CELEX: 51991PC0118
Language: en
Date: 1991-04-12
Title: PROPOSAL FOR A COUNCIL REGULATION ( EEC ) IMPOSING A DEFINITIVE ANTI-DUMPING DUTY ON IMPORTS OF AUDIO TAPES IN CASSETTES ORIGINATING IN JAPAN AND THE REPUBLIC OF KOREA, COLLECTING DEFINITIVELY THE PROVISIONAL DUTY AND TERMINATING THE PROCEEDING CONCERNING HONG KONG

COMMISSION OF THE EUROPEAN COMMUNITIES
                                      C0M(91) 118 final
                                      Brussels, 12 April 1991
                            Proposal for a
                       COUNCIL REGULATION (EEC)
         imposing a definitive anti-dumping duty on imports
          of audio tapes in cassettes originating in Japan
         and the Republic of Korea, collecting definitively
              the provisional duty and terminating the
                   proceeding concerning Hong Kong
                    (presented by the Commission)
v,
i"
 ---pagebreak---                                        - 2 -
                              EXPLANATORY     MEMORANDUM
     The   Commission,     by    Regulation     (EEC)   No   3262/90^ 1) ,    imposed   a
     provisional anti-dumping duty on imports into the Community of audio
     tapes    in  cassettes      (hereafter    referred    to   as   audio   cassettes)
     originating in Japan, the Republic of Korea and Hong Kong.                 The duty
     was   extended    for    a   maximum    period    of   two   months    by   Council
     Regulation (EEC) No 578/91<2>
      In  its provisional      findings,    the Commission       found   that   although
     there are various models of audio cassettes differing in length and
     coating of tape and design of the cartridge, these models have the
     same basic physical characteristics, application, use and channels
     of distribution.       It is proposed       that this provisional       finding be
     confirmed.
     For   the   purpose    of    definitive    findings,    normal    value    was,   in
     general, established on the basis of the same methods as those used
      in  the   provisional     determination     of   dumping,    after   talcing   into
     consideration new facts and arguments presented by the parties.
     -   As previously stated in its provisional findings, the Commission
         considered    that   giveaway    goods,     which,   by   their   nature    were
         unconnected with the product under consideration, did not                   have
         the effect of reducing the price of audio cassettes sold on the
         domestic   market     but   were   promotional     expenses     for   which   no
         deduction can be made.
(1) OJ No L 313, 13.11.1990, p. 5.
(2) OJ No L 65, 12.3.1991, p. 20.
 ---pagebreak---                                       - 3 -
   -   Since it was established that for one exporter there were neither
       sufficient sales on the domestic market of audio cassette models
       suitable for direct comparison to those sold for export            to the
       Community   nor   sales at prices which permitted        recovery of all
       costs reasonably allocated, normal         value was determined on the
       basis of a constructed value of each model concerned.
   -   One exporter maintained        its claim that there were no comparable
       prices, since it made no sales to OEM customers on the domestic
       market, whereas its export sales to the Community were made on an
       OEM basis
       For  the   purpose    of   definitive    determination,   the  Commission
       considered that, given the limited nature of the costs assumed by
       the importer    (for   instance absence of after sales service), the
       profit   rate   of   the   manufacturer's    own brand   sales  used  for
       constructing normal value should be reduced by 50%.
       It is proposed to confirm the above findings.
4. The final examination of the facts showed the existence of dumping
   in respect of audio-cassettes in Japan, the Republic of Korea and
   Hong Kong on the part of eight exporters concerned.
   The   weighted   average    margins    varied  according   the  exporters  as
   fol lows :
     Japanese exporters :
     Fuji                      64.2%
     TDK                       48.2%
     Maxell                    47   %
     Denon Columbia            44.5%
   -Korean exporters
   - Goldstar                   9.2%
   - Sunkyong Magnetics :       2.6%
   -Hong Kong exporters
   -Yee Keung                   2.4%
 ---pagebreak---                                       - 4 -
   As   far   as Saehan Media, Sungnam, Keum          Sahn  Electronics   (Korea),
   Tomei Magnetics, Swire, Magnetic Enterprise and Forward Electronics
   (Hong Kong) are concerned, no dumping was found.
5. As far as      injury   is concerned, the Commission       considered,   in its
   provisional findings, that the effects of Japanese, Korean and Hong
   Kong   imports had to be analysed cumulatively.             It  is proposed  to
   confirm this finding except for audio cassettes imported from Hong
   Kong since they had no discernible impact on the Community            industry.
6. In   addition,     it   is considered    that   the   Community   industry  had
   suffered material       injury which manifested     itself, in particular, by
   a  loss of market       share, price erosion,      insufficient   profitability
   and   employment      losses.   This  finding    is based    on  the  following
   facts :
       imports of audio cassettes from Japan and Korea have increased at
       a more rapid rate than the rate of Community consumption.
   -   the market share of the total dumped imports from Korea and Japan
       increased by 3%, namely from 43.5% to 46.4% from 1985 to 1988.
      As    far  as Hong     Kong   is concerned,    its market    share  remained
       stable (1.5% in 1985; 1.6% in 1988);
   -   the    complainant     producers'   selling    prices    in  the  Community
       suffered a significant erosion between 1985 and 1988;
   -   Community producers were unable to increase, significantly, their
       production between       1985 and 1988 and their      sales fell   by 8.5%
      over    this period, despite an        increase   in total   consumption of
       30%;
   -   between 1985 and 1988 return on sales of the Community             industry
       showed a constant negative trend.
 ---pagebreak---                                        - 5 -
   -    large   price    undercutting     was     found   on    the   part    of    Korean
       exporters     and   significant     price    undercutting      on   the   part   of
       Japanese    exporters     on   the   German    market    where    the   Community
       industry still retained a large market share.
   As far as Hong Kong         imports are concerned,         the Council      considers
   that   in view of the small amount of dumped              imports from Hong Kong
   and   of   the   absence   of   their   brand    recognition     on   the   Community
   market, these could not have caused material injury to the Community
    industry.
7. Finally, it is proposed to confirm that the Community                   industry was
   unable to defend its price, brand image and volume of sales against
   the Japanese exporters         : these    were able to finance         large selling
   expenditure      thanks   to   their    high    domestic   profits.      It   is   also
   considered     that   the Community      industry had     to face the effect of
   dumped   imports from Korea, and was not able to meet the low prices
   of these imports.
    In conclusion, Korean and Japanese imports, taken in isolation, have
   caused material      injury.
8.  In its provisional findings, the Commission considered and balanced
   the   interests of the Community           industry, of     the consumers and of
   other industries and activities concerned, and it concluded that the
   Community     interests called, on balance, for granting protection to
   the Community       industry    against    unfair   competition      due   to   dumped
    imports.    It is proposed to confirm this finding.
9. The   provisional     findings    of   the Commission       with    regard    to   duty
   calculation were also confirmed.
   In addition, it is considered that, in order to establish the rate
   of   the   definitive     duties    to   be   imposed,    the    individual     injury
   margins     determined     provisionally       have   to    be    expressed      as   a
   percentage of the CIF value of the imports.
 ---pagebreak---                             - 6 -
The  result  of  this calculation   is the  price   increase at  the
Community frontier necessary to remove the injury caused by each
exporter.
The duties to be imposed should thus be at the level of the dumping
margin for all exporters    except for the exporters whose dumping
margins exceed the injury level and are as follows :
(a)     27.4% for audio cassettes originating in Japan , with the
        exception :
        Sony     23.4%
        MaxelI   21.8%
        Denon    18.7%
        Fuji     15.2%
(b)     9.2% for audio cassettes originating    in the Republic of
        Korea , with the exception of :
        Sunkyong Magnetics Ltd (SKM) : 2.6% (Taric additional code :
        8489)
 ---pagebreak---                                       - 7 -
                                  Proposal for a
                            COUNCIL REGULATION (EEC)
             imposing a definitive anti-dumping duty on imports
              of audio tapes in cassettes originating in Japan
             and the Republic of Korea, collecting definitively
                   the provisional duty and terminating the
                        proceeding concerning Hong Kong
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
Having regard to Council Regulation (EEC) No 2423/88 of 11 July 1988 on
protection   against   dumped    or  subsidized   imports   from  countries not
members   of   the   European    Economic   Community<1),   and   in  particular
Articles 9 and    12 thereof,
Having   regard   to   the   proposal   submitted    by  the   Commission  after
consultation within the Advisory Committee as provided for under the
above Régulât ion,
Whereas:
                            A.   PROVISIONAL MEASURES
     The   Commission,    by   Regulation   (EEC) No    3262/90(2),   imposed  a
     provisional anti-dumping duty on imports into the Community of audio
     tapes   in cassettes (hereinafter       referred to as audio cassettes)
     originating    in Japan, the Republic of Korea and Hong Kong and
     falling within CN code 8523 11 00. The duty was extended for a
     maximum    period    of    two  months    by   Council   Regulation   (EEC)
     No 578/91(3>.
(1) OJ No L 209, 2.8.1988, p. 1.
(2) OJ No L 313, 13.11.1990, p. 5.
(3) OJ No L 65, 12.3.1991, p. 20.
 ---pagebreak---                                   - 8 -
                        B.   SUBSEQUENT PROCEDURE
2. Following the imposition of the provisional anti-dumping duty, all
   the exporters mentioned by name in Regulation (EEC) No          3262/90, as
   well as the representatives of the complainants, requested and were
   granted an opportunity to be heard by the Commission.         They, as well
   as one importer,    also made written submissions making their views
   known on the findings.
3. The Commission    continued   to   seek  and  verify   all  information   it
   deemed to be necessary for its determinations.        For this purpose, an
    investigation was   carried    out  at  the  premises   of  the   following
   exporter :
   - Hitachi Maxell, Tokyo, Japan
4. Upon request, the parties were informed of the essential           facts and
   considerations on the basis of which        it was  intended to recommend
   the imposition of definitive duties and the definitive collection of
   amounts   secured  by  way   of   a  provisional   duty.   They   were  also
   granted a period within which to make representations subsequent to
   these disclosures. Their oral and written comments were considered
   and, where appropriate, the Commission's findings were modified to
   take account of them.
5. Owing  to the complexity of       the proceeding,   in particular     to the
   detailed   verification   of   the   voluminous  data    involved   and  the
   numerous   arguments  put   forward,    the  investigation   could   not  be
   concluded within the time limit provided for in Article 7(9) (a) of
   Regulation (EEC) No 2423/88.
 ---pagebreak---                                       - 9 -
              C. PRODUCT UNDER CONSIDERATION, LIKE PRODUCT,
                               COMMUNITY INDUSTRY
6. In its provisional      findings, (recitals 9 to 12 of Regulation (EEC)
   No 3262/90) the Commission          found  that although      there are various
   models of audio cassettes differing           in length and coating of tape
   and  design    of   the   cartridge,    these   models   have    the  same   basic
   physical     characteristics,       application,     use     and    channels    of
   distr ibut ion.
7. This finding was questioned by one exporter who requested that audio
   cassettes whose tapes were coated with a metal pigment               (hereinafter
   referred to as metal audio cassettes) should be excluded from the
   scope of the proceeding.         This exporter submitted that metal audio
   cassettes are extremely high quality cassettes bought by specialist
   consumers    and   require    a  cassette   recorder    with   a   specific   key-
   function    to   appreciate    their   true quality.     A   similar    claim  was
   submitted     by   an    importer    requesting    the    exclusion     of   audio
   cassettes for answering machines from the scope of the proceeding.
8. However,    while     the   Commission     accepts    that    there    are   minor
   differences in quality or use of audio cassettes, it considers that
   these are actually outweighed by the similarity of characteristics
   and functions which give them a high degree of              interchangeabiIity.
   The Commission notes in this respect that metal audio cassettes can
   be  used   on   a  cassette     recorder  without    a  specific     key-function
   (giving   thus a sound of a         lower quality) and      that cassettes     for
   answering machines can be used on any other cassette recorder or
   player   to record or play any sound.            In these circumstances, the
   Commission     concludes     that   metal    audio   cassettes     and    standard
   cassettes for answering machines should not be excluded                  from  the
   scope of the proceeding.
 ---pagebreak---                                  - 10 -
9.  The Council confirms the above conclusions and confirms that, in
    contrast, audio cassettes which have important physical differences
    in size, components and use such as micro cassettes, small endless
    cassettes for answering machines, computer       cassettes or digital
    audio tapes (DAT) cassettes are not covered by the scope of the
    present proceeding.   In addition, the Council confirms the findings
    of the Commission with regard to the like product and the Community
    Industry set out in recitals 15 and 16 (on the content of which
    there was no comment by the interested parties) of Regulation (EEC)
    No 3262/90.
                             D.  NORMAL VALUE
10. For  the purpose of     definitive  findings, normal    value  was, in
    general, established on the basis of the same methods as those used
    in the provisional   determination of dumping, after       taking  into
    consideration new facts and arguments presented by the parties.
    1) Normal value based on prices in the exporting country
11. In recital 20 of Regulation (EEC) No 3262/90, the value of giveaway
    goods (e.g. index cards, photographs, ...) granted by two exporters
    was* disallowed  for   the  purpose  of   provisional   findings  as a
    deduction from domestic sales prices in establishing normal value.
    The exporters concerned have reacted to the Commission's provisional
    findings and have argued that the value of these giveaway goods
    should be treated as a discount and as such, be deducted from the
    domestic selling price.
 ---pagebreak---                                      - 11 -
    As previously     stated   in  its provisional   findings,    the   Commission
    considers   that    these giveaway    goods, which, by     their   nature   are
    unconnected with the product under consideration, do not have the
    effect of reducing the price of audio cassettes sold on the domestic
    market but are promotional expenses for which no deduction can be
    made  in   conformity    with   the  provision   of   Article    2(3)   (a) of
    Regulation (EEC) No 2423/88.       This view is confirmed by the Council.
    2) Normal value based on constructed value
       a)    models grouped together in series
12. As explained     in recital    22 of   Regulation   (EEC) No     3262/90,   the
    Commission provisionally established normal value for one exporter
    on the basis of the weighted average price of series of models of
    audio  cassettes.     Subsequent    investigation   led  the   Commission    to
    believe that   this average price could not be relied upon to form
    accurate data for the establishment of normal value.
13. Since  this   subsequent     investigation  established     that   there   were
    neither sufficient     sales on the domestic market of audio cassette
    models suitable for direct comparison to those sold for export to
    the Community nor sales at prices which permitted recovery of all
    costs reasonably allocated, normal value was determined on the basis
    of a constructed value of each model concerned.             This constructed
    value was established on the same basis as described            in recital 23
    of Regulation (EEC) No 3262/90.
       b)  OEM sales
14. One exporter   maintained     its claim   that  there were     no   comparable
    prices, since     it made no sales to OEM customers on the domestic
    market, whereas     its export sales to the Community were made on an
    OEM basis; this exporter thus required that the Commission establish
 ---pagebreak---                                     - 12 -
    a   constructed    value   including   a  reduced   profit    margin    for the
    purpose of comparison with its export sales made on an OEM basis and
    submitted new facts to substantiate its request.
    In   view   of   this   evidence,   the   Commission    considers      that the
    Community customers of this Korean exporter           are buying on an OEM
    basis : indeed, they are purchasing audio cassettes made to their
    own specifications (which differ         in some aspects      from   the Korean
    producer's own      specifications)    in order   to supplement       their own
    production and resell them while assuming the full responsibility of
    a   manufacturer     with  regard   to   the   product.    In   addition,   the
    difference claimed was clearly reflected in the quantities sold and
    the pattern of price charged.
    For    the   purpose    of  definitive     determination,      the   Commission
    considers that, given the limited nature of the costs assumed by the
     importer (for    instance absence of after sales service), the profit
    rate of    the manufacturer's own brand sales used          for    constructing
    normal value shall be reduced by 50% : indeed this constitutes the
    difference which exists between own-brand and OEM profits if sales
    of the latter had taken place on the Korean market.
    In the light of the Commission's considerations set out above, the
    Council confirms the Commission's findings and conclusions.
        c) Profit
15. As explained     in recital   30 of Regulation     (EEC) No 3262/90, where
    insufficient profitable sales took place on the domestic market, the
    addition of profit to be included in the constructed value was based
    on   the weighted     average  profits   realized   by  other     exporters  on
    profitable sales on the domestic market.
16. Two Hong Kong exporters contested          the profit    figure used     by the
    Commission since, according to them, this figure was based on the
 ---pagebreak---                                   - 13 -
     profits achieved by a fully-integrated producer in Hong Kong whereas
     they   were  not  integrated  and  actually   mainly   involved   in  the
     assembling of audio cassettes.     They  alleged  that a    lower  profit
     margin should thus be applied to reflect this difference.
      In these circumstances, the Council considers reasonable to base the
     profit figure for these Hong Kong exporters on the rate of profit
     determined for the manufacturing of a product      in the same business
     sector,   namely video  cassettes, where    these   exporters   performed
     similar activities (see Council Regulation (EEC) No l768/89) ( 4 ) .
                              E.  EXPORT PRICE
17.  The Council confirms the findings and conclusions of the Commission,
     as well as those set out in recitals 31 to 39      of   Regulation (EEC) f
     No 3262/90 on the content of which recitals there was no substantial
     comment by the interested parties.
                               F.  COMPARISON
18.  One exporter contested the amount of credit costs deducted from the
     domestic selling price for the establishment of normal         value and
     claimed that it was lower than its actual expenses.
     The Commission considers that the credit expenses claimed are partly
     related to sales of products other than audio cassettes and should
     thus be reduced to the proportion of sales of audio cassettes only,
     in conformity with   the provisions of Article     2(11) of   Regulation
     (EEC) No 2423/88.
(4) OJ No L 174, 22.6.1989, p. 1
 ---pagebreak---                                  - 14 -
                           G.  DUMPING MARGIN
19. On comparing normal   values for domestically    sold models of the
    producers/exporters which were investigated with the export prices
    of comparable models on a transaction-by-transaction basis, the
    final examination of the facts shows the existence of dumping in
    respect of audio-cassettes in Japan, the Republic of Korea and Hong
    Kong on the part of eight exporters concerned, the margin of dumping
    being equal to the amount by which the normal value as established
    exceeds the price for export to the Community.
20. The weighted average margins, expressed as a percentage of CIF
    frontier prices, varied according the exporters as follows :
      Japanese exporters :
      Fuji                 64.2%
      TDK                   48.2%
      Maxell                47  %
      Denon Columbia       44.5%
    -Korean exporters
    - Goldstar               9.2%
    - Sunkyong Magnetics : 2.6%
    -Hong Kong exporters
    -Yee Keung               2.4%
21. As far as Saehan Media, Sungnam, Keum Sahn Electronics (Korea),
    Tomei Magnetics, Swire, Magnetic Enterprise and Forward Electronics
    (Hong Kong) are concerned, no dumping was found.
22. For those exporters who did not make themselves known in the course
    of investigation, or cooperated only partly with the Commission, a
    dumping margin was determined on the basis of the facts available as
    explained in recitals 50 and 51 of Regulation (EEC) No 3262/90 and
    it is considered appropriate to use the highest dumping margin of
 ---pagebreak---                                     - 15 -
    64.2% for Japan and 9.2% for Korea and 2.4% for Hong Kong for these
    groups of exporters.
    The Council confirms the above findings and conclusions.
                                   H.   INJURY
    1. Cumulât ion
23. In   its provisional     findings,   the Commission       considered    that  the
    effects of Japanese, Korean and Hong Kong imports had to be analysed
    cumulatively.     The exporters reacted extensively to the Commission's
    provisional    findings.   They argued that the difference           in consumer
    recognition, market segment and pricing pattern acknowledged               in the
    provisional findings between Japanese and Korean exports should have
    led the Commission to rule out the cumulation of imports from Japan,
    Korea and Hong Kong for the purpose of assessing injury.
24. The   Commission    confirms   its   finding   set    out   in   recital   78  of
    Regulation (EEC) No 3262/90 that, on one hand, the Korean exporters
    compete   to a very     large extent on price alone, with products of
    comparatively standard technology and no significant difference in
    features    and   quality,   while    on  the    other    hand,    the   Japanese
    exporters now tend also to concentrate on non-price elements, such
    as   brand   name,   marketing    features    and    styling    as   their   main
    market ing strategy.
    However, it is standard practice for the Community              institutions to
    cumulate imports from several countries when these imported products
    and the like product of the Community           industry meet     the following
    criteria :
    -   they are interchangeable,
    -   they   are  sold   or  offered   for  sale     in  the   same   geographical
        markets,
    -   they have common or similar channels of distribution,
    -   they are simultaneously present in the market,
    -   they are not negligible as such.
 ---pagebreak---                                         - 16 -
25. The application of these criteria does not permit the establishment
    of a clear      dividing    line, separating       audio cassettes either          from
    Japan or     from Korea.       Indeed,    besides   the    identity of      the   basic
    physical    characteristics, application           and   use of     audio    cassettes
    whatever their source, there is to a very               large extent, commercial
    interchangeabiIity       and   competition      between    the  various     models of
    audio cassettes; this is shown by the fact that Japanese exporters
    are selling      in the Community       audio cassettes manufactured           both in
    Japan and Korea, with no difference in the consumer's perception of
    these products by reason of their different sources.
    In contrast, given the small amount of audio cassettes imported from
    Hong Kong which were found to be dumped,                they had no discernible
    impact on the Community         industry.      Indeed, dumped     imports from Hong
    Kong represented      in 1988 a very small share of the Community market
    and   their   brand    recognition      was   almost   inexistant.       Accordingly,
    since they did not bear any contribution to material                 injury, imports
    from Hong Kong should not be cumulated.
    The Council confirms the above findings and concludes therefore that
    the effects of       Japanese     and   Korean    imports    have   to be     analysed
    accumulatively.
    2) Effect on the dumped        imports
26. The   Commission     concluded      in   its   provisional     findings      that   the
    Community     industry    had   suffered    material    injury    which    manifested
    itself,   in particular, by a          loss of market       share, price erosion,
    insufficient      profitability      and   employment     losses.     It  based    this
    finding on the following facts :
        imports of audio cassettes from Japan and Korea have increased at
        a more rapid rate than the rate of Community                 consumption, from
        149 million units in 1985 to 205 million units in 1988, i.e. by
        38%.   Imports    from    Japan    increased    from    142 million      units   to
        154 million     units   over    this   period,    while    imports    from    Korea
        increased from 7 million units to 51 million units;
 ---pagebreak---                                        - 17 -
    -   imports of audio cassettes          from Hong Kong     have    increased   from
       4.9 million units in 1985 to 7 million units in 1988;
    -  the market share of the total dumped imports from Korea and Japan
       increased by 3%, namely from 43.5% to 46.4% from 1985 to 1988.
       As   far   as Hong    Kong    is concerned,     its market     share   remained
       stable (1.5% in 1985; 1.6% in 1988);
    -  the    complainant     producers'     selling    prices    in   the   Community
       suffered a significant erosion between 1985 and 1988;
    -  Community producers were unable to increase, significantly, their
       production between       1985 and     1988 and   their sales fell      by 8.5%
       over   this period, despite an          increase   in total    consumption of
       30%;
    -  between 1985 and 1988 return on sales of the Community                 industry
       showed a constant negative trend.           The slight    improvement of its
       profit    in 1988 appears       to be the result      of  the withdrawal      of
        loss-making models, which         involves a further       shrinking of     its
       sales and presence on the market;
    -  cost-saving    measures      involved    a decline of     employment     in  the
       Community of some 23% of the audio cassettes workforce between
       1985 and 1988;
    -  for a large number of transactions, large price undercutting was
       found    on  the   part   of   Korean   exporters    and  significant     price
       undercutting     on  the part     of   Japanese   exporters on      the German
       market where the Community        industry still retained a large market
       share.
27. No   new   facts  concerning      these    findings   were   submitted     to   the
    Commission but the exporters concerned challenged injury findings on
    a number of points.
 ---pagebreak---                                      - 18
28. One exporter argued that the use of average figures for the whole of
    Community    industry    was   misleading    since    they   mask     conflicting
    underlying trends by the two major Community producers which should
    have led to a separate determination of            injury for each of them.
    The   Council   cannot   accept    this  argument    since   when     determining
    whether material     injury has been caused to the Community             industry,
    this term shall be interpreted         in conformity with Article 4(5) of
    Regulation (EEC) No 2423/88 as referring to the production of the
    Community producers as a whole.
29. One exporter also argued that one of the Community producers was not
    experiencing material      injury and should have been excluded from the
    injury assessment owing to an alleged healthy profit situation.                The
    Council cannot accept this view and recalls, as noted in recital 26,
    that the    injury suffered by the Community          industry     is determined
    globally, on the basis of economic factors relating to its situation
    as a whole.
    In addition it notes that several factors concerning this Community
    producer   were   a   clear    indication  of   the   existence      of   material
     injury, such as a profit rate which was in fact below the                average,
    and    a  low   global    profitability     achieved     at   the     expense   of
    withdrawing loss-making models from the market.
30. It was also argued that the Commission's findings with regard                   to
    production, capacity, utilization of capacity, and sales not only
    referred   to production      in the Community      but   also   included    audio
    cassettes manufactured       by  the Community     industry    in   its overseas
    facilities, and sold in the Community.
    As   noted   in  the   provisional     findings   of    the  Commission,      this
    activity    has   completely     ceased   in   1988,    which     is   a   further
    indication of the existence of material           injury.     Indeed, while in
    1985 the Community industry was operating at full capacity and thus
    decided, in order to meet the demand, to increase               its capacity of
    production    in   the   Community    and   simultaneously      to    supply   the
 ---pagebreak---                                        - 19 -
    Community market with products manufactured              in overseas facilities,
    the subsequent      decrease of      its sales      in clear    contrast   with    the
    buoyancy of the market led it to close these overseas facilities and
    to bear the costs of increasingly            idle production facilities.
31. Several    exporters     contested     the   Commission's      analysis    of    price
    undercutting.
    One exporter      argued   that   the price undercutting         analysis    for   the
    German   market     was   based    on   data    involving     the  resale     by   its
    subsidiary     of   audio    cassettes     to   other    Community     markets     and
    submitted new data at the end of the investigation.
    However,    the Commission      considers     that    these   new  data   should    be
    disregarded     : indeed, they show discrepancies when              the Commission
    cross-checked      these   with   other    data    supplied    by   this   exporter,
    whilst the data used for the undercutting analysis were submitted by
    the exporter      itself as referring unequivocally and             exclusively to
    the German market and were verified as correct at the premises of
    this company.
     In addition, these new data appear to show that price undercutting
    has   been   merely    shifted     to   other    geographical     markets     in   the
    Community.     Finally, the necessary         verification of      these new data
    would have inadmissably delayed the course of the proceeding.
    The Council confirms the above finding of the Commission.
32. Another   exporter    argued    that   the   Italian market      should   have been
    taken into account       in the price undercutting analysis since              it was
    in Italy that it sold its most           important volume of audio cassettes.
    However,    it has to be noted        that, as explained         in recital     66 of
    Regulation    (EEC) No 3262/90, the Commission              selected    three major
    Community    markets    covering more       than 70% of      the Community      sales
    which are the most representative of all sales of audio cassettes in
    the Community.      The Commission found in contrast that the volume of
 ---pagebreak---                                          - 20 -
    sales and price patterns of the exporters and Community producers on
    other markets were not representative of the Community market as a
    who Ie.
33. The above conclusion, in addition to the findings of the Commission
    set out in recitals 55 to 77 of Regulation (EEC) No 3262/90 lead the
    Council     to   consider     that    the   Community     industry     is  suffering
    material     injury within      the meaning of Article         4(1) of    Regulation
     (EEC) No 2423/88.
    3. Causât ion of injury
    a) Effect of dumped       imports
34.  In its provisional findings, the Commission found that the increased
     influx of dumped imports coincided with a significant               loss of market
    share    and    reduced   profitability       on   the   part   of   the   Community
     industry, together with price erosion, and price undercutting of the
    audio cassettes produced by the Community              industry.     In particular,
     it was noted that the Community           industry was in a dilemma since it
    had simultaneously to resist the dumped               imports from Japan      in the
    high segment of the market, and the dumped imports from Korea in the
     lower   segment   of   the market      where    competition     is  led mainly   by
    price. As a result, the Commission               concluded    that  dumped   imports
    had, taken      in  isolation, caused material          injury    to the   Community
    industry.
35. As far as Hong Kong         imports are concerned,         the Council     considers
    that   in view of the small amount of dumped              imports from Hong Kong
    and of     the   absence   of    their   brand    recognition    on  the   Community
    market, these could not have caused material injury to the Community
    industry.
36. As   far   as   Japanese    and    Korean    imports   were    concerned,    several
    arguments      were   raised,       mostly    by    Japanese     exporters.    These
    contested the provisional finding of the Commission and argued that
    their exports could not be held responsible for causing injury since
 ---pagebreak---                                                                            , .!=;•. »!,•. : ^ A « l . . i l 4 t . . ^ -V. . • ^. ^ft/,
                                       - 21 -
    the market share of their exports decreased from 42% to 35% between
    1985 and 1988 and have been mainly replaced by products manufactured
    by   their    subsidiaries      in    the    Community.     According         to           these
    exporters,    material     injury    could    only    be   attributed       to          dumped
     imports  from Korea, or       to the effect       of non-dumped     sales             in the
    Community which had been overlooked by the Commission, such as the
    sales   of   the   audio   cassettes      manufactured      by   their     production
    subsidiaries in the Community.
37. The   Council    cannot   accept    these     arguments.     If   Japanese              dumped
    exports were     isolated from the other dumped exports, the arguments
    raised are not corroborated by the facts.               Indeed, while there is a
    certain decrease of the market share of dumped exports from Japan
    the Japanese exporters       in 1988 retained a very           large share of the
    Community    market    (35%,    which      is   almost    double    the        Community
     industry's market share) and have increased in absolute terms their
    volume of dumped imports by 8%.
     In addition, as explained in recital 27, the Council considers that
    the effect of dumped imports from Japan and Korea should be analysed
    cumulatively.     This   analysis     shows    an   increase    in volume            of         the
    dumped imports by 38% and in market share by 3%.
38. Finally, the effect of the dumped exports from Japan could not be
    analysed without reference to the real weight that they have on this
    market.    It should be pointed out that, as described               in recital 81
    of Regulation (EEC) No 3262/90, the Japanese exporters have between
    1985 and 1988 retained        their market presence at about 70% of the
    Community market including audio cassettes produced in the Community
    and   in Korea by related companies.            They diversified      their supply
    channels in particular by increasing the output of their production
    subsidiaries in the Community, but dumped             imports from Japan remain
    their main source of supply.            In this respect,        the Council               notes
    that dumped    imports of audio cassettes and sales of audio cassettes
    from other sources are part of the same commercial strategy In which
    dumping is the driving element.
 ---pagebreak---                                          22 -
    °) Effects of other factors
39. One exporter     argued   that   the Commission      did   not  consider      in its
    provisional findings, the effect of the audio cassettes manufactured
    by the Community     industry and sold for export           to third countries.
    The Commission     notes that     between    1985 and    1988, while      Community
    sales decreased from 94 million units to 86 million units, export
    sales   of   audio   cassettes      increased     from   11   million     units   to
    21 million    units      however,     this only     shows    that   the   Community
    industry has reacted in an efficient manner to the effect of dumping
    by   developing    new   markets     which    were   not    affected     by   unfair
    competition.     A further    indication of      injury   is shown by the fact
    that the production of the Community             industry, after      deduction of
    the production destined for export, was actually declining over the
    per iod considered,
40. It   was   also   argued    that    the   injury    suffered     by   one    of  the
    complainants was the result of a wrong commercial decision when it
    cut its prices in an attempt to sell on the low end of the market.
    The Council     cannot  accept     this argument         the good      performances
    achieved by this Community producer           in other sectors show that, for
    lack of contrary proof, its commercial policy was adequate in so far
    as  it decided to decrease        its prices     in an attempt      to retain    its
    market share against the pressure of the dumped imports.
41. In conclusion, the Council recognizes that oth^r factors, including
    the sales of the production subsidiaries of the Japanese exporters,
    may have had a negative effect on the situation of                   the Community
    industry.    However, this does not         detract    from   the   fact   that  the
    dumped   imports had a clear detrimental           impact on the situation of
    the Community    industry and that this impact, taken in isolation, has
    to be considered as material.
    Indeed, given the facts described in recitals 30 to 32, the Council
    confirms the Commission's findings that the Community                 industry was
 ---pagebreak---                                       - 23 -
    unable to defend its price, brand image and volume of sales against
    the Japanese exporters : these          were able to finance        large selling
    expenditure    thanks   to high     profits on     a domestic    market     without
    foreign competition and large volume of sales resulting from dumping
    and were    in a position to force down the prices of the Community
    industry in particular in its most important national market where a
    significant price undercutting was found.
    The council also considers that the Community              industry had to face
    the effect of dumped       imports from Korea, and was not able to meet
    the low prices of these imports without definitively undermining its
    profit   situation    and   jeopardizing     any  possibility     of    competition
    with the Japanese products in the high segment of the market.
    Therefore, the Council adopts the findings of the Commission set out
    in recitals 78 to 94 of Regulation (EEC) No 3262/90 pertaining to
    Korean   and   Japanese    imports    and  concludes     that  these,     taken   in
    isolation, have caused material         injury.
                             I.   COMMUNITY    INTEREST
42. In its provisional findings, the Commission considered and balanced
    the  interests of the Community          industry, of     the consumers and of
    other industries and activities concerned.            For the reasons given in
    recitals 95 to 104 of Regulation (EEC) No 3262/90, it concluded that
    the   interests   of   the    Community    call,   on   balance,     for   granting
    protection to the Community        industry against unfair competition due
    to dumped imports.
43. One   exporter     submitted     that    the   withdrawal     of    one     of   the
    complainants, AGFA, from this sector            in 1990, and the takeover of
     its activities    by   another   complainant,     BASF, will      lead   to   cost-
    savings   and   rationalization which       could   not   fail   to    improve   the
    profit    situation    of    the   Community     industry,    and     thus    render
    protective measures unnecessary and contrary to Community                interest.
 ---pagebreak---                                           - 24 -
     The samo exporter also argued that the creation of manufacturing
     subsidiaries       in   the   Community      by   some    Japanese    exporters      has
     actually     offset     the    loss   of    Jobs     incurred    in   the     Community
      industry's plants.
44.  The Council considers on the contrary that these facts strengthen
     the case for the adoption of protective measures in order to prevent
     other Community producers from disappearing, and considers that the
     creation of       jobs by    non-integrated       subsidiaries of       the    Japanese
     exporters could not be considered as a fair substitute for a global
     loss of employment in fully integrated producers.
    Therefore the Council confirms the Commission's findings that it is
     in   the   Community      interest     to    impose    ant I-dumping     measures     to
    eliminate the injurious effects of imports originating in Japan and
     In Korea.
                                        J.    DUTY
    Sovera!      exporters      contested      the    methodoiogy      applied      by   the
    Commission       to   determine    the     individual      injury   margin     of   each
    exporter.      They argued that the effect of the determination of the
    price increase of the Community            industry was to compensate for past
     lose of market share and not to eliminate present injury.
     In addition, they alleged that this determination took no account of
    the    other     factors    which    may    have    contributed     to    ths    current
    unsatisfactory state of the Community industry.
    The Commission cannot accept these arguments.
    Firstly,     the    Commission     recalls     that    the   very   purpose      of  the
    Commun i ty's ant i-dump i no       ! eg i G 1 at i on  is to counter act dump i ng and
    material      injury      caused     thereby.     Consequently,      the      Community
    institutions       are  empowered     to   impose    anti-dumping     duties     to  the
    extent    of    the   dumping    found.    There     is, however,      an   additional
 ---pagebreak---                                        - 25 -
    responsibility on the institutions to avoid measures which can have
    excessive consequences.         Indeed, Article 13(3) of Regulation                (EEC)
    No   2423/88  states    that    the    measures     "should     be   less"   than    the
    dumping margin "if such        lesser duties would be adequate to remove
    the   injury".   This   entails      an   assessment     and    a  forecast     of   the
    future effects on the Community market of any anti-dumping measures
    which by its very nature is Judgemental.              This assessment, for which
    the   legislation gives no guidance, has to be reasonable and                       take
    account of the particularities of each case.
     In fulfilling this responsibility the Commission considered that it
     is reasonable to assess, in this case, that the elimination of the
    full dumping margin for some exporters would probably be excessive
    since the consequent price increase would place them at too much of
    a disadvantage and possibly eliminate them from the market.
    The   Commission    therefore       concluded,      given     the    serious     injury
     inflicted on the Community        industry over the years and            its present
    weakened situation, that the minimum necessary for its recovery from
    the injurious effects of dumping would be to ensure that it is able
    to   achieve   a  reasonable      rate    of   profit     in   combination     with    a
    reasonable quantity of sales.
46. As far as this rate of profit          is concerned, the Commissioan, in its
    preliminary findings, has established 12% as reasonable.
    One   exporter   contested      the    rate    of   the    target    profit    of    12%
    determined by the Commission, arguing that an audio cassette                        is a
    mature   product   which     does     not    necessitate      large    research      and
    development expenditures which have to be financed by profits.                       The
    Commission    considers     that,     on    the    contrary,      in   view    of    the
    importance   of   the   marketing      and    promotion     expenditures      on    this
    Community   market,    and   of   the    need    for   constantly     upgrading      the
    features and styling of audio cassettes to attract consumers, a rate
    of profit of 12% is reasonable.            This is supported by the fact that
    profits   achieved   by   several     of   the exporters       concerned    on    their
    domestic   markets    are   far    higher     than   this    rate.    This    view    is
    confirmed by the Council.
 ---pagebreak---                                            26 -
     As   far   as   a    reasonable     turnover       is  concerned      the   Commission
     considers     it    inappropriate,       as    explained       in    its   preliminary
     findings, to take the turnover              of the Community         industry    in the
     reference    psriod     (i.e.    tho  year     1988) since        this   turnover   was
     particularly      heavily     affected     by   the    dumping      practices    found.
     Therefore, calculations of the necessary amounts of duty were based
    on tho quantity of sales achieved by tho Community industry in 1985,
    a    year    which     i«j   considered      closer      to   a    normal    situation,
    notwithstanding tho fact that the sales volume                     In that period may
    also have been adversely affected by dumped imports or other factors
    and    that   the    trarket    has   evolved      with     the   appearance    of   new
    suppiiers.
47. Several exporters, atso contested tho use of an adjustment of the
     injury margin of each exporter according to the relative volume of
    dumped imports of each exporter in relation to the others.                        It was
    ajrgue/d; that, the     comparât i ve     volume     of   dumped     Imports   bears   no
    relationship to the injury suffered by the Community                      industry, and
    that the adjustment was based on an arbitrary factor which does not
    reflect the real position of each exporter.
48. The    Gouncii      cannot     accept    this      view.     Indeed,    as    shown   in
    recitals 55 to 61 and 80 to 87 of Regulation (EEC) No 3262/90 tho
    volume of dumped import;? has been identified as one of the critical
    factors of      injury and      it had thus to be taken             into account when
    detera&taP/ig which duty,         iower    than the dumping margin, would             be
    acteQUattt to remove the injury           in conformity with Article 13(3) of
    Rsgula'tion (EEC) No 242 3/88.          In addition, tho factor used for this
    adjustment, namely a variation of 20% of tho injury margin above and
    below    the   average      according    to    the    volume    of   exports   of   each
    exporter, far from being unreasonab!e has been determined by the
    Commission according to its injury findings (such as evolution of
    volume    and market       share of    dumped     imports and of        tho   Community
    industry) as a reasonable estimate of the effect of tho volume of
    CiUmped imports on tho injury suffered.
 ---pagebreak---                                    - 27 -
49. It was also submitted that this adjustment           should be based on the
    volume of sales of dumped audio cassettes           in the Community      rather
    than the volume of dumped       imports.   The Council      considers however
    that this adjustment     can be based only on the volume of            imports,
    since the volume of sales of these imports in the Community may vary
    during  a  period   for   inventory   reasons,    or   because   of   transfers
    between   subsidiaries,    and   thus   not   be     representative     of           the
    injurious effect of the volume of dumped imports.
50. Finally, the Commission considers that,          in order    to establish the
    rate of the definitive duties to be imposed, the             Individual    injury
    margins   determined    provisionally     have    to    bo   expressed       as          a
    percentage of the CIF value of the imports.
    To do this, for each exporter the weighted average selling price of
    its sales to the first unrelated buyer          has been converted        to the
    average CIF value of these sales.        The   individual     injury threshold
    was then expressed as a percentage of the weighted              average resale
    price of each exporter at CIF level.       The result of this calculation
    is the price increase at the Community frontier necessary to remove
    the injury caused by each exporter.
51. The  Council   confirms   the  above   findings of      the   Commission,            and
    concludes   that   on  the   basis  of   the    injury    calculation      method
    described  in recitals 105 to 109 of Regulation (EEC) No 3262/90 and
    for the abovement ioned reasons, the duty to be imposed should be at
    the  level  of   the dumping   margin   for  all    exporters    mentioned             in
    recital 21, except    for the exporters whose dumping margins exceed
    the injury level and for which the following anti-dumping duties are
    required to eliminate the injury suffered :
                                                                             • . •1<C-L. , *.--'. .
 ---pagebreak---                                      - 28 -
    Fuji                     15.2%
    Denon Columbia           18.7%
    Maxel 2                  21.8%
    Sony                     23.4%
    TDK                      27.4%
52. For   other   companies    which   neither   replied   to  the   Commission's
    questionnaire nor otherwise made themselves known or refused             full
    access to information deemed to be necessary by the Commission for
     its verification of the company's records, the Council considers it
    appropriate to impose the highest duty calculated,            i.o. 27.4% for
    products originating     in Japan and    9.2% for products originating in
    Korea.    Indeed, it would constitute a bonus for non-cooperation to
    hold that tho duties for these producers/exporters woro any             lower
    than the highest anti-dumping duty determined.
    Tho duty    to be   imposed should apply      to all   audio cassettes   from
    Japan and Korea.
                    K.   COLLECTION OF PROVISIONAL DUTIES
53. in view of the dumping margins established, and the seriousness of
    the injury caused to the Community         industry, tho Council    considers
    it necessary     that  amounts   collected   by way   of  provisional   anti-
    dumping duties should be definitively collected to the extent of the
    amount of the duty definitively imposed.
54. !n respect of tho exporters whose dumping           did not cause material
    injury, the provisional duty coilected has to be released entirely.
    Provisional anti-dumping duties collected or securities received for
    audio cassettes not covered by the definition anti-dumping             duties
    should also be released.
 ---pagebreak---                                    - 29 -
HAS ADOPTED THIS REGULATION
                                  Article 1
(1) A definitive anti-dumping duty is hereby imposed on imports of audio
     tapes in cassettes falling within CN code ex 8523 11 00 (Taric
     code 8523 11 00 *10) and originating in Japan and the Republic of
     Korea.
(2) The   rate of    the duty   applicable    to  the net-free-at-Community-
     frontier price before duty, is set as follows :
     (a)     27.4% for audio tapes      in cassettes originating     in Japan
             (Taric   additional   code      8487), with   the exception of
             imports which are manufactured and sold for export to the
             Community by the following companies.      These companies shall
             be subject to the rate of duty mentioned hereunder :
             Sony       23.4% (Taric additional code : 8483)
             MaxelI     21.8% (Taric additional code : 8484)
             Denon      18.7% (Taric additional code : 8486)
             Fuji       15.2% (Taric additional code : 8485)
     (b)     9.2%   for   audio  tapes   in   cassettes  originating   in the
             Republic of Korea (Taric additional code : 8488), with the
             exception of imports which are manufactured and sold for
             export   to the Community by the following        company.  This
             company shall be subject       to the rate of duty mentioned
             hereunder :
             Sunkyong Magnetics Ltd (SKM) : 2.6% (Taric additional code :
             8489)
 ---pagebreak---                                     - 30 -
 (3) None of tho    duties shall apply to Imports of tho products specified
      in paragraph 1 manufactured and sold for export by the following
      Korean companies :
     - Saehan Media Co. Seoul (Taric additional code : 8490)
      - Sungnam Ltd. Seoul (Taric additional code : 8490)
     - Keum Sahn Electronics Co. Ltd, Kyung Do (Taric additional
        code : 8490)
 (4) For the purpose of this Regulation, audio tapes in cassettes mean
     audio   cassettes   of  a   length  of   100 millimetres, a     height   of
     64 millimetres and a depth of 12 millimetres and with a tolerance of
     approximately +/- 2 millimetres.
 (5)  In cases where     the  exporting   company   is not   the  same   as  the
     producing company the rate applicable to the producing company shall
     apply.
 (6) The provisions in force concerning customs duties shall apply.
                                   Article 2
The  amounts   secured   by  way  of   provisional   anti-dumping   duty   under
Regulation (EEC) No 3262/90 shall be definitively collected at the duty
rate definitively imposed.     Amounts secured in excess of the definitive
rate of duty shall be released.
                                   Article 3
The  anti-dumping    proceeding   concerning    imports   of  audio   tapes   in
cassettes originating In Hong Kong is terminated.       The amounts secured by
way of provisional anti-dumping duty under Regulation (EEC) No 3262/90
shalI be released.
 ---pagebreak---                                  - 31 -
                                Article 4
This Regulation shall enter into force on the day following that of its
publication in the Official Journal of the European Communities.
This Regulation shall be binding in its entirety and directly applicable
in all Member States.
Done at Brussels,                          For the Council
                                           The President
 ---pagebreak---  ---pagebreak---                                                 - 32 -
                                                                               ISSN 0254-1475
                                                                COM(91) 118 final
                                                       DOCUMENTS
  N                                                                                        02
                                 Catalogue number : CB-CO-91-148-EN-C
                                                               ISBN 92-77-71038-1
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