Proposal for a COUNCIL REGULATION imposing a definitive countervailing duty on imports of certain graphite electrode systems originating in India following an expiry review pursuant to Article 18 of Council Regulation (EC) No 597/2009
Date: 2010-11-16
Institutions: European Commission
Subjects: World Trade Organisation, countervailing charge, export subsidy, import policy, import restriction, third country

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EUROPEAN COMMISSION 

Brussels, 16.11.2010 
COM(2010) 669 final 

2010/0328 (NLE) 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive countervailing duty on imports of certain graphite electrode 
systems originating in India following an expiry review pursuant to Article 18 of Council 
Regulation (EC) No 597/2009 

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EXPLANATORY MEMORANDUM 

1) 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

This  proposal  concerns  the  application  of  Council  Regulation  (EC)  No  597/2009  of 
11 June 2009 on protection against subsidised imports from countries not members of 
the  European  Community  (‘the  basic  Regulation’),  in  the  expiry  review  of  the 
countervailing duty in force in respect of imports of certain graphite electrode systems 
originating in India. 

General context 

This proposal is made in the context of the implementation of the basic Regulation and 
is the result of an investigation which was carried out in line with the substantive and 
procedural requirements laid out in the basic Regulation. 

Existing provisions in the area of the proposal 

A definitive countervailing duty on imports of certain graphite electrodes falling within 
CN codes ex 8545 11 00 and nipples used for such electrodes falling within CN code 
ex 8545 90 90 originating in India imposed by Council Regulation (EC) No 1628/2004 
(OJ  L  295,  18.9.2004,  p.  4.)  as  amended  by  Council  Regulation  (EC)  No  1354/2008 
(OJ L 350, 30.12.2008, p. 24).  

Consistency with other policies and objectives of the Union 

Not applicable. 

2) 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

Consultation of interested parties 

Interested parties concerned by the proceeding have had the possibility to defend their 
interests during the investigation, in line with the provisions of the basic Regulation. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

This proposal is the result of the implementation of the basic Regulation. 

The basic Regulation does not provide for a general impact assessment but contains an 
exhaustive list of conditions that have to be assessed. 

3) 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

On 17 September  2009,  the Commission initiated upon  substantiated  request  of three 
Union  producers  an  expiry  review  of  the  countervailing  duty  in  force  in  respect  of 
imports of certain graphite electrodes originating in India. 

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The  review  investigation  found  continuing  subsidisation  of  the  product  concerned, 
which,  should  countervailing  measures  be  lifted,  would  result  in  the  recurrence  of 
injury to the Union industry. It was further established that the lapse of measures would 
not be in the interest of the Union.  

Therefore,  it  is  suggested  that  the  Council  adopts  the  attached  proposal  for  a 
Regulation in order to prolong the existing measures, which should be published in the 
Official Journal of the European Union by 16 December 2010 at the latest. 

Legal basis 

Council  Regulation  (EC)  No  597/2009  of  11 June  2009  on  protection  against 
subsidised imports from countries not members of the European Community. 

Subsidiarity principle 

The  proposal  falls  under  the  exclusive  competence  of  the  European  Union.  The 
subsidiarity principle therefore does not apply. 

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

The form of action is described in the above-mentioned basic Regulation and leaves no 
scope for national decision. 

Indication of how financial and administrative burden falling upon the Union, national 
governments,  regional  and  local  authorities,  economic  operators  and  citizens  is 
minimized and proportionate to the objective of the proposal is not applicable. 

Choice of instruments 

Proposed instruments: regulation. 

Other means would not be adequate for the following reason: 

the basic Regulation does not provide for alternative options. 

4) 

BUDGETARY IMPLICATION 

The proposal has no implication for the Union budget. 

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2010/0328 (NLE) 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive countervailing duty on imports of certain graphite electrode 
systems originating in India following an expiry review pursuant to Article 18 of Council 
Regulation (EC) No 597/2009 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, 

Having  regard  to  Council  Regulation  (EC)  No  597/2009  of  11  June  2009  on  protection 
against  subsidised  imports  from  countries  not  members  of  the  European  Community1  (‘the 
basic Regulation’), and in particular Article 18 thereof, 

Having regard to Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection 
against  dumped  imports  from  countries  not  members  of  the  European  Community2,  and  in 
particular Article 14(1) thereof, 

Having  regard  to  the  proposal  submitted  by  the  European  Commission  ('the  Commission') 
after consulting the Advisory Committee, 

Whereas: 

1.  Measures in force 

A. 

PROCEDURE 

(1) 

(2) 

(3) 

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The  Council,  following  an  anti-subsidy  investigation  ('the  original  investigation'),  by 
Regulation (EC) No 1628/20043, imposed a definitive countervailing duty on imports 
of  certain  graphite  electrodes  currently  falling  within  CN  code  ex  8545  11  00  and 
nipples  used  for  such  electrodes  currently  falling  within  CN  code  ex  8545  90  90 
originating in India (‘the definitive countervailing measures’). The measures took the 
form of an ad valorem duty of 15,7 %, with the exception of one company for which 
the duty rate was 7 %. 
The  Council,  by  Regulation  (EC)  No  1629/20044,  imposed  definitive  anti-dumping 
duties on imports of certain graphite electrodes currently falling within CN codes ex 
8545 11 00 and nipples used for such electrodes currently falling within CN code ex 
8545  90  90  originating  in  India  (‘the  definitive  anti-dumping  measures’).  The 
measures took the form of an ad valorem duty of 0 %. 

Following  an  ex  officio  partial  interim  review  of  the  countervailing  measures,  the 
Council  by  Regulation  (EC)  No  1354/20085  amended  Council  Regulation  (EC)  No 
1628/2004 and Council Regulation (EC) No 1629/2004. The definitive countervailing 

OJ L 188, 18.7.2009, p. 93. 
OJ L 343, 22.12.2009, p. 51. 
OJ L 295, 18.9.2004, p. 4. 
OJ L 295, 18.9.2004, p. 10. 
OJ L 350, 30.12.2008, p. 24. 

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duties  were  amended  to  6,3  %  and  7,0  %  for  imports  from  individually  named 
exporters with a residual duty rate of 7,2 %. The definitive anti-dumping duties were 
amended  to  9,4  %  and  0  %  for  imports  from  individually  named  exporters  with  a 
residual duty rate of 8,5 %. 

2.  Request for an expiry review 
Following  the  publication  of  a  notice  of  impending  expiry6  of  the  definitive 
countervailing  measures  in  force,  the  Commission,  on  18  June  2009,  received  a 
request for the initiation of an expiry review of these measures, pursuant to Article 18 
of the basic Regulation. The request was lodged by three Union producers of the like 
product,  i.e.  Graftech  International,  SGL  Carbon  GmbH,  and  Tokai  ERFTCARBON 
GmbH (‘the applicants’) representing a major proportion, in this case more than 90 % 
of the total Union production of certain graphite electrode systems.  

The request was based on the grounds that the expiry of the measures would be likely 
to  result  in  a  continuation  or  recurrence  of  subsidisation  and  injury  to  the  Union 
industry. 

Prior to the initiation of the expiry review, and in accordance with Articles 22(1) and 
10(7) of the basic Regulation, the Commission notified the Government of India (‘the 
GOI’) that it had received a properly documented review request and invited the GOI 
for consultations with the aim of clarifying the situation as regards the contents of the 
review request and arriving at a mutually agreed solution. The GOI accepted the offer 
of  consultations  and  consultations  were  subsequently  held  on  16  September  2009. 
During  the  consultations,  no  mutually  agreed  solution  could  be  arrived  at.  However, 
due note was taken of the comments submitted by the authorities of the GOI. 

3. 

Initiation of an expiry review 

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed  for  the  initiation  of  an  expiry  review,  the  Commission  announced  on  17 
September 2009, by a notice published in the Official Journal of the European Union7 
('the Notice of initiation'), the initiation of an expiry review pursuant to Article 18 of 
the basic Regulation. 

4. 

Parallel investigations 

By a notice of initiation published in the Official Journal of the European Union on 
17 September  20098,  the  Commission  also  announced  the  initiation  of  an  expiry 
review  investigation  pursuant  to  Article  11(2)  of  Council  Regulation  (EC)  No 
1225/2009  of  30  November  2009  on  protection  against  dumped  imports  from 
countries  not  members  of  the  European  Community9  of  the  definitive  anti-dumping 
measures. 

(4) 

(5) 

(6) 

(7) 

(8) 

5. 

Investigation 

5.1.  Investigation period  

(9) 

The  investigation  of  continuation  or  recurrence  of  subsidisation  covered  the  period 
from  1  July  2008  to  30  June  2009  (‘the  review  investigation  period’  or  ‘RIP’).  The 
examination  of  the  trends  relevant  for  the  assessment  of  the  likelihood  of  a 

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OJ C 34, 11.2.2009, p. 11. 
OJ C 224, 17.9.2009, p. 24. 
OJ C 224, 17.9.2009, p. 20. 
OJ L 343, 22.12.2009, p. 51. 

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continuation or recurrence of injury covered the period from 1 January 2006 to the end 
of the review investigation period (‘the period considered’). 

5.2.  Parties concerned by the investigation  

(10)  The  Commission  officially  advised  the  applicants,  other  known  Union  producers, 
exporting  producers,  importers,  users  known  to  be  concerned,  and  the  GOI  of  the 
initiation of the expiry review. Interested parties were given the opportunity to make 
their views known in writing and to request a hearing within the time limit set out in 
the Notice of initiation.  

(11)  All interested parties, who so requested and showed that there were particular reasons 

why they should be heard, were granted a hearing.  

(12) 

In  view  of  the  apparent  large  number  of  unrelated  importers,  it  was  considered 
appropriate, in accordance 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  be  necessary  and,  if  so,  to  select  a  sample,  the  above  parties  were 
requested, pursuant to Article 27 of the basic Regulation, to make themselves known 
within 15 days of the initiation of the reviews and to provide the Commission with the 
information  requested  in  the  Notice  of  initiation.  However,  no  unrelated  importers 
came forward to cooperate. Sampling was therefore not necessary.  

(13)  The Commission sent questionnaires to all parties known to be concerned and to those 
who  made  themselves  known  within  the  deadlines  set  in  the  Notice  of  initiation. 
Replies were received from three groups of Union producers (i.e., the applicants), one 
exporting  producer  and  17 users,  and  the  GOI.  None  of  the  importers  came  forward 
during  the  sampling  exercise  and  no  other  importers  supplied  the  Commission  with 
any information or made themselves known in the course of the investigation.  

(14)  Only  one  of  the  two  known  exporting  producers  in  India,  namely  HEG  Limited 
('HEG') fully cooperated in the review by submitting a response to the questionnaire. It 
should be noted in this regard that in the original investigation the full, official name 
of that company was Hindustan Electro Graphite Limited. Subsequently the company 
has changed its name into HEG Limited. The second exporting producer cooperating 
in  the  original  investigation,  namely  Graphite  India  Limited  ('GIL')  decided  not  to 
submit a questionnaire reply in the present review.  

(15)  The  Commission  sought  and  verified  all  the  information  it  deemed  necessary  for  a 
determination  of  the  likelihood  of  continuation  or  recurrence  of  subsidisation  and 
resulting  injury  and  of  the  Union  interest.  Verification  visits  were  carried  out  at  the 
premises of the following interested parties: 

(a)  Union producers 

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– 

– 

– 

SGL Carbon GmbH, Wiesbaden and Meitingen, Germany; 

Graftech Switzerland SA, Bussigny, Switzerland; 

Graftech Iberica S.L., Ororbia, Spain; 

Tokai ERFTCARBON, Grevenbroich, Germany. 

(b)  Exporting producer in India 

– 

HEG Limited, Bhopal. 

(c)  Government of India ('GOI'). 

B. 

PRODUCT CONCERNED AND LIKE PRODUCT 

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(16)  The  product  concerned  by  this  review  is  the  same  as  the  one  in  the  original 
investigation, namely 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  µ.Ω.m  or 
less,  currently  falling  within  CN  code  ex  8545  11  00  and  nipples  used  for  such 
electrodes, currently falling within CN code ex 8545 90 90 whether imported together 
or separately originating in India (‘the product concerned’). 

(17)  The  investigation  confirmed  that,  as  in  the  original  investigation,  the  product 
concerned and the products manufactured and sold by the exporting producer on the 
domestic  market  in  India,  as  well  as  those  manufactured  and  sold  in  the  EU  by  the 
Union producers, have the same basic physical and technical characteristics as well as 
the same uses and are, therefore, considered to be like products within the meaning of 
Article 2(c) of the basic Regulation. 

C. 

LIKELIHOOD OF CONTINUATION OR RECURRENCE OF 

SUBSIDISATION 

1. 

Introduction 

(18)  On the basis of the information contained in the review request and the replies to the 
Commission’s  questionnaire,  the  following  schemes,  which  allegedly  involve  the 
granting of subsidies, were investigated:  

Nationwide schemes  

(a)  Advance Authorisation Scheme ('AAS');  

(b)  Duty Entitlement Passbook Scheme ('DEPBS'); 

(c)  Export Promotion Capital Goods Scheme ('EPCGS'); 

Regional Scheme 

(d)  Electricity Duty Exemption Scheme ('EDES'). 

(19)  The schemes (a) to (c) 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.  These  are  summarised  in  'Foreign  Trade 
Policy'  documents,  which  are  issued  by  the  Ministry  of  Commerce  every  five  years 
and updated regularly. Two Foreign Trade Policy documents are relevant to the RIP of 
this  case,  i.e.  FT-policy  04-09  and  FT-policy  09-14.  The  latter  entered  into  force  in 
April 2009. In addition, the GOI also sets out the procedures governing the FT-policy 
04-09 and FT-policy 09-14 in a  'Handbook of Procedures, Volume I' ('HOP I 04-09' 
and  'HOP  I  09-14'  respectively).  The  Handbook  of  Procedures  is  also  updated  on  a 
regular basis 

(20)  The  scheme  specified  above  under  (d)  is  managed  by  the  authorities  of  the  State  of 

Madhya Pradesh.  

2.  Advance Authorisation Scheme (‘AAS’) 

(21) 

In the course of the investigation it was found that the cooperating Indian producer did 
not  obtain  any  benefits  under  the  AAS  scheme  during  the  RIP.  It  was  therefore  not 
necessary to further analyse this scheme in this investigation. 

3.  Duty Entitlement Passbook Scheme (‘DEPBS’) 

(a)  Legal Basis 

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(22)  The detailed description of the DEPBS is contained in paragraphs 4.3 of the FT-policy 
04-09 and FT-policy 09-14 as well as in chapter 4 of the HOP I 04-09 and of the HOP 
I 09-14.  

(b)  Eligibility 

(23)  Any manufacturer-exporter or merchant-exporter is eligible for this scheme.  

(c)  Practical implementation of the DEPBS 

(24)  An eligible exporter can apply for DEPBS credits which are calculated as a percentage 
of  the  value  of  products  exported  under  this  scheme.  Such  DEPBS  rates  have  been 
established  by  the  Indian  authorities  for  most  products,  including  the  product 
concerned. They are determined on the basis of Standard Input Output Norm ('SION'), 
which  is  a  norm,  taking  into  account  a  presumed  import  content  of  inputs  in  the 
exported  product  and  the  customs  duty  incidence  on  such  presumed  imports, 
regardless of whether import duties have actually been paid or not.  

(25)  To be eligible for benefits under this scheme, a company must export. 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  DEPBS.  In 
order  for  the  goods  to  be  exported,  the  Indian  customs  authorities  issue,  during  the 
dispatch  procedure,  an  export  shipping  bill.  This  document  shows,  inter  alia,  the 
amount  of  DEPBS  credit  which  is  to  be  granted  for  that  export  transaction.  At  this 
point  in  time,  the  exporter  knows  the  benefit  it  will  receive.  Once  the  customs 
authorities issue an export shipping bill, the GOI has no discretion over the granting of 
a  DEPBS  credit.  The  relevant  DEPBS  rate  to  calculate  the  benefit  is  that  which 
applied at the time the export declaration was made. Therefore, there is no possibility 
for a retroactive amendment to the level of the benefit. 

(26) 

It was found that in accordance with Indian accounting standards, DEPBS credits can 
be booked on an accrual basis as income in the commercial accounts, upon fulfilment 
of  the  export  obligation.  Such  credits  can  be  used  for  payment  of  customs  duties  on 
subsequent  imports  of  any  goods  unrestrictedly  importable,  except  capital  goods. 
Goods  imported  against  such  credits  can  be  sold  on  the  domestic  market  (subject  to 
sales  tax)  or  used  otherwise.  DEPBS  credits  are  freely  transferable  and  valid  for  a 
period of 12 months from the date of issue. 

(27)  Applications  for  DEPBS  credits  are  electronically  filed  and  can  cover  an  unlimited 
amount of export transactions. De facto, no strict deadlines to apply for DEPBS credits 
exist.  The  electronic  system  used  to  manage  DEPBS  does  not  automatically  exclude 
export  transactions  exceeding  the  deadline  submission  periods  mentioned  in  chapter 
4.47 of the HOP I 04-09 and 09-14. Furthermore, as clearly provided in chapter 9.3 of 
the  HOP  I  04-09  and  09-14,  applications  received  after  the  expiry  of  submission 
deadlines can always be considered with the imposition of a minor penalty fee (i.e. 10 
% of the entitlement). 

(28) 

It was found that the cooperating Indian exporting producer used this scheme during 
the RIP. 

(d)  Conclusions on the DEPBS 

(29)  The  DEPBS  provides  subsidies  within  the  meaning  of  Article  3(1)(a)(ii)  and  Article 
3(2) of the basic Regulation. A DEPBS credit is a financial contribution by the GOI, 
since  the  credit  will  eventually  be  used  to  offset  import  duties,  thus  decreasing  the 

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GOI’s  duty  revenue  which  would  be  otherwise  due.  In  addition,  the  DEPBS  credit 
confers a benefit upon the exporter, because it improves its liquidity. 

(30)  Furthermore,  the  DEPBS  is  contingent  in  law  upon  export  performance,  and  is 
therefore  deemed  to  be  specific  and  countervailable  under  Article  4(4),  first 
subparagraph, point (a) of the basic Regulation.  

(31)  This  scheme  cannot  be  considered  as  permissible  duty  drawback  system  or 
substitution  drawback  system  within  the  meaning  of  Article  3(1)(a)(ii)  of  the  basic 
Regulation  as  claimed  by  the  cooperating  Indian  exporting  producer.  It  does  not 
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.  An  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. Moreover, 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, 
an  exporter  is  eligible  for  the  DEPBS  benefits  regardless  of  whether  it  imports  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 which 
can be used as inputs are still entitled to benefit from the DEPBS  

(e)  Calculation of the subsidy amount 

(32) 

In  accordance  with  Articles  3(2)  and  5  of  the  basic  Regulation,  the  amount  of 
countervailable  subsidies  was  calculated  in  terms  of  the  benefit  conferred  on  the 
recipient, which is found to exist during the review investigation period. In this regard, 
it  was  considered  that  the  benefit  is  conferred  on  the  recipient  at  the  point  in  time 
when  an  export  transaction  is  made  under  this  scheme.  At  this  moment,  the  GOI  is 
liable  to  forego  the  customs  duties,  which  constitutes  a  financial  contribution  within 
the meaning of Article 3(1)(a)(ii) of the basic Regulation. 

(33) 

In  light  of  the  above,  it  is  considered  appropriate  to  assess  the  benefit  under  the 
DEPBS as being the sum of the credits earned on all export transactions made under 
this scheme during the RIP.  

(34)  The  cooperating  Indian  exporting  producer  claimed  that  in  their  case  all  the  DEPBS 
credits obtained had been used to import materials used solely in the production of the 
product concerned, despite being in principle allowed to sell them or use them for the 
import of other materials. The company claimed that therefore DEPBS was a normal 
duty  drawback  system,  and  only  the  excess  remission  should  be  countervailed.  This 
claim has to be rejected, however, since, as explained above in recital (31), DEPBS is 
not  considered  as  a  permissible  duty  drawback  system  or  substitution  drawback 
system, which has been also admitted by the GOI. It is therefore not relevant what the 
exporter  actually  does  with  the  licences  obtained  under  this  scheme.  It  is  at  the 
moment  of  the  export  transactions  made  under  this  scheme,  that  an  exporter  is 
obtaining an irrevocable conferral of a benefit, not at the moment of subsequent usage 
of the licence.  

(35)  Where justified claims were made, fees necessarily incurred to obtain the subsidy were 
deducted from the credits so established to arrive at the subsidy amounts as numerator, 
pursuant to Article 7(1)(a) of the basic Regulation.  

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(36) 

In  accordance  with  Article  7(2)  of  the  basic  Regulation  these  subsidy  amounts  have 
been allocated over the total export turnover during the review investigation period as 
appropriate denominator, because the subsidy is contingent upon export performance 
and it was not granted by reference to the quantities manufactured, produced, exported 
or transported.  

(37)  Based  on  the  above,  the  subsidy  rate  established  in  respect  of  this  scheme  for  the 

cooperating exporting producer during the RIP amounts to 5,7 %.  

4. 

Export Promotion Capital Goods scheme (‘EPCGS’) 

(a)  Legal basis 

(38)  The detailed description of the EPCGS is contained in chapter 5 of the FT-policy 04-
09 and of the FT-policy 09-14 as well as in chapter 5 of the HOP I 04-09 and of the 
HOP I 09-14.  

(b)  Eligibility 

(39)  Manufacturer-exporters,  merchant-exporters  “tied  to”  supporting  manufacturers  and 

service providers are eligible for this scheme.  

(c)  Practical implementation 

(40)  Under  the  condition  of  an  export  obligation,  a  company  is  allowed  to  import  capital 
goods (new and -since April 2003- second-hand capital goods up to 10 years old) at a 
reduced rate of duty. To this end, the GOI issues, upon application and payment of a 
fee, an EPCGS licence. Since April 2000, the scheme provides for  a reduced  import 
duty rate of 5 % applicable to all capital goods imported under the scheme. Until 31 
March 2000, an effective duty rate of 11 % (including a 10 % surcharge) and, in case 
of  high  value  imports,  a  zero  duty  rate,  was  applicable.  In  order  to  meet  the  export 
obligation,  the  imported  capital  goods  must  be  used  to  produce  a  certain  amount  of 
export goods during a certain period. Under a new FT-policy 09-14 the capital goods 
can be imported with 0 % duty rate under the EPCGS but in such case the time period 
for fulfilment of the export obligation is shorter.  

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

(42) 

It was found that the cooperating exporting producer used this scheme during the RIP. 

(d)  Conclusion on EPCGS 

(43)  The  EPCGS  provides  subsidies  within  the  meaning  of  Article  3(1)(a)(ii)  and  Article 
3(2) of the basic Regulation. The duty reduction constitutes a financial contribution by 
the  GOI,  since  this  concession  decreases  the  GOI’s  duty  revenue  which  would  be 
otherwise  due.  In  addition,  the  duty  reduction  confers  a  benefit  upon  the  exporter, 
because the duties saved upon importation improve the company’s liquidity. 

(44)  Furthermore,  the  EPCGS  is  contingent  in  law  upon  export  performance,  since  such 
licences cannot be obtained without a commitment to export. Therefore it is deemed to 
be specific and countervailable under Article 4(4), first subparagraph, point (a) of the 
basic  Regulation.  It  has  been  claimed  by  the  cooperating  exporting  producer  that 
EPCGS  subsidies  with  regard  to  the  purchase  of  capital  goods  where  the  export 
obligation  was  already  fulfilled  before  the  RIP,  should  not  anymore  be  treated  as 

EN 

10 

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contingent upon export performance. Therefore they should not be treated as specific 
subsidies and should not be countervailed. However, this claim has to be rejected. It 
has  to  be  underlined  that  the  subsidy  itself  was  contingent  upon  export  performance 
i.e.  it  would  not  have  been  granted  had  the  company  not  accepted  a  certain  export 
obligation.  

(45)  The EPCGS cannot be considered a permissible duty drawback system or substitution 
drawback  system  within  the  meaning  of  Article  3(1)(a)(ii)  of  the  basic  Regulation. 
Capital goods are not covered by the scope of such permissible systems, as set out in 
Annex  I,  item  (i),  of  the  basic  Regulation,  because  they  are  not  consumed  in  the 
production of the exported products. 

(e)  Calculation of the subsidy amount 

(46)  The  subsidy  amount  was  calculated,  in  accordance  with  Article  7(3)  of  the  basic 
Regulation, on the basis of the unpaid customs duty on imported capital goods spread 
across a period which reflects the normal depreciation period of such capital goods in 
the industry concerned. Interests were added to this amount in order to reflect the full 
value  of  the  benefit  over  time.  The  commercial  interest  rate  during  the  review 
investigation period in India was considered appropriate for this purpose.  

(47) 

In accordance with Articles 7(2) and 7(3) of the basic Regulation this subsidy amount 
has been allocated over the export turnover during the RIP as appropriate denominator, 
because the subsidy is contingent upon export performance.  

(48)  The  subsidy  rate  established  in  respect  of  this  scheme  for  the  cooperating  exporting 

producer during the RIP amounts to 0,9 %. 

5. 

Electricity Duty Exemption Scheme (EDES) – regional scheme of the State 
of Madhya Pradesh  

(49)  Under  the  Industrial  Promotion  Policy  of  2004,  the  State  of  Madhya  Pradesh  (MP) 
offers  exemption  of  electricity  duty  to  industrial  companies  investing  in  electricity 
generation for captive consumption.  

(a)  Legal basis 

(50)  The  detailed  description  of  the  EDES  is  contained  in  the  Government  of  Madhya 
Pradesh Notification No 29 of 21 July 2006 and Order No 4238-XIII-2006 Annexure 
C of 12 July 2006.  

(b)  Eligibility 

(51)  Every manufacturer, which invests a certain amount of capital in the set up of a power 

plant within the State of Madhya Pradesh is eligible for this scheme.  

(c)  Practical implementation 

(52)  The EDES provides for the exemption from the payment of the electricity duty - local 
sales  tax  normally  due  in  Madhya  Pradesh  -  for  companies  which  invested  a  certain 
amount  of  capital  in  the  building  of  a  power  plant.  The  exemption  is  granted  for  a 
certain  period  depending  on  the  value  of  investment.  The  aim  of  the  scheme  is  to 
develop  infrastructure  as  the  state-owned  power  plants  cannot  provide  companies  in 
the area with sufficient electricity. The duty exemption is granted only for captive use 
of energy.  

(53) 

It was found that the cooperating exporting producer used this scheme during the RIP. 

(d)  Conclusion on EDES 

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11 

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(54)  The  EDES  provides  subsidies  within  the  meaning  of  Article  3(1)(a)(ii)  and  Article 
3(2) of the basic Regulation. The duty exemption constitutes a financial contribution 
by the State Government of Madhya Pradesh, since this concession decreases the State 
Government's  duty  revenue  which  would  be  otherwise  due.  In  addition,  the  tax 
reduction confers a benefit upon the exporter, because the duty saved upon purchases 
of electricity improve its liquidity. 

(55)  The  EDES  is  not  contingent  in  law  upon  export  performance.  In  addition  it  is  not 
limited in law to certain geographical areas within the State of Madhya Pradesh or to 
only  some  companies  or  branches  of  industry.  Therefore,  it  was  claimed  by  the 
cooperating exporting producer that this scheme should not be considered specific and 
therefore  should  not  be  countervailed,  as  its  eligibility  is  based  on  objective  and 
neutral economic criteria.  

(56)  However, due to the lack of cooperation of the State Government of Madhya Pradesh, 
the Commission was unable to make a firm conclusion on this scheme as regards the 
specificity and practical application of this law and the level of discretion the granting 
authority  enjoys  when  deciding  on  the  applications.  Indeed,  it  cannot  be  determined 
with certainty whether Article 4(2), first subparagraph, point (b) is fulfilled, given that 
it  could  not  be  established  that  the  State  Government  of  Madhya  Pradesh  applied 
objective criteria or conditions for granting the subsidy. Therefore, even if the scheme 
was shown not to be specific in law, it is still not clear that it is not specific de facto. 
As  a  result  it  is  deemed  to  be  specific  and  countervailable  under  Article  4(2),  first 
subparagraph, point (c) and Article 4(2), fourth subparagraph of the basic Regulation.  

(e)  Calculation of the subsidy amount 

(57)  The  subsidy  amount  was  calculated,  in  accordance  with  Article  7(2)  of  the  basic 
Regulation, on the basis of the unpaid sales duty on  electricity purchased in the RIP 
(the  numerator)  and  the  total  sales  turnover  of  the  company  (the  denominator)  as 
EDES  is  neither  contingent  upon  export  performance  nor  was  the  use  of  electricity 
limited only to the production of the product concerned.  

(58)  The  subsidy  rate  established  in  respect  of  this  scheme  for  the  cooperating  exporting 

producer during the RIP amounts to 0,5 %. 

6.  Amount of countervailable subsidies 

(59)  The amount of countervailable subsidies determined in accordance with the provisions 
of the basic Regulation, expressed ad valorem, for the investigated exporting producer 
amounts  to  7,1  %.  These  amounts  of  subsidisation  exceed  the  de  minimis  threshold 
mentioned under Article 14(5) of the basic Regulation. 

(60)  The level of the subsidisation established in the current procedure corresponds to the 
level of subsidisation of 7,2 % found for the same exporting producer during the most 
recent interim review.  

(61) 

It  is  therefore  considered  that,  pursuant  to  Article  18  of  the  basic  Regulation, 
subsidisation continued during the RIP. 

SCHEMES 

AAS 

DEPBS 

EPCGS 

EDES 

Total 

HEG Ltd. 

Nil  

5,7 % 

0,9 % 

0,5 % 

7,1 % 

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(62) 

(63) 

7.  Conclusions  on 
subsidisation 

the 

likelihood  of  continuation  or  recurrence  of 

In accordance with Article 18(2) of the basic Regulation, it was examined whether the 
expiry of the measures in force would be likely to lead to a continuation or recurrence 
of subsidisation. 

In this respect it is recalled that only one of the two known exporting producers of the 
product concerned cooperated. It was established that during the RIP, the cooperating 
exporting  producer  continued  to  benefit  from  countervailable  subsidisation  by  the 
Indian  authorities.  The  subsidy  schemes  analysed  above  give  recurring  benefits  and 
there are no indications that these programmes would be phased out or modified in the 
foreseeable  future  or  that  the  cooperating  exporting  producer  would  stop  obtaining 
benefits under these schemes. The schemes in question are still maintained in the FT-
policy 09-14.  

(64)  As  regards  the  other  known  exporting  producer  in  India,  according  to  the  review 
request it continued to benefit from the subsidy schemes analysed above. There is no 
information available which would indicate that this was not the case. It is therefore 
concluded that the subsidisation at the country-wide level continued. 

(65) 

In  view  of  the  findings  described  above  it  is  concluded  that  subsidisation  continued 
during the RIP and would be likely to continue in the future.  

(66)  Since it has been demonstrated that subsidisation continued during the RIP and that it 
is likely to continue in the future, the issue of likelihood of recurrence of subsidisation 
is irrelevant. 

D. 

DEFINITION OF THE UNION INDUSTRY 

1.  Union production 

(67)  Within  the  Union,  the  like  product  is  manufactured  by  five  companies  or  groups  of 
companies  whose  output  constitutes  the  total  Union  production  of  the  like  product 
within the meaning of Article 9(1) of the basic Regulation. 

2.  Union industry 

(68)  Two of the five groups of companies did not come forward to support the request and 
did  not  cooperate  in  the  review  investigation  by  submitting  a  response  to  the 
questionnaire. The following three groups of producers lodged the request and agreed 
to cooperate: Graftech International, SGL Carbon GmbH, and Tokai ERFTCARBON 
GmbH. 

(69)  These  three  groups  of  producers  account  for  a  major  proportion  of  the  total  Union 
production  of  the  like  product,  since  they  represent  over  90  %  of  the  total  Union 
production of certain graphite electrode systems, as indicated at recital (4) above. They 
are  therefore  deemed  to  constitute  the  Union  industry  within  the  meaning  of  Article 
9(1) and Article 10(8) of the basic Regulation and will hereinafter be referred to as the 
‘Union industry’. 

E. 

SITUATION ON THE UNION MARKET 

1. 

Preliminary remark 

(70)  Given that only one Indian exporting producer of the product concerned cooperated in 
this investigation, data relating to imports of the product concerned into the European 

EN 

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Union  originating  in  India  are  not  presented  in  precise  figures  in  order  to  preserve 
confidentiality pursuant to Article 29 of the basic Regulation. 

(71)  The  situation  of  the  graphite  electrode  industry  is  closely  linked  to  that  of  the  steel 
sector  since  graphite  electrodes  are  primarily  used  in  the  electrical  steel  industry.  In 
this context, it should be noted that in 2007, and up to the first three quarters of 2008, 
very  positive  market  conditions  prevailed  within  the  steel  sector,  and  as  a 
consequence, also for the graphite electrode industry. 

(72) 

It should be noted that sales volumes of graphite electrodes move more or less in line 
with  the  volume  of  steel  production.  However,  supply  contracts  for  graphite 
electrodes,  covering  prices  and  quantities,  are  usually  negotiated  for  6-12  month 
periods.  There  is,  therefore,  generally  a  time  lag  between  developments  in  sales 
volume resulting from changes in demand and any consequential effect on prices.  

2.  Consumption in the Union market 

(73)  Union  consumption  was  established  on  the  basis  of  the  sales  volumes  of  the  Union 
industry on the Union market, an estimation of the sales volumes of the other Union 
producers  on  the  Union  market,  import  data  from  Eurostat,  and  data  collected  in 
accordance  with  Article  24(6)  of  the  basic  Regulation.  As  had  been  done  in  the 
original  investigation10,  some  imports  were  disregarded  because,  on  the  basis  of  the 
information available, they appeared not to be the product under investigation.  

(74)  Between 2006 and the RIP, Union consumption decreased by almost 25 %, with the 
main  decrease  occurring  between  2008  and  the  RIP.  It  should  be  noted  that,  due  to 
very  positive  market  conditions  at  the  beginning  of  the  period  considered,  Union 
consumption  was  at  very  high  levels  and  had  increased  by  30  %  between  the 
investigation period of the original investigation and 2006. 

Table 1 

2006 

2007 

2008 

RIP 

Total EU consumption (tonnes) 

170.035 

171.371 

169.744 

128.437 

Index (2006=100) 

100 

101 

100 

76 

3.  Volume, market share and prices of imports from India 

(75)  The  volume  of  imports  originating  in  India  ('the  country  concerned')  has  increased 
steadily  by  143  percentage  points  over  the  period  considered  and  reached  a  level  of 
5.000 to 7.000 tonnes during the RIP. The market share of imports from the country 
concerned more than tripled between 2006 and the RIP, when it reached the level of 
around  5  %.  Market  share  was  still  growing  during  the  RIP,  notwithstanding  the 
significant  decrease  in  demand.  The  prices  of  imports  from  the  country  concerned 
increased by 52 % over the period considered, following a similar trend to that for the 
Union  industry's  prices,  but  remained  consistently  lower  than  those  of  the  Union 
industry.  The  data  in  Table  2  is  not  given  in  precise  figures  for  reasons  of 
confidentiality, since there are only two known exporting producers in India. 

Table 2 

2006 

2007 

2008 

RIP 

10 

See recital (132) of Commission Regulation (EC) No 1008/2004 (OJ L 183, 20.5.2004, p. 35).  

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Volume of imports from the country concerned 
(tonnes) * 
Index (2006=100) 

Market share of imports from the country concerned * 
Price of imports from the country concerned 
(EUR/tonne) 
Index (2006=100) 

2.000 to 
3.000 
100 

Around 
1,5 % 

Around 
2.000 
100 

3.000 to 
4.000 
123 

Around 
2 % 

Around 
2.600 
133 

7.000 to 
9.000 
318 

Around 
5 % 

Around 
3.000 
145 

5.000 to 
7.000 
243 

Around 
5 % 

Around 
3.200 
152 

4. 

Economic situation of the Union industry  

(76)  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  Union 
industry.  

4.1.  Production 

(77) 

In  the  RIP,  production  decreased  by  29  %  compared  to  2006.  The  Union  industry’s 
production first increased by 2 % in 2007 compared to 2006, before declining sharply, 
particularly during the RIP.  

Production (tonnes) 
Index (2006=100) 

Table 3 

2006 
272.468 
100 

2007 
278.701 
102 

2008 
261.690 
96 

RIP 
192.714 
71 

4.2.  Capacity and capacity utilisation rates 

(78)  Production capacity decreased marginally (by 2 % overall) between 2006 and the RIP. 
As production also decreased in 2008, and in particular during the RIP, the resulting 
capacity utilisation showed an overall decrease of 25 percentage points between 2006 
and the RIP. 

Production capacity (tonnes) 
Index (2006=100) 
Capacity utilisation 
Index (2006=100) 

4.3.  Stocks  

Table 4 

2006 
298.500 
100 
91 % 
100 

2007 
292.250 
98 
95 % 
104 

2008 
291.500 
98 
90 % 
98 

RIP 
293.500 
98 
66 % 
72 

(79)  The level of closing stocks of the Union industry remained stable in 2007 compared to 
2006  and  then  decreased  by  10  %  in  2008.  In  the  RIP,  the  level  of  stocks  increased 
somewhat, but was 5 % lower than in 2006.  

Closing stock (tonnes) 
Index (2006=100) 

4.4.  Sales volume  

Table 5 

2006 
21.407 
100 

2007 
21.436 
100 

2008 
19.236 
90 

RIP 
20.328 
95 

(80)  The sales by the Union industry on the Union market to unrelated customers decreased 
by  39  %  over  the  period  considered.  They  were  very  high  at  the  beginning  of  the 
period  considered  having  increased  by  nearly  70  %  compared  to  the  investigation 
period of the original investigation. Sales volumes decreased slightly in 2007 and 2008 

EN 

15 

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but remained at a relatively high level (in 2008 they were still 47 % above the level of 
the  investigation  period  of  the  original  investigation).  However,  sales  volumes 
dropped significantly between 2008 and the RIP (by almost one-third). 

Table 6 

EU Sales volume to unrelated customers (tonnes) 
Index (2006=100) 

4.5.  Market share 

2006 
143.832 
100 

2007 
139.491 
97 

2008 
124.463 
87 

RIP 
88.224 
61 

(81)  The  market  share  held  by  the  Union  industry  declined  progressively  by  almost  16 

percentage points between 2006 and the RIP (from 84,6 % to 68,7 %).  

Table 7 

2006 

2007 

2008 

RIP 

Market share of the Union industry 

84,6 % 

81,4 % 

73,3 % 

68,7 % 

Index (2006=100) 

100 

96 

87 

81 

4.6.  Growth  

(82)  Between  2006  and  the  RIP,  the  Union  consumption  decreased  by  almost  25  %.  The 
Union  industry  lost  almost  16  percentage  points  of  market  share,  whilst  the  imports 
concerned gained 3,4 percentage points of market share. 

4.7.  Employment 

(83)  The level of employment of the Union industry declined by 7 % between 2006 and the 

RIP. 

Table 8 

Employment product concerned (persons) 
Index (2006=100) 

4.8.  Productivity 

2006 
1.942 
100 

2007 
1.848 
95 

2008 
1.799 
93 

RIP 
1.804 
93 

(84)  Productivity  of  the  Union  industry's  workforce,  measured  as  output  per  person 
employed per year, decreased by 24 % between 2006 and the RIP. It increased slightly 
during 2007 and 2008, before decreasing by almost 25 % during the RIP. 

Table 9 

Productivity (tonnes per employee) 
Index (2006=100) 

2006 
140 
100 

2007 
151 
107 

2008 
146 
104 

RIP 
107 
76 

4.9.  Sales prices and factors affecting domestic prices 

(85)  Unit sales prices of the Union industry show a positive trend, having increased by 40 
%  during  the  period  considered.  This  is  due  to:  i)  the  general  level  of  prices  in  the 
market, ii) the need to recover increases in costs of production, and iii) the way supply 
contract prices are established. 

(86) 

In 2007 and 2008 the Union industry was able to increase its prices in the context of 
generally  increasing  market  prices,  which  was  due  to  continued  strong  demand  for 

EN 

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graphite electrodes. This demand was a result of the very positive market conditions 
prevailing within the steel sector up until the first three quarters of 2008, as described 
in recital (71).  

(87)  Prices also increased in 2007 and 2008, in part, in order to cover increasing costs of 
production  and  in  particular  those  of  raw  materials.  Between  2006  and  2008  costs 
increased by 23 %. However, the Union industry was able to cover this by increasing 
its prices considerably (+33 %).  

(88)  Prices  still  increased,  although  to  a  lesser  extent  (+5  %),  in  the  RIP.  The  fact  that 
prices  did  not  fall  during  a  period  when  demand  dropped  is  explained  by  the  way 
supply contracts are established in the market and the fact that most supply contracts 
for  2009  were  concluded  in  2008.  As  indicated  at  recital  (72),  sales  volumes  of 
graphite  electrodes  move  more  or  less  in  line  with  steel  production.  However,  the 
negotiation of supply contracts for graphite electrodes  for  periods  of  6  to  12  months 
can  lead  to  a  delay  in  the  effect  of  any  change  (increase  or  decrease)  in  demand  on 
prices. Contracts are negotiated on the basis of anticipated sales volumes, which may 
be different from the actual sales level achieved, with the result that the price trend in a 
particular period may  not  necessarily  follow the  trend  in  sales  volumes  for  the  same 
period.  This  was  the  case  in  the  RIP  when  sales  volumes  decreased  but  prices 
remained  high  because  most  supply  contracts  for  2009  were  concluded  in  2008  and 
some deliveries foreseen for 2008 were deferred until 2009. The 5 % increase in prices 
during the RIP was, nevertheless, not sufficient to cover cost increases (+13 %), as had 
been  possible  during  the  previous  periods.  Prices  were  renegotiated  at  lower  levels 
from after the RIP. 

(89)  As explained in recital (75), the prices of imports from the country concerned followed 
a  trend  similar  to  that  of  the  Union  industry,  but  were  consistently  lower  than  the 
prices of the Union industry.  

Table 10 

2006 

2007 

2008 

RIP 

Unit price EU market (EUR/tonne) 

2.569 

3.103 

3.428 

3.585 

Index (2006=100) 

100 

121 

133 

140 

4.10.  Wages  

(90)  Between 2006 and the RIP, the average wage per employee increased by 15 %. 

Annual labour cost per employee ('000 EUR) 
Index (2006=100) 

4.11.  Investments  

Table 11 

2006 
52 
100 

2007 
56 
108 

2008 
61 
118 

RIP 
60 
115 

(91)  Between 2006 and the RIP, the annual flow of investments in the product concerned 
made by the Union industry increased by 37 %. However, during the RIP investments 
decreased by 14 % compared to 2008.  

Table 12 

Net investments (EUR) 

2006 
30.111.801 

2007 
45.383.433 

2008 
47.980.973 

RIP 
41.152.458 

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Index (2006=100) 

100 

151 

159 

137 

4.12.  Profitability and return on investments 

(92)  With  an  increase  in  costs  of  40  %  occurring  over  the  period  considered,  the  Union 
industry still managed, between 2006 and 2007, to increase its prices by more than its 
increase in costs. This led to a profit increase from the level of 19 % in 2006 to 26 % 
in 2007. From 2007 to 2008 prices and costs increased in the same proportion so that 
the  Union  industry's  margin  remained  stable  at  the  level  of  2007.  Profits  then 
decreased  again  to  19  %  in  the  RIP  due  to  the  effect  on  costs  of  lower  production 
capacity utilisation and higher raw material prices. Profits decreased further in 2009, 
since  the  Union  industry  had  to  adjust  its  prices  downwards  in  order  to  reflect  the 
general decrease of selling prices in the graphite electrode market, due to the shrinking 
demand within the steel sector.  

(93)  The return on investments (‘ROI’) increased from a level of 71 % in 2006 to 103 % in 
2007.  In  2008  it  increased  to  119  %  before  decreasing  to  77  %  during  the  RIP. 
Overall, the return on investments only increased by 6 percentage points between 2006 
and the RIP. 

Table 13 

Net Profit of EU sales to unrelated customers (% of 
net sales) 
ROI (net profit in % of net book value of investments) 

4.13.  Cash flow and ability to raise capital  

2006 

2007 

2008 

RIP 

19 % 
71 % 

26 % 
103 % 

25 % 
119 % 

19 % 
77 % 

(94)  The  net  cash-flow  from  operating  activities  increased  between  2006  and  2007.  This 
increase continued in 2008 before decreasing during the RIP. Overall, cash flow was 
28 % higher in the RIP than at the start of the period considered.  

(95)  There  were  no  indications  that  the  Union  industry  encountered  difficulties  in  raising 
capital,  mainly  due  to  the  fact  that  some  of  the  producers  are  incorporated  in  larger 
groups. 

Cash flow (EUR) 
Index (2006=100) 

Table 14 

2006 

2007 

2008 

RIP 

109.819.535  159.244.026  196.792.707  140.840.498 

100 

145 

179 

128 

4.14.  Magnitude of subsidisation 

(96)  Given  the volume, market share and prices of the imports from India, the  impact on 
the  Union  industry  of  the  actual  subsidy  margins  cannot  be  considered  to  be 
negligible. 

4.15.  Recovery from the effects of past subsidisation and of past dumping  

(97)  The  indicators  examined  above  show  some  improvement  in  the  economic  and 
financial  situation  of  the  Union  industry  following  the  imposition  of  definitive 
countervailing  and  anti-dumping  measures  in  2004.  In  particular,  between  2006  and 
2008, the Union industry benefited from increased prices and profits. This was due to 
very positive market conditions, which allowed a high level of prices and profitability 
to  be  maintained,  even  though,  as  explained  in  recital  (81),  the  market  share  of  the 
Union  industry  was  declining.  However,  over  the  same  period,  and  despite  the 
measures, the market share of Indian imports has increased and Indian products have 

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been imported at prices lower than those of the Union industry. During the RIP, profits 
already started to decrease for the Union industry and decreased further in 2009 due to 
increased costs and limited price increases. 

5. 

Impact of subsidised imports and other factors 

5.1. Impact of the subsidised imports  

(98)  Despite a decrease in consumption in the European Union over the period considered, 
the volume of imports from the country concerned more than doubled and the market 
share  of  those  imports  more  than  tripled  (see  recital  (75)).  If  the  anti-dumping  and 
countervailing  duties  are  not  taken  into  consideration,  the  imports  from  the  country 
concerned undercut the prices of the Union industry, although by less than 2 %, during 
the RIP.  

5.2.  Impact of the economic crisis 

(99)  Due  to  the  very  positive  economic  conditions  prevailing  in  the  steel  and  related 
industries,  including  graphite  electrodes,  in  2007  and  in  the  first  three  quarters  of 
2008,  the  Union  industry  was  in  a  relatively  good  economic  condition  when  the 
economic crisis started at the end of 2008. The fact that supply contracts for graphite 
electrodes  are  usually  negotiated  for  6-12  months  means  that  there  is  a  delay  in  the 
effect  of  any  change  (increase  or  decrease)  in  demand  on  prices.  Since  contracts  for 
the RIP were negotiated at a stage when the effects of the economic crisis could not be 
foreseen,  the  impact  of  the  economic  crisis  during  the  RIP  was  mainly  in  terms  of 
volumes,  since,  in  terms  of  prices,  any  impact  would  be  felt  by  the  Union  industry 
with a delay. In that context it has to be noted that the situation of the Union industry 
has  deteriorated  in  some  respect,  even  during  the  period  of  positive  economic 
conditions,  by  losing  market  share  to  imports  from  the  country  concerned.  The  fact 
that this deterioration did not lead to more significant negative effects was partly due 
to  the  high  level  of  demand  in  2007-2008  which  had  allowed  the  Union  industry  to 
maintain  high  volumes  of  production  and  sales  and  partly  due  to  the  fact  that  when 
these  volumes  decreased  in  the  RIP,  the  prices  could  still  be  maintained  due  to  the 
time-lag described above.  

5.3.  Imports from other countries 

(100)  Due  to  the  inclusion  of  products  other  than  the  product  under  investigation  in  the 
import data available at CN code level from Eurostat, the following analysis has been 
made  on  the  basis  of  import  data  at  Taric  code  level,  supplemented  by  information 
from  data  collected  in  accordance  with  Article  24(6)  of  the  basic  Regulation.  Some 
imports  were  disregarded  because,  on  the  basis  of  the  information  available,  they 
appeared not to be the product under investigation.  

(101)  It is estimated that the volume of imports from other third countries increased by 63 % 
from  around  11.000 tonnes  in  2006  to  around  18.500 tonnes  in  the  RIP.  The  market 
share of imports from other countries increased from 6,6 % in 2006 to 14,4 % in the 
RIP.  The  average  price  of  imports  from  other  third  countries  increased  by  42  % 
between 2006 and the RIP. The main imports appear to be from the People's Republic 
of  China  ('PRC'),  Russia,  Japan,  and  Mexico,  which  were  the  only  countries  with 
individual market shares higher than 1 % during the RIP. Imports from these countries 
are  further  examined  in  the  following  recitals.  Imports  from  nine  other  countries 
account for a total market share of only around 2 % and are not examined further.  

(102)  The  market  share  of  Chinese  imports  increased  by  2,4  percentage  points  over  the 
period  considered  (from  0,2  %  to  2,6  %).  The  available  information  indicates  that 

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these imports were made at prices which were lower than those of the Union industry 
and also lower than those of the imports originating in India.  

(103)  The market share of imports from Russia increased by 4,2 percentage points over the 
period  considered  (from  1,9  %  to  6,1  %).  The  available  information  indicates  that 
these imports were made at prices which were slightly lower than those of the Union 
industry, but higher than those of the imports originating in India.  

(104)  The market share of imports from Japan decreased by 0,4 percentage points over the 
period  considered  (from  2,0  %  to  1,6  %).  The  available  information  indicates  that 
these imports were made at prices which were similar to, or above, those of the Union 
industry and also higher than those of the imports originating in India.  

(105)  The market share of imports from Mexico increased by 1,0 percentage points over the 
period  considered  (from  0,9  %  to  1,9  %).  The  available  information  indicates  that 
these imports were made at prices which were higher than those of the Union industry 
and also higher than those of the imports originating in India.  

(106)  In  conclusion,  it  cannot  be  excluded  that  the  development  of  imports  from  the  PRC 
and  from  Russia  could  have  contributed  to  some  extent  to  the  deterioration  in  the 
market  share  of  the  Union  industry.  However,  given  the  general  nature  of  the  data 
available  from  the  import  statistics,  which  does  not  allow  a  price  comparison  by 
product  type,  as  was  possible  for  India  on  the  basis  of  the  detailed  information 
provided  by  the  exporting  producer,  the  impact  of  the  imports  from  the  PRC  and 
Russia cannot be established with certainty. 

Table 15 

Volume of imports from other countries (tonnes) 

Index (2006=100) 

Market share of imports from the other countries 

Price of imports from the other countries (EUR/tonne) 

Index (2006=100) 

Volume of imports from the PRC (tonnes) 

Index (2006=100) 

Market share of imports from the PRC 

Price of imports from the PRC (EUR/tonne) 

Index (2006=100) 

Volume of imports from Russia (tonnes) 

Index (2006=100) 

Market share of imports from Russia 

2006 

2007 

2008 

RIP 

11.289 

11.243 

19.158 

18.443 

100 

100 

170 

163 

6,6 % 

6,6 % 

11,3 % 

14,4 % 

2.467 

3.020 

3.403 

3.508 

100 

122 

138 

142 

2006 

421 

2007 

659 

2008 

2.828 

RIP 

3.380 

100 

157 

672 

804 

0,2 % 

0,4 % 

1,7 % 

2,6 % 

1.983 

2.272 

2.818 

2.969 

100 

2006 

3.196 

115 

2007 

2.887 

142 

2008 

8.441 

150 

RIP 

7.821 

100 

90 

264 

245 

1,9 % 

1,7 % 

5,0 % 

6,1 % 

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Price of imports from Russia (EUR/tonne) 

Index (2006=100) 

Volume of imports from Japan (tonnes) 

Index (2006=100) 

Market share of imports from Japan 

Price of imports from Japan (EUR/tonne) 

Index (2006=100) 

Volume of imports from Mexico (tonnes) 

Index (2006=100) 

Market share of imports from Mexico 

Price of imports from Mexico (EUR/tonne) 

Index (2006=100) 

6.  Conclusion  

2.379 

2.969 

3.323 

3.447 

100 

2006 

3.391 

125 

2007 

2.223 

140 

2008 

3.731 

145 

RIP 

2.090 

100 

66 

110 

62 

2,0 % 

1,3 % 

2,2 % 

1,6 % 

2.566 

3.131 

3.474 

3.590 

100 

2006 

1.478 

122 

2007 

2.187 

135 

2008 

2.115 

140 

RIP 

2.465 

100 

148 

143 

167 

0,9 % 

1,3 % 

1,2 % 

1,9 % 

2.634 

3.629 

4.510 

4.554 

100 

138 

171 

173 

(107)  As  shown  under  recital  (75)  the  volume  of  imports  from  the  country  concerned  has 
more  than  doubled  between  2006  and  the  RIP.  Given  that  consumption  declined  by 
almost 25 % over the same period, this resulted in a sharp rise in the market share held 
by Indian exporters from around 1,5 % in 2006 to around 5 % during the RIP. While 
Indian export prices to the Union increased considerably during the period considered 
as an effect of generally high market prices, they were still undercutting the prices of 
the Union industry. 

(108)  Between 2006 and the RIP, and notwithstanding the existence of the anti-dumping and 
countervailing  measures,  a  number  of  important  indicators  developed  negatively: 
production  and  sales  volumes  decreased  by  29  %  and  39  %  respectively,  capacity 
utilisation  went  down  by  28  %  and  was  followed  by  a  decrease  in  employment  and 
productivity levels. Although a part of these negative developments may be explained 
by the strong decrease in consumption, which declined by almost 25 % over the period 
considered,  the  Union  industry's  strong  decrease  in  market  share  (down  by  15,9 
percentage points between 2006 and the RIP) must also be interpreted in the light of 
the constant increase in market share of imports from India.  

(109)  As for the relatively high level of profits during the RIP, this was mainly due to the 
continued high level of prices, for the reasons explained in recital (88). It is concluded 
that  the  Union  industry's  situation  deteriorated  overall  during  the  period  considered 
and that the Union industry was in a fragile situation at the end of the RIP, despite a 
relatively high level of profit at that stage, when its efforts to maintain sales volumes 
and a sufficient level of prices, in a situation of weakened demand, were hampered by 
the increased presence of the Indian subsidised imports.  

F. 

LIKELIHOOD OF CONTINUATION AND RECURRENCE OF INJURY 

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1. 

Preliminary remarks 

(110)  As  already  seen,  the  imposition  of  countervailing  measures  has  allowed  the  Union 
industry to recover only to some extent from the injury suffered. However, when the 
high  levels  of  Union  consumption  experienced  during  most  of  the  period  considered 
disappeared  during  the  RIP,  the  Union  industry  appeared  in  a  fragile  and  vulnerable 
situation and still exposed to the injurious effect of the subsidised imports from India. 
In particular, the ability of the Union industry to recover increased costs was weak at 
the end of the RIP.  

2.  Relationship  between  export  volumes  and  prices  to  third  countries  and 

export volumes and prices to the Union  

(111)  It  was  found  that  the  average  export  price  of  Indian  sales  to  non-EU  countries  was 
below the average export price to the Union and also below the prices on the domestic 
market.  The  Indian  exporter’s  sales  to  non-EU  countries  were  made  in  significant 
quantities,  accounting  for  the  majority  of  its  total  export  sales.  Therefore,  it  was 
considered  that,  should  measures  lapse,  Indian  exporters  would  have  an  incentive  to 
shift significant quantities of exports from other third countries to the more attractive 
Union market, at price levels, which, even if they were higher than the prices to third 
countries, would likely still be below the current export price levels to the Union.  

3.  Unused capacity and stocks in the Indian market 

(112)  The  cooperating  Indian  producer  had  significant  spare  capacities  and  planned  to 
increase  its  capacity  in  2010/2011.  Therefore,  the  capacity  to  significantly  increase 
export  quantities  to  the  EU  exists,  in  particular  because  there  are  no  indications  that 
third country markets or the domestic market could absorb any additional production.  

(113)  In  its  comments  to  the  disclosure,  the  cooperating  Indian  producer  alleged  that  its 
spare  capacity  was  mainly  due  to  the  economic  crisis  and  the  related  decrease  in 
demand. However, a significant part of the company's spare capacity can be explained 
by the fact that the company substantially increased its capacity between 2006 and the 
RIP.  Furthermore,  it  should  be  noted  that  the  company  has  planned  additional 
increased capacity. Moreover, it should also be pointed out that there is another Indian 
producer which did not cooperate, that has similar capacity and utilisation and has also 
announced recently an even more substantial increase in capacity. 

4.  Conclusion  

(114)  The producers in the country concerned have the potential to raise and/or redirect their 
export  volumes  to  the  EU  market.  Moreover,  the  prices  of  Indian  exports  to  third 
countries are lower than those to the EU. The investigation showed that, on the basis 
of  comparable  product  types,  the  cooperating  exporting  producer  sold  the  product 
concerned  at  prices  lower  than  the  Union  industry's.  These  low  prices  would  most 
likely  decrease  in  line  with  the  lower  prices  charged  to  the  rest  of  the  world.  Such 
price behaviour, coupled with the ability of the exporters in the country concerned to 
deliver significant quantities of the product concerned to the EU market, would, in all 
likelihood, have a negative impact on the economic situation of the Union industry. 

(115)  As shown above, the situation of the Union industry remains vulnerable and fragile. If 
the  Union  industry  were  to  be  exposed  to  increased  volumes  of  imports  from  the 
country concerned at subsidised prices, this would be likely to result in a deterioration 
of  its  sales,  market  share,  sales  prices,  as  well  as  a  consequent  deterioration  of  its 
financial situation to the levels found in the original investigation. On this basis, it is 
therefore concluded, that the repeal of the measures would in all likelihood result in a 

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worsening  of  the  already  fragile  situation,  and  a  recurrence  of  material  injury  to  the 
Union industry.  

G. 

UNION INTEREST 

1. 

Introduction 

(116)  In  accordance  with  Article  31  of  the  basic  Regulation,  it  was  examined  whether  the 
maintenance of the existing countervailing measures would be against the interest of 
the  Union  as  a  whole.  The  determination  of  the  Union  interest  was  based  on  an 
appreciation  of  the  various  interests  involved,  i.e.  those  of  the  Union  industry,  of 
importers, and of users.  

(117)  It should be recalled that, in the original investigation, the adoption of measures was 
considered  not  to  be  against  the  interest  of  the  Union.  Furthermore,  the  fact  that  the 
present  investigation  is  a  review,  thus  analysing  a  situation  in  which  countervailing 
measures  have  already  been  in  place,  allows  the  assessment  of  any  undue  negative 
impact on the parties concerned by the current countervailing measures.  

(118)  On this basis it was examined whether, despite the conclusions on the likelihood of a 
continuation  or  recurrence  of  injurious  subsidisation,  compelling  reasons  existed 
which  would  lead  to  the  conclusion  that  it  is  not  in  the  Union  interest  to  maintain 
measures in this particular case.  

2. 

Interest of the Union industry 

(119)  The Union industry has proven to be a structurally viable industry. This was confirmed 
by the positive development of its economic situation observed after the imposition of 
the  countervailing  measures  in  2004.  In  particular,  the  fact  that  the  Union  industry 
increased  its  profitability  in  the  few  years  before  the  RIP  contrasts  sharply  with  the 
situation preceding the imposition of the measures. However, the Union industry has 
consistently  lost  market  share  while  imports  from  the  country  considered  have 
substantially  increased  in  market  share  over  the  period  considered.  Without  the 
existence  of  the  measures,  the  Union  industry  would  likely  be  in  an  even  worse 
situation. 

3. 

Interest of importers/users 

(120)  None of the nine unrelated importers that were contacted came forward to cooperate. 

(121)  Seventeen users came forward and submitted questionnaire replies. While most users 
have  not  sourced  graphite  electrodes  from  India  for  several  years,  and  therefore 
remained  neutral  with  respect  to  a  possible  continuation  of  the  measures,  six  users 
have,  at  least  to  some  extent,  used  Indian  electrodes.  Four  users  claimed  that  a 
continuation  of  measures  would  have  a  negative  impact  on  competition.  One 
association  (Eurofer)  strongly  opposed  a  continuation  of  the  measures  and  claimed 
that  the  measures  resulted  in  Indian  exporters  largely  withdrawing  from  the  EU 
market. The association alleges that the continuation of measures would hamper steel 
producers  in  developing  alternative  sources  of  supply  and  would  allow  the  Union 
industry  to  continue  having  a  dominant,  near  duopoly  position.  However,  it  is  clear 
from the development of the Indian imports after the imposition of the measures, that 
such a large withdrawal has not taken place; instead imports from India have increased 
significantly  during  the  period  considered.  In  addition,  the  investigation  has  shown 
that the graphite electrodes are increasingly entering the EU market from a number of 
other third countries. As for the strength of the Union industry's position in the market, 
it is recalled that its market share has decreased by almost 16 percentage points over 

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the  period  considered  (see  recital  (81)  above).  Finally,  this  association  also  admitted 
that graphite electrodes represent only a relatively small component of the total costs 
of steel manufacturers. 

(122)  It is further recalled that, in the original investigation, it was found that the impact of 
the  imposition  of  measures  would  not  be  significant  for  the  users11.  Despite  the 
existence of measures for five years, importers/users in the Union continued to source 
their  supply,  inter  alia,  from  India.  No  indications  were  brought  forward  either  that 
there  have  been  difficulties  in  finding  other  sources.  Moreover,  it  is  recalled  that,  as 
regards  the  effect  of  the  imposition  of  measures  on  users,  it  was  concluded  in  the 
original  investigation  that,  given  the  negligible  incidence  of  the  cost  of  graphite 
electrodes  on  user  industries,  any  cost  increase  was  unlikely  to  have  a  significant 
effect  on  the  user  industry.  No  indications  of  the  contrary  were  found  after  the 
imposition  of  measures.  It  is  therefore  concluded  that  the  maintenance  of  the 
countervailing measures is not likely to have a serious effect on importers/users in the 
Union. 

4.  Conclusion  

(123)  Given  the  above,  it  is  concluded  that  there  are  no  compelling  reasons  against  the 

maintenance of the current countervailing measures.  

H. 

COUNTERVAILING MEASURES 

(124)  All  parties  were  informed  of  the  essential  facts  and  considerations  on  the  basis  of 
which it was intended to recommend that the existing measures be maintained. They 
were  also  granted  a  period  to  submit  comments  subsequent  to  this  disclosure.  The 
submissions and comments were taken duly into consideration where warranted. 

(125)  It  follows  from  the  above  that,  as  provided  for  by  Article  18(2)  of  the  basic 
Regulation,  the  countervailing  measures  applicable  to  imports  of  certain  graphite 
electrodes, originating in India should be maintained. It is recalled that these measures 
consist of ad valorem duties. 

(126)  The  individual  company  countervailing  duty  rates  specified  in  this  Regulation  are 
solely  applicable  to  imports  of  the  product  concerned  produced  by  these  companies 
and  thus  by  the  specific  legal  entities  mentioned.  Imports  of  the  product  concerned 
manufactured by any other company not specifically mentioned in the operative part 
of  this  Regulation  with  its  name  and  address,  including  entities  related  to  those 
specifically mentioned, cannot benefit from these rates and shall be subject to the duty 
rate applicable to “all other companies”.  

(127)  Any claim requesting the application of these individual countervailing duty rates (e.g. 
following  a  change  in  the  name  of  the  entity  or  following  the  setting  up  of  new 
production or sales entities) should be addressed to the Commission12 forthwith with 
all  relevant  information,  in  particular  any  modification  in  the  company’s  activities 
linked  to  production,  domestic  and  export  sales  associated  with,  for  instance,  that 
name  change  or  that  change  in  the  production  and  sales  entities.  If  appropriate,  the 
Regulation  will  then  be  amended  accordingly  by  updating  the  list  of  companies 
benefiting from individual duty rates, 

11 

12 

See  recital  (150)  of  Commission  Regulation  (EC)  No  1008/2004  (OJ  L  183,  20.5.2004,  p.  35)  and 
recital (30) of Council Regulation (EC) No 1628/2004 (OJ L 295, 18.9.2004, p. 4). 
European Commission, Directorate-General for Trade, Directorate H, B-1049 Brussels, Belgium. 

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HAS ADOPTED THIS REGULATION: 

Article 1 

1. 

2. 

A definitive 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 µ.Ω.m or less, currently falling within CN code ex 
8545  11  00  (TARIC  code  8545  11  00  10)  and  nipples  used  for  such  electrodes 
currently  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 duty applicable to the net free-at-Union-frontier price, before duty, for the 
products described in paragraph 1 and produced by the companies listed below shall 
be as follows: 

Company 

Graphite  India  Limited  (GIL),  31 
Chowringhee  Road,  Kolkatta  – 
700016, West Bengal 

HEG  Limited,  Bhilwara  Towers,  A-
12,  Sector-1,  Noida  –  201301,  Uttar 
Pradesh 

Definitive 
Duty 
(%) 
6,3  

TARIC 
Additional 
Code 
A530 

7,0  

A531 

All other companies 

7,2  

A999 

3. 

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

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

Article 2 

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

Done at Brussels,  

For the Council 
The President 

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