessed. In accordance with Article 7(1)(a) of the basic
Regulation, fees necessarily incurred to obtain the subsidy
were deducted.

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(14)

In respect of the final argument relating to the alleged
reduction of the DEPB rate, it is accepted that prima facie
evidence has been submitted to show that the DEPB rate
for the product concerned was reduced to 11 % with
effect from 9 February 2004. However, as the amount
of benefit is assessed on the basis of the amount of
benefit earned on all export transactions made during
the IP, the reduction in the DEPB rate after this period
will have no effect on the level of subsidy determined.

(19)

(15) On the basis of these changes, the benefit under this
scheme for the two cooperating companies was revised
to 16,6 and 14,4 % respectively.

2. Export promotion capital goods scheme (EPCGS)

(16)

In the absence of any comments from interested parties,
the conclusions outlined in recitals 56 to 58 of
the
provisional Regulation, are hereby confirmed.

3. Advance licence scheme (ALS)

(17) At the provisional stage, one exporting producer in India
was deemed to have received a countervailable benefit
under this scheme. The representatives of this exporter
claimed both that (i) the scheme was not countervailable;
and (ii) in any case, any benefit received was only granted
to a business unit of the company which did not manu-
facture the product concerned and which had been sold
off by the company subsequent to the IP. Accordingly, it
was claimed that no benefit under the ALS should be
attributed to the exporter.

(18)

In respect of
the first claim, no new evidence was
provided to show that the ALS was not a countervailable
export subsidy. In this context, it is recalled that the GOI
apply an effective verification system or
did not
procedure to confirm whether and in what amounts
inputs were
the
exported product (Annex II(II)(4) of the basic Regulation
and,
in the case of substitution drawback schemes,
the basic Regulation). Additionally,
Annex III(II)(2) of
the GOI did not carry out a post-export examination
inputs involved to determine whether
based on actual
although this would
an excess payment occurred,

consumed in the production of

normally be required in the absence of an effectively
applied verification system (Annex II(II)(5) and Annex
III(II)(3) to the basic Regulation). For these reasons, the
conclusions in recitals 64 to 70 of the provisional Regu-
lation are hereby confirmed.

that

In respect of the second claim, it was found that during
the IP the exporter concerned had benefited from the
scheme and had, as a result, received a countervailable
benefit. Furthermore,
the business unit
the fact
producing this product was sold subsequent to the IP,
is not relevant for determining whether the company
benefited of a subsidy during the IP. In addition,
it is
not considered to be relevant when assessing the level
of the subsidisation of the company as a whole, whether
the subsidy scheme was
the
the product
company that did not
concerned. Indeed, it is the company as a whole which
is examined, and thus any benefit to one of the units is
considered to represent a benefit for the company as a
whole. To that end, it is confirmed that during the IP, the
business unit which benefited from the ALS scheme and
the business units which manufactured the product
concerned,
entity.
Therefore, the conclusion outlined in recital 71 of the
provisional Regulation is hereby confirmed.

targeted at a unit of
itself produce

economic

formed

legal

one

4. Export processing zones (EPZ)/export orientated

unit (EOU)

(20)

In the absence of any comments from interested parties,
the conclusion outlined in recital 72 of the provisional
Regulation, is hereby confirmed.

5. Income tax exemption (ITE)

(21)

In the absence of any comments from interested parties,
the conclusion outlined in recital 74 of the provisional
Regulation, is hereby confirmed.

6. Amount of countervailable subsidies

(22)

In light of the conclusions outlined above, the amount of
countervailable subsidies
is definitively confirmed, as
follows:

Type of subsidy

DEPB

EPCGS

ALS

EPZ/EOU

ITE

TOTAL

Graphite India Limited (GIL)

16,6 %

0,1 %

Hindustan Electro Graphite (HEG)
Limited

14,4 %

0,3 %

0,2 %

All others

16,7 %

14,9 %

16,7 %

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E. COMMUNITY INDUSTRY

H. COMMUNITY INTEREST

(23)

In the absence of any substantially new information or
argument in this particular respect, recitals 76 to 79 of
the provisional Regulation are hereby confirmed.

F. INJURY

(24)

(25)

type of

concerned,

the product

Following the provisional disclosure, the Indian exporters
pointed to the divergence in the undercutting margin of
as
one particular
compared with the undercutting margins of
similar
types. The claim was properly examined and it was
found that the discrepancy was due to a mistake in the
reporting of a number of credit notes and discounts of
one particular Community producer. The claim was
therefore accepted and the undercutting margin of this
particular type and, where applicable, of other types were
corrected accordingly.

It was further found that a number of sale transactions of
the Community industry used for the undercutting calcu-
lations were double-counted. In view of this, the double-
counted transactions had to be eliminated and the under-
cutting calculations had to be modified accordingly.
taken place
However,
when establishing the figures used for assessing the
injury indicators. Therefore,
there was no need to
modify the injury indicators.

this double-counting had not

(26) As a result, the comparison showed that during the IP
the prices of the product concerned originating in India
and sold in the Community undercut the Community
industry’s prices by between 3 and 11 %.

(27)

In the absence of any substantially new information or
argument in this particular respect, recitals 80 to 116 of
the provisional Regulation are hereby confirmed, with
the exception of recital 86 (see recitals 24 to 26 above).

G. CAUSATION

1. Return to normal competition conditions after

the dismantling of the cartel

(28)

The Indian exporters reiterated their argument that the
establishment of a causal
link between the subsidised
imports and the injury suffered by the Community
industry is based on data which would be unreliable
because of
the
beginning of 1998. However, the Indian exporters did
not provide any new information within the deadline
set for submitting comments in this particular respect.

the existence of a cartel up until

(29)

In the absence of any substantially new information or
argument, recitals 117 to 137 of the provisional Regu-
lation are hereby confirmed.

for

(30) An association representing users and a user company
reiterated their main concern that, by excluding Indian
suppliers from the Community market, the imposition of
any measure would reduce overall competition on the
Community market
this particular product and
inevitably lead to an increase in prices. However, as
assessed under recital 147 of the provisional Regulation,
the like
the impact of any increase in the price of
product for final customers is likely to be minimal. It
is further recalled that the purpose of any countervailing
into the
measure is by no means
Community of products
to
rather
restore a level playing field that had been distorted by
unfair trade practices. Finally,
it is considered that the
level of
the measures is not such as to exclude the
Indian producers from the Community market.

to stop access
from India, but

(31)

In the absence of any substantially new information or
argument in this particular respect, recitals 138 to 151 of
the provisional Regulation are hereby confirmed.

I. INJURY ELIMINATION LEVEL

(32)

situation of

the financial

to disclosure of provisional

Further
findings, several
interested parties claimed that the profit level of 9,4 %
the
deemed to represent
Community industry in the absence of injurious subsidi-
sation from India was too high. It was alleged that the
ratio for
normal practice was
commodity goods sectors such as steel,
textiles and
base chemicals. The same parties further claimed that
the methodology used to arrive at this figure should be
fully disclosed.

to set a 5 % profit

that

(33) As explained under recital 154 of the provisional Regu-
lation, the profit of 9,4 % was the result of a reasoned
assessment established on the basis of a number of
elements, amongst which (i) the profit achieved by the
Community industry in 1999, when the market share of
the dumped imports was at its lowest; (ii) the market
conditions at
the output drawn
time; and (iii)
from a database on company accounts. As regards this
database, it consists of company accounts data, which are
first collected by national central banks of the largest
industrialised countries,
i.e. most of the Member States
of the European Union, the United States of America and
Japan, and then aggregated, by sectors, by the European
Committee of Central Balance Sheet Data Offices and the
European Commission. The database has been updated
between provisional and definitive determination. An
the updated data referring to the EU
analysis of
Member States, plus the United States of America and
Japan shows that the average profit before extraordinary
items for companies belonging to the nearest available
business sector was of 7,5 % in 2002, which is the last
year available in the database.

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(34) However, it is further considered that, when setting the
profit that could have been achieved in the absence of
subsidisation, due consideration has to be paid to all
qualitative and quantitative elements relevant
for this
In particular, as this has been done under
purpose.
recital 154 of the provisional Regulation, a proper exam-
ination was made of Community industry’s profit levels
when the market share of subsidised imports was at its
lowest
(namely 1999), and of any other causes and
circumstances that might affect the representativity of
the latter period. Finally,
it is noted that the product
concerned is used in demanding applications and has
to strictly match certain parameters, notably in terms
of electrical resistance. This entails both a highly capital
intensive manufacturing process and a not negligible
amount of research and development costs. The fact
that only a limited number of producers in the world
master this technology is a further indication that this
product can certainly not be considered as a basic
commodity.

(35)

circumstances

and elements

into
these
Taking all
account,
the profit
is definitively concluded that
it
margin that can reasonably be deemed to represent the
financial situation of
the Community industry in the
absence of injurious subsidisation from India should be
set at 8 % for the purpose of the calculation of the injury
margin.

(38)

(39)

(36) As a consequence of

the above and of

regarding undercutting (see recitals 24 to 26),
injury margins were revised as follows.

the finding
the

at the level for the company with the highest individual
margin, that is to say 16,7 %.

K. DEFINITIVE COLLECTION OF THE PROVISIONAL
DUTY

In view of the magnitude of the subsidy margins found
for the exporting producers in India and given the level
of the injury caused to the Community industry,
it is
considered necessary that the amounts secured by way
of provisional countervailing duty imposed by the provi-
sional Regulation should be definitively collected to the
extent of the amount of definitive duties imposed. As the
definitive countervailing duty for Graphite India Limited
(GIL) is higher than the provisional countervailing duty,
the amounts secured by way of provisional counter-
vailing duty imposed by the provisional Regulation
shall be definitively collected. Conversely, as the definitive
countervailing duty for Hindustan Electro Graphite (HEG)
Limited is lower than the provisional countervailing duty,
amounts provisionally secured in excess of the definitive
rate of countervailing duties shall be released.

The individual countervailing duty rates specified in this
Regulation were established on the basis of the findings
of the present investigation. Therefore, they reflect the
situation found during that
investigation with respect
to these companies. These duty rates (as opposed to
the country-wide duty applicable to ‘all others’) are thus
exclusively applicable to imports of products originating
the
in the
companies
entities
and thus by the
Imported products produced by any other
mentioned.
company not specifically mentioned in the operative
this Regulation with its name and address,
part of
including
specifically
to
from these rates and shall
mentioned, cannot benefit
be subject to the duty rate applicable to ‘all others’.

concerned and produced by

country

specific

entities

related

those

legal

Graphite India Limited (GIL)

Hindustan Electro Graphite (HEG) Limited

15,7 %

7,0 %

J. DEFINITIVE MEASURES

(37)

In view of the conclusions reached with regard to subsi-
disation, injury, causation and Community interest, it is
considered that a definitive countervailing duty should be
imposed in order to prevent further injury being caused
to the Community industry by the subsidised imports.
The definitive measures 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 15(1) of
the
level of the overall cooperation for India was high, the
residual subsidy margin for all other companies was set

the basic Regulation. Given that

(for example,

(40) Any claim requesting the application of these individual
countervailing duty rates
following a
the entity or following the
change in the name of
setting up of new production or sales entities) should
be addressed to the Commission forthwith with all
relevant information,
in particular any modification in
the company's activities linked to production, domestic
sales and export sales associated with for example that
name change or that change in the production and sales
entities. If appropriate, the Regulation will accordingly be
amended by updating the list of companies benefiting
from individual duties.

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L. UNDERTAKINGS

(41) During the course of the investigation, the two exporting
producers in India, Graphite India Limited and Hindustan
Electro Graphite Limited offered price undertakings in
accordance with Article 13(1) of the basic Regulation.
However, significant differences were observed between
the investigation period and the present time for raw
material costs, this being due to the general volatility
of this particular market. It follows that if undertakings
were accepted in this case, on the basis of minimum
import prices established solely on the data collected
relating to the investigation period, as currently offered,
this would have negative consequences on the effec-
tiveness of the said undertakings in removing injurious
subsidisation. In addition, one of the exporting producers
concerned, subsequent to its undertaking offer, acquired
a graphite electrode production company situated in the
Community which raises the risk of circumvention of its
undertaking offer. In view of both of these developments
it was not possible to finalise workable, and therefore
acceptable, undertakings within the time limits of the
present investigation,

HAS ADOPTED THIS REGULATION:

Article 1

A definitive countervailing duty is hereby imposed on
1.
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 electrodes, 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 definitive countervailing duty applicable to
2.
the net
for
free-at-Community-frontier price, before duty,
products produced by the companies listed below shall be as
follows:

Company

Graphite India Limited (GIL), 31 Chow-
ringhee Road, Kolkatta — 700016, West
Bengal

Electro Graphite

Hindustan
(HEG)
Limited, Bhilwara Towers, A-12, Sector-
1, Noida — 201301, Uttar Pradesh

Definitive
duty

TARIC addi-
tional code

15,7 %

A530

7,0 %

A531

All others

15,7 %

A999

Unless otherwise

3.
concerning customs duties shall apply.

specified,

the provisions

in force

Article 2

The amounts secured by way of provisional countervailing
duties pursuant to the provisional Regulation 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
falling within CN code
less,
ex 8545 11 00 (TARIC code 8545 11 00 10) and nipples used
for such electrodes,
falling within CN code ex 8545 90 90
(TARIC code 8545 90 90 10) whether imported together or
separately originating in India shall be definitively collected as
follows.

The amounts secured in excess of the definitive rate of counter-
vailing duties shall be released. Where the definitive duties are
higher than the provisional duties, only the amounts secured at
the level of the provisional duties shall be definitively collected.

Article 3

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

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

Done at Brussels, 13 September 2004.

For the Council
The President

B. R. BOT