(1)

The Council, by Regulation (EC) No 2597/1999 (3), imposed a definitive countervailing duty on imports of polyethylene terephthalate (PET) film (the product concerned) falling within CN codes ex 3920 62 19 and ex 3920 62 90, originating in India. The investigation which led to the adoption of that Regulation is hereinafter referred as to the ‘original investigation’. The measures took the form of an ad valorem duty, ranging between 3,8 % and 19,1 % imposed on imports from individually named exporters, with a residual duty rate of 19,1 % imposed on imports of the product concerned from all other companies. The countervailing duty imposed on PET film manufactured and exported by Garware Polyester Limited (Garware or the company) was 3,8 %. The original investigation period was 1 October 1997 to 30 September 1998.

(2)

The Council, by Regulation (EC) No 367/2006 (4), maintained the definitive countervailing duty imposed by Regulation (EC) No 2597/1999 on imports of PET film originating in India, following an expiry review pursuant to Article 18 of the basic Regulation.

(3)

The Council, by Regulation (EC), No 366/2006 (5), amended Regulation (EC) No 1676/2001 (6) following a partial interim review of the level of anti-dumping duty in force against five Indian producers and imposed an anti-dumping duty ranging from 0 % to 18 %. The anti-dumping duty imposed on imports of PET film from Garware was 17,4 %. It is noted that the anti-dumping duty rate for Garware was adjusted to take into account the level of subsidisation countervailed by Regulation (EC) No 367/2006 (see also recital 71 below).

(4)

A request for a partial interim review of Council Regulation (EC) No 2597/1999, limited to the level of countervailing duty imposed on Garware was lodged by the following Community producers: DuPont Teijin Films, Mitsubishi Polyester Film GmbH, Nuroll SpA and Toray Plastics Europe (the applicants). The applicants represent a major proportion of the Community production of PET film.

(5)

The applicants alleged that, in regard to imports of PET film from Garware, the level of existing countervailing measures was no longer sufficient to counteract the injurious subsidisation, as the circumstances regarding the subsidisation of Garware had changed significantly.

(6)

Having determined, after consulting the Advisory Committee, that sufficient evidence existed to justify the initiation of a partial interim review, the Commission announced on 12 July 2005, by a notice of initiation published in the Official Journal of the European Union (7), the initiation of a partial interim review, in accordance with Article 19 of the basic Regulation.

(7)

The review is limited in scope to the examination of subsidisation of one exporting producer, Garware, in order to assess the need for continuation, removal or amendment of the level of the existing measures. The investigation period ran from 1 April 2004 to 31 March 2005.

(8)

The Commission officially advised the exporting producer concerned, the Government of India (GOI) and the applicants of the initiation of the partial interim review. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time-limit set in the notice of initiation.

(9)

In order to obtain the information necessary for its investigation, the Commission sent a questionnaire to Garware, which cooperated by replying to the questionnaire. A verification visit was carried out at Garware's premises in India.

(10)

Garware, the GOI and the applicants were informed of the essential results of the investigation and had the opportunity to comment (see recital 73 below).

(11)

The product concerned is, as defined in the original investigation, polyethylene terephthalate (PET) film, originating in India, normally declared under CN codes ex 3920 62 19.

(12)

As in the original investigation, it was found that PET film produced and sold by Garware on the domestic market in India and PET film exported to the Community from India have the same basic physical and technical characteristics and uses. Therefore, they are like products within the meaning of Article 1(5) of the basic Regulation.

(13)

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:

(i)

Advance Licence Scheme/Advance Release Order;

(ii)

Duty Entitlement Passbook Scheme;

(iii)

Special Economic Zones/Export Oriented Units Scheme;

(iv)

Export Promotion Capital Goods Scheme;

(v)

income tax schemes

(vi)

Export Credit Scheme;

(vii)

Duty-Free Replenishment Certificate.

(14)

The schemes (i) to (iv) and (vii) above are based on the Foreign Trade (Development and Regulation) Act 1992 (No 22 of 1992) which entered into force on 7 August 1992 (the Foreign Trade Act). The Foreign Trade Act authorises the GOI to issue notifications regarding export and import policy. A five-year plan relating to export and import policy for the period 1 April 2002 to 31 March 2007 was published by the GOI (EXIM policy 2002-07). In addition, a handbook of procedures governing the EXIM policy 2002-07 (HOP I 2002-07) was published by the GOI and is updated on a regular basis (8).

(15)

The Income Tax Schemes specified in (v) above are based on the Income Tax Act 1961, which is amended annually by the Finance Act.

(16)

The Export Credit Scheme specified in (vi) above is based on sections 21 and 35A of the Banking Regulation Act 1949, which allows the Reserve Bank of India to instruct commercial banks regarding export credits.

(17)

On the basis of the information contained in the review request and the replies to the Commission's questionnaire, the Commission also investigated the package scheme of incentives (hereinafter, the PSI) of the Government of Maharashtra (the GOM) 1992. This scheme is based on resolutions of the GOM Industries, Energy and Labour Department.

(18)

The detailed description of the scheme is contained in paragraphs 4.1.1 to 4.1.14 of the EXIM policy 2002-07 and chapters 4.1 to 4.30 of the HOP I 2002-07.

(19)

Garware was not found to be using the ALS/ARO during the investigation period, therefore no further analysis of the countervailability of this scheme is necessary.

(20)

A detailed description of DEPBS is contained in paragraph 4.3 of the EXIM policy 2002-07 and in Chapter 4 of HOP I 2002-07. At the time of the original investigation, two forms of DEPB existed: pre-export and post-export. In April 2000, the pre-export form of DEPB was discontinued and therefore only the post-export form was investigated in the current review.

(21)

Any manufacturer-exporter or merchant-exporter is eligible for this scheme. Garware was found to benefit from this scheme during the investigation period.

(22)

An eligible exporter can apply for DEPB credits, which are calculated as a percentage of the value of products exported under this scheme. Such DEPB 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 norms (SIONs), taking into account a presumed import content of inputs in the export product and the customs duty incidence on such presumed imports, regardless of whether import duties have actually been paid or not.

(23)

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 he 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 of a retroactive amendment to the level of the benefit.

(24)

It was also found that, in accordance with Indian accounting standards, DEPBS credits can be booked on an accruals basis as income in the commercial accounts, upon fulfilment of the export obligation.

(25)

Such credits may 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 otherwise used.

(26)

DEPBS credits are freely transferable and valid for a period of 12 months from the date of issue.

(27)

An application for DEPBS credits can cover up to 25 export transactions or, if electronically filed, an unlimited amount of export transactions. De facto, no strict deadlines to apply for DEPBS exist, because the time periods mentioned in Chapter 4.47 HOP I 2002-07 are always counted from the most recent export transaction included in a given DEPBS application.

(28)

The company brought to the Commission's attention that this scheme would soon be discontinued and be replaced by an allegedly WTO compatible scheme with effect from 1 April 2006. The DEPB was originally planned to expire on 1 April 2005. However, as the replacement scheme was not ready to be implemented by that date, the DEPBS was prolonged until 1 April 2006. No confirmation was given by the company whether this new scheme has finally entered into force after the latter date. In any event, this alleged change would fall outside the review investigation period.

(29)

The DEPBS provides subsidies within the meaning of Article 2(1)(a)(ii) and Article (2)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 GOI's duty revenue which would otherwise be due. In addition, the DEPBS credit confers a benefit upon the exporter, because it improves the liquidity of the company.

(30)

Further, the DEPBS is contingent in law upon export performance, and therefore deemed to be specific and countervailable under Article 3(4)(a) of the basic Regulation.

(31)

This scheme cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 2(1)(a)(ii) of the basic Regulation. 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), Annex I and Annexes II and III of the basic Regulation. Lastly, an exporter is eligible for 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 their inputs locally and do not import any goods which can be used as inputs are still entitled to benefit from DEPBS.

(32)

In accordance with Articles 2(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 2(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 investigation period. The company submitted that the rate applicable to the DEPBS has been reduced from 11 % to 8 % with effect from 26 May 2005, i.e., this alleged change falls outside the review investigation period; therefore, the effects and relevance of this change could not be verified and this claim must be rejected in accordance with Article 5 of the basic Regulation.

(34)

Fees necessarily incurred to obtain the subsidy were deducted from the credits received to arrive at the subsidy amount as the numerator, pursuant to Article 7(1)(a) of the basic Regulation.

(35)

In accordance with Article 7(2) of the basic Regulation, the subsidy amount has been allocated over the total export turnover during the review investigation period as the appropriate denominator, as the subsidy is contingent on export performance and it was not granted by reference to the quantities manufactured, produced, exported or transported. Garware benefited from this scheme during the investigation period and obtained a subsidy of 10,3 %.

(36)

The details of these schemes are contained in Chapters 6 (EOUS) and 7 (SEZS) respectively of the EXIM policy 2002-07 and HOP I 2002-07.

(37)

Garware was not found to be set up under either of these schemes during the investigation period, therefore no further analysis of their countervailability is necessary.

(38)

A detailed description of the EPCGS can be found in Chapter 5, EXIM Policy 2002-07 and in Chapter 5, HOP I 2002-07.

(39)

Any manufacturer-exporter and merchant-exporter tied to a supporting manufacturer or service provider is eligible for this scheme. Garware was found to benefit from this scheme during the investigation period.

(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 the payment of a fee, an EPCG licence. Since April 2000, the scheme provides for a reduced import duty rate of 5 %, applicable to all capital goods imported under the scheme. 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.

(41)

The EPCGS provides subsidies within the meaning of Article 2(1)(a)(ii) and Article 2(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 otherwise be due. In addition, the duty reduction confers a benefit upon the exporter because the duties saved upon importation improve its liquidity.

(42)

Further, the EPCGS is contingent in law upon export performance, since such licences can not be obtained without a commitment to export. Therefore, it is deemed to be specific and countervailable under Article 3(4)(a) of the basic Regulation.

(43)

The scheme cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 2(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.

(44)

The numerator was established as follows: the subsidy amount was calculated, in accordance with Article 7(3) of the basic Regulation, on the basis of unpaid customs duty on imported capital goods spread over a period which reflects the normal depreciation period of such capital goods in the PET film industry. Interest was added to this amount in order to reflect the full value of the benefit over time. Fees necessarily incurred to obtain the subsidy were deducted, in accordance with Article 7(1)(a) of the basic Regulation.

(45)

In accordance with Article 7(2) and 7(3) of the basic Regulation, this subsidy amount has been allocated over the export turnover during the review investigation period as the appropriate denominator, as the subsidy is contingent upon export performance. The subsidy obtained by Garware is 1,8 %.

(46)

The legal basis for this scheme is contained in the Income Tax Act 1961, amended yearly by the Finance Act. The latter sets out, every year, the basis for the collection of taxes, as well as various exemptions and deductions which can be claimed. Exporting companies may claim income tax exemptions under sections 10A, 10B and 80HHC of the Income Tax Act 1961.

(47)

As Garware was not found to have availed of any benefits under the ITES, no further analysis of the countervailability of this scheme is necessary.

(48)

The details of the scheme are set out in Master Circular IECD No 5/04.02.01/2002-03 (Export Credit in Foreign Currency) and Master Circular IECD No 10/04.02.01/2003-04 (Rupee Export Credit) of the Reserve Bank of India (RBI), which is addressed to all commercial banks in India.

(49)

Manufacturing-exporters and merchant-exporters are eligible for this scheme. Garware was found to benefit from this scheme during the investigation period.

(50)

Under this scheme, the RBI sets mandatory ceilings on interest rates applicable to export credits, both in Indian rupees and in foreign exchange, which commercial banks can charge an exporter ‘with a view to making credit available to exporters at internationally competitive rates’. The ECS consists of two sub-schemes, the Pre-Shipment Export Credit Scheme (packing credit), which covers credits provided to an exporter for financing the purchase, processing, manufacturing, packing and/or shipping of goods prior to export, and the Post-Shipment Export Credit Scheme, which provides for working capital loans for financing export receivables. The RBI also directs the banks to provide a certain amount of their net bank credit towards export finance.

(51)

As a result of these RBI Master Circulars, exporters can obtain export credit at preferential interest rates compared to the interest rates on ordinary commercial credit (cash credits), which are set under market conditions.

(52)

Firstly, by lowering financing costs as compared with market interest rates, the above preferential interest rates confer a benefit within the meaning of Article 2(2) of the basic Regulation on such exporters. Despite the fact that the preferential credits under the ECS are granted by commercial banks, this benefit is a financial contribution by a government within the meaning of Article 2(1)(iv) of the basic Regulation. The RBI is a public body, falling, therefore, within the definition of a ‘government’ set out in Article 1(3) of the basic Regulation and it instructs commercial banks to grant preferential financing to exporting companies. This preferential financing amounts to a subsidy, which is deemed to be specific and countervailable since the preferential interest rates are contingent upon export performance, pursuant to Article 3(4)(a) of the basic Regulation.

(53)

The subsidy amount has been calculated on the basis of the difference between the interest paid for export credits used during the investigation period and the amount that would have been payable if market interest rates were charged, as for ordinary commercial credits used by the company. The subsidy amount (numerator) has been allocated over the total export turnover during the review investigation period as the appropriate denominator in accordance with Article 7(2) of the basic Regulation, as the subsidy is contingent upon export performance and is not granted by reference to quantities manufactured, produced, exported or transported. Garware availed of benefits under the ECS and obtained a subsidy of 1,2 %.

(54)

The legal basis for this scheme is contained in paragraphs 4.2.1 to 4.2.7 of the EXIM Policy 2002-07 and in paragraphs 4.31 to 4.36 of the HOP I 2002-07.

(55)

As Garware was not found to have availed of any benefits under the DFRC, no further analysis of the countervailability of this scheme is necessary.

(56)

In order to encourage the dispersal of industries to less developed areas of the State, the GOM has been granting incentives to new expansion units set up in developing regions of the State, since 1964, under a scheme commonly known as the ‘Package Scheme of Incentives’. The scheme has been amended several times since its introduction and the 1993 scheme was operative from 1 October 1993 to 31 March 2001, whereas the latest amendment, the 2001 scheme, was introduced on 31 March 2001 and foreseen to be operative up to 31 March 2006. The PSI of the GOM is composed of several sub-schemes, the main being the exemption from local sales tax and the refund of octroi tax.

(57)

In order to be eligible, companies must invest in less developed areas, either by setting up a new industrial establishment or by making a large scale capital investment in expansion or diversification of an existing industrial establishment. These areas are classified, according to their economic development, into different categories (e.g., less developed area, lesser developed area, least developed area). The main criterion to establish the amount of incentives is the area in which the enterprise is or will be located and the size of the investment.

(58)

Exemption from local sales tax: Goods are normally subject to central sales tax (for inter-State sales) or State sales tax (for intra-State sales) at varying levels, depending upon the State(s) in which transactions are being made. There is no sales tax on the import or export of goods, while domestic sales are subject to the sales tax at the applicable rates. Under the exemption scheme, designated units are not required to collect any sales tax on their sales transactions. Similarly, designated units are exempted from payment of the local sales tax on their purchases of goods from a supplier itself eligible for the scheme. Whereas the sales transaction does not confer any benefit on the designated selling unit, the purchase transaction does confer a benefit to the designated purchasing unit. Garware was found to have benefited from this exemption during the investigation period.

(59)

Refund of the Octroi Tax: Octroi is a tax levied by local Governments in India, including the GOM, on goods that enter the territorial limits of a town or district. Industrial enterprises are entitled to a refund of the octroi tax from the GOM, if their facility is located in certain specified towns and districts within the territory of the State. The total amount that may be refunded is restricted to 100 % of the fixed capital investment. Garware was found to have benefited from this refund during the investigation period.

(60)

The PSI of the GOM provides subsidies within the meaning of Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation. The two sub-schemes examined constitute a financial contribution by the GOM, since this concession decreases the GOM's revenue which would be otherwise due. In addition, this exemption/refund confers a benefit upon the company, as it improves its liquidity.

(61)

The company submitted that the sales tax was abolished on 1 April 2005 and that the GOM has since introduced a value added tax regime, under which the company is obliged to pay the full rate. However, this alleged change occurred after the end of the investigation period, therefore the effects and relevance of this change could not be verified. In any event, no relevant evidence was submitted relating to the regime and the company's obligations thereunder. In accordance with Article 5 of the basic Regulation, this claim has to be rejected.

(62)

The scheme is only available to companies which have invested within certain designated geographical areas within the jurisdiction of the State of Maharashtra. It is not available to companies located outside these areas. The level of the benefit is different according to the area concerned. The scheme is specific, in accordance with Articles 3(2)(a) and 3(3) of the basic Regulation and therefore countervailable.

(63)

Concerning the tax exemption, the subsidy amount was calculated on the basis of the amount of sales tax normally due during the review investigation period, but which remained unpaid under the scheme. Similarly, as far as octroi is concerned, the benefit to the exporter was calculated as the amount of octroi tax refunded during the investigation period. Pursuant to Article 7(2) of the basic Regulation, these amounts of subsidy (numerator) have then been allocated over the total sales during the review investigation period as the appropriate denominator, as the subsidy is not export contingent and it was not granted by reference to the quantities manufactured, produced, exported or transported. During this period, Garware benefited from these schemes and obtained subsidies of 1,6 %.

(64)

The amount of countervailable subsidies determined in accordance with the basic Regulation, expressed ad valorem, for the investigated exporting producer is 14,9 %. This amount of subsidisation exceeds the de minimis threshold mentioned under Article 14(5) of the basic Regulation.

(65)

It is therefore considered that, pursuant to Article 19 of the basic Regulation, the measures currently in force are no longer sufficient to counteract the countervailable subsidies which are causing the injury to the Community industry.

(66)

In accordance with Article 19(2) of the basic Regulation, it was examined whether the continuation of the existing measure would not be sufficient to counteract the countervailable subsidy which is causing injury.

(67)

It was established that, during the investigation period, Garware continued to benefit from countervailable subsidisation by the Indian authorities. Further, the subsidy rate found during this review is considerably higher than that established during the original investigation. The subsidy schemes analysed above give recurring benefits. With the exception of the DEPBS and the sales tax refund, there is no allegation that these programmes will be phased out in the foreseeable future. According to Garware, a replacement scheme to the DEPBS was planned to enter into force on 1 April 2006. No confirmation was given by the company whether this in fact took place. The situation arising from the replacement of the DEBPS by an allegedly WTO compatible scheme, on which the Commission has no information, will have to be assessed in due time. In the absence of any substantiated evidence of the replacement of the DEBPS, it is considered that, for the need of the present review, the DEPBS is still in place. Similarly, the company did not provide any details of the VAT-like scheme which allegedly replaced the sales tax in the GOM after the end of the investigation period and therefore it was considered that, for the need of the present review, the sales tax scheme is still in place.

(68)

Since it has been demonstrated that the company is in receipt of much higher subsidisation than before and that it is likely to continue to receive subsidies of an amount higher than determined in the original investigation, it is concluded that the continuation of the existing measure is not sufficient to counteract the countervailable subsidy causing injury and that the level of the measures should therefore be amended to reflect the new findings.

(69)

In view of the conclusions reached with regard to the level of subsidisation of Garware and the insufficiency of the current measures to counteract the countervailable subsidies found, the countervailing duty on Garware imports of the product concerned should be amended in order to reflect the new subsidisation levels found.

(70)

The amended countervailing duty set out in recital 72 was established at the new rate of subsidisation found during the present review, as the injury margin calculated in the original investigation remains higher.

(71)

Since, pursuant to Article 24(1) of the basic Regulation and Article 14(1) of Regulation (EC) No 384/96, no product shall be subject to both anti-dumping and countervailing duties for the purpose of dealing with one and the same situation arising from dumping or from export subsidisation, the countervailing duty found as a result of this review investigation to correspond to export subsidies (13,3 %) shall be deducted from the anti-dumping duty imposed on Garware by Regulation (EC) No 1676/2001. Following the amendment to the latter, introduced by Regulation (EC) No 366/2006, a dumping margin of 20,1 % was established for Garware. Of that, 2,7 % was deducted to reflect the countervailing duty then in force corresponding to export subsidies and thus an anti-dumping duty of 17,4 % was imposed on that company. As a result of the current review, a further 10,6 % shall be deducted from its individual anti-dumping duty, reflecting the countervailing duty corresponding to export subsidies found; the anti-dumping duty imposed on Garware should thus be reduced by that amount to 6,8 %.

(72)

On the basis of the above, the proposed duty amounts concerning Garware, expressed on the CIF Community border price, customs duty unpaid, are as follows:

(73)

Garware, the GOI and the applicants were informed of the essential facts and considerations on the basis of which it was intended to recommend the amendment of the measures in force and had the opportunity to comment. No comments were received by Garware or the GOI; the applicant's comments reflect their agreement with the conclusions reached by the Commission.

(74)

The individual company countervailing and anti-dumping duty rates specified in this Regulation were established on the basis of the findings of the investigations which led to the adoption of Regulation (EC) No 367/2006 and Regulation (EC) No 366/2006, as well as of the findings of the present review. They reflect the situation found during this review with respect to Garware. These duty rates (as opposed to the country-wide duty applicable to all other companies) are thus exclusively applicable to imports of products originating in the country concerned and produced by the companies and thus by the specific legal entities mentioned. Imported products produced 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.

(75)

Any claim requesting the application of these individual company countervailing and anti-dumping 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 Commission (9) forthwith with all relevant information, in particular any modification in the company's activities linked to production, domestic and export sales associated with, for example, that name change or that change in the production and sales entities,

(1)

On 2 June 2005, the Commission published a notice (2) initiating an anti-dumping proceeding on imports into the Community of certain side-by-side refrigerators originating in the Republic of Korea. On 1 March 2006, the Commission, by Regulation (EC) No 355/2006 (3) (‘the provisional Regulation’) imposed a provisional anti-dumping duty on the same product.

(2)

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

(3)

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

(4)

All parties were informed of the essential facts and considerations on the basis of which it was intended to recommend the imposition of a definitive anti-dumping duty on imports of certain side-by-side refrigerators originating in the Republic of Korea and the definitive collection of the amounts secured by way of the provisional duty. They were also granted a period within which to make representations subsequent to the disclosure of the essential facts and considerations on the basis of which definitive measures are imposed.

(5)

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

(6)

The same exporting producer as referred to under recitals 11 and 12 of the provisional Regulation reiterated and elaborated further its arguments on the issue of the product scope.

(7)

In particular, this exporter claimed that the product scope should have covered all large capacity combined refrigerator-freezers (‘CRF’) with a capacity above 400 litres since a segmentation of those refrigerators would be inconsistent with the past practice of the Community institutions, would disregard evidence from other interested parties and would ignore market reality (claim (i)).

(8)

This exporter further claimed that should claim (i) be rejected, any attempt to segment the CRF market should exclude three-door side-by-side models (as described in recital 12 of the provisional Regulation) from the scope of the product concerned. In essence, this exporter argued that it is not the external characteristics (notably the doors) of the models which are relevant, but the internal configuration. In particular, the exporter considered that the alignment of the fresh food and freezer compartments was the essential basic distinguishing characteristic of a side-by-side refrigerator (claim (ii)).

(9)

It is the standing practice of the Community institutions when defining the product concerned to consider primarily the basic physical and technical characteristics of the said product. Furthermore, models classified in different product segments are usually considered to form one single product unless clear dividing lines exist between the various segments.

(10)

Having paid careful attention to all the submissions made by all the interested parties to this proceeding, the investigation has identified that the CRF market is traditionally divided into three segments: the segment of the bottom-mount refrigerators (i.e. fresh-food compartment placed on top of the freezer compartment), the segment of the top-mount refrigerators (i.e. freezer compartment placed on top of the fresh-food compartment) and the segment of the side-by-side refrigerators (i.e. two doors side-by-side opening on two compartments placed side-by-side). This market categorisation into three distinct segments is undisputed and is familiar to all operators in this particular business. It has even been acknowledged by the said exporter in several written submissions. Furthermore, the claim based on the ‘evidence from other interested parties’ reflects in fact selective reading by this exporter of a fragment of a submission from a white goods producer that supports measures but does not manufacture the like product (see recitals 10 and 104 of the provisional Regulation). In this submission, the manufacturer of white goods indicates that it has faced negative knock-on effects on its sales of non-like products in the Community due to dumped imports. However, the fact that this manufacturer has allegedly suffered such a knock-on effect is not in itself conclusive evidence that all large capacity CRFs with a capacity above 400 litres should be considered to be the product concerned regardless of the segments as described above into which they fall. Indeed, it was established that the technological and physical characteristics underlying these two products are totally different.

(11)

It is therefore considered that there exists a clear dividing line between the three segments constituting the universe of the CRF market. It is concluded that there is no justification for expanding the scope of the product concerned in order to encompass all CRFs as requested by the exporter concerned. As a consequence, claim (i) had to be rejected.

(12)

In claim (ii), the same exporter seeks the exclusion from the scope of the product concerned of a particular model of CRF (hereafter referred to as ‘the three-door model’) which has already been described in recital 12 of the provisional Regulation.

(13)

Since the start of this proceeding, the Commission had defined the scope of the product on the basis of external characteristics, namely the presence of at least two separate swing doors, placed side-by-side. This approach was deemed appropriate on both grounds of physical characteristics and consumer perception. As to physical characteristics, the presence of the two swing doors placed side-by-side was considered the most immediately visible feature. As to consumer perception, a key element was the fact that the claimant itself had repeatedly marketed and advertised the three-door model as a side-by-side refrigerator. The Commission was informed that inner compartments were placed differently in a typical side-by-side refrigerator and in a three-door model, but this distinction was not considered decisive for the exclusion of three doors side-by-side refrigerators from the product definition since no conclusive evidence had been submitted in this respect. On the basis of the information available at that time, the Commission had indicated in recital 14 of the provisional Regulation that ‘there is no commonly used definition of side-by-side refrigerators’.

(14)

This issue continued to be examined after provisional measures. Additional evidence supporting a definition of the segment of side-by-side refrigerators on the basis of the inner configuration of the compartments and not on the basis of the position of the doors was submitted by the above-mentioned exporter. After definitive disclosure, in the light of further evidence provided by the same exporter, the positions expressed by some leading research institutes and classification bodies, most of which classify side-by-side refrigerators on the basis of the inner configuration and not on the basis of the position of the doors, were further assessed. This lead to the conclusion that, from the point of view of physical characteristics, the three-door model cannot be considered as part of the side-by-side segment, as referred to under recital 10 above. As to consumer perception, both the claimant and the Community industry submitted consumer surveys supporting their respective views and contradicting each other. In this respect, therefore, no clear conclusion could be drawn in one direction or the other.

(15)

It stems from the above that the three-door model should be regarded as belonging to the segment of the bottom-mount refrigerators and not to the segment of the side-by-side refrigerators. Claim (ii) was therefore accepted.

(16)

As a consequence, it was deemed appropriate to revise the product scope definition as determined in the provisional Regulation. Therefore, the product concerned is definitively defined as combined refrigerator-freezers with a capacity exceeding 400 litres and with the freezer and refrigerator compartments placed side-by-side, originating in the Republic of Korea, currently classifiable within CN code ex 8418 10 20.

(17)

In the absence of any comments, the content of recitals 18 to 22 of the provisional Regulation concerning normal value is hereby confirmed.

(18)

As stipulated in recital 23 of the provisional Regulation, the export price for sales into the Community made via related importers was constructed on the basis of the resale price to the first independent customer in accordance with Article 2(9) of the basic Regulation. In this export price construction, a profit margin of a company which was considered to be an independent importer of the product concerned had been used. After final disclosure was made to the interested parties, one exporting producer submitted that the company used for establishing this profit margin was not an unrelated importer but a first independent customer of one of its related importers. The claim was duly investigated and it was concluded that the company concerned indeed did not qualify as an unrelated importer. Consequently, it was decided that its profit margin could not be used in the construction of the export prices. Therefore, an alternative source had to be found to establish a reasonable margin for profit as required under Article 2(9) of the basic Regulation. No alternative independent importer's profit information could be acquired within the framework of this investigation. Therefore, in view of the fact the two products pertain to the same white goods sector and the Korean exporting producers concerned being the same, it was considered reasonable to revert for this purpose to the 5 % profit margin used in the microwave ovens anti-dumping proceeding (4).

(19)

In the absence of any further comments, the contents of recitals 23 to 24 of the provisional Regulation concerning the determination of the export price are hereby confirmed.

(20)

As indicated in recital 26 of the provisional Regulation, in cases where no direct comparison between exported models and domestically sold models could be made and in order to establish the normal value as much as possible on the domestic sales of the exporting producers, adjustments were made to the normal values established for some models to reflect the market value of the different physical characteristics between the model sold domestically and the one exported, pursuant to Article 2(10)(a) of the basic Regulation. Two of the exporting producers contested the adjustment made at the provisional stage.

(21)

One exporting producer claimed that no adjustment should have been made because even if there were differences in physical characteristics between the exported models and the domestically sold models proposed for comparison, these differences would have no impact on the market price. This claim had to be dismissed as the number of differences found between the exported models and those sold domestically and proposed for comparison ranged up to seven features and these differences often included important features like ice and water dispenser, door finishing and temperature control system. Therefore, following a normal economic logic, such differences should have an impact on the market value of these models.

(22)

The other exporting producer for which, in order to properly reflect the market value of the differences in physical characteristics, an adjustment to the submitted values for these differences had been made by the Commission at the provisional stage, contested the resulting calculation. Subsequent to the final disclosure, the company pointed at some elements in the Commission's approach which might lead to distortions in the normal value thus calculated and requested that the normal value for exported models without corresponding domestic sales be constructed. This claim was investigated and it was found that certain adjustments made by the Commission to the physical characteristics claim of the company might have led to distorted normal values. It was therefore decided to construct normal values for this company in cases where no direct comparison between exported models and domestically sold models could be made, in accordance with Article 2(3) of the basic Regulation.

(23)

All three exporting producers contested the provisional determination not to grant an adjustment, claimed under Article 2(10)(g) of the basic Regulation, for credit costs allegedly incurred on their domestic sales. The three exporters substantiated that the credit terms used had been contractually agreed and enforced by the companies. It was also demonstrated that invoices could be linked to payments. In view of the foregoing, the domestic credit costs were found to have an impact on price comparability as required by Article 2(10) of the basic Regulation and it was consequently decided to grant adjustments for these costs.

(24)

One exporting producer requested the exclusion of its related importers' sales of damaged and/or malfunctioning products from the dumping calculation. These sales, which constituted a very minor part of the company's sales on the Community market, had been reported separately and had been verified during the on the spot verifications. It had been evidenced that these sales related indeed to malfunctioning or damaged products and that customers and prices of these products were entirely distinct as compared to customers and prices of regular sales. In view of the absence of comparable sales on the company's domestic market, no meaningful comparison could be made with regard to these sales. Therefore, this claim was accepted.

(25)

The same exporting producer contested the Commission's provisional determination to reject the reported ocean freight costs for the purpose of adjusting the export price pursuant to Article 2(10)(e) of the basic Regulation. The reported ocean freight costs were rejected because they were invoiced to the exporter by a related company. The exporting producer now demonstrated that the related company was a logistics entity that contracted the transport services to independent shipping companies. It was further proven that the related company invoiced to the exporter the actual cost of the freight as invoiced to it by the independent shipping companies plus a reasonable mark-up for its services. Therefore, it was decided that the reported ocean transport costs could be considered reliable and the calculations were amended accordingly.

(26)

Apart from the adjustments made, as set out in recitals 22 to 25 of this Regulation, the contents of recitals 25 to 30 of the provisional Regulation in relation to the comparison of normal value and export prices, are hereby confirmed.

(27)

All three companies contested the methodology the Commission had used for calculating the dumping margin. As explained in recitals 31 to 34 of the provisional Regulation, in order to reflect in the calculation of the dumping the significant differences of export prices which constituted a pattern among different regions and because a comparison of either weighted average normal values with weighted average export prices or of individual export and domestic sales transactions would not have reflected the full degree of dumping being practiced, the weighted average normal value was compared to the prices of all individual export transactions to the Community. For all three exporting producers, it was confirmed that significant differences in sales prices amongst regions existed and that, for the reasons already set out in recitals 31 to 34 of the provisional Regulation, it was indeed warranted to compare the weighted average normal value to the prices of all individual export transactions to the Community. The claims of the exporting producers are therefore dismissed.

(28)

In the light of the above adjustments, and after correction of some calculation errors, the amount of dumping finally determined, expressed as a percentage of the cif net free-at-Community-frontier price, before duty, is as follows:

(29)

In the absence of any new and substantiated information or argument in this particular respect, recitals 37 to 40 of the provisional Regulation are hereby confirmed.

(30)

After provisional measures the definition of the product scope was revised as explained at recital 16. Accordingly, data relating to the three-door model have been excluded from the injury analysis. In any event, it should be noted that, during the IP, the Community industry was not producing this type of product and the volume of imports of the three-door model from the Republic of Korea into the Community were negligible.

(31)

Since it was found that Samsung Electronics Corporation (‘Samsung’) had a de minimis dumping margin during the IP (see recital 28), it is necessary to distinguish those imports from the remainder of the imports originating in the Republic of Korea. The latter is referred to as ‘dumped imports’ hereafter. Recitals 44 to 47 of the provisional Regulation are therefore superseded by the following considerations. In order to preserve confidentiality, data concerning the imports from the two remaining Korean producers are presented in an indexed format.

(32)

On this basis, the volume of dumped imports increased sharply (by 266 %) between 2002 and the IP. It rose by 83 % between 2002 and 2003, by a further 153 percentage points in 2004 and by a further 30 percentage points in the IP. During the IP, the volume of dumped imports stood between 180 000 and 250 000 pieces.

(33)

The corresponding market share held by dumped imports increased by around 20 percentage points between 2002 and the IP, to reach a level between 42 and 50 % during the IP. In terms of indices, the market share grew by 21 % in 2003, by a further 43 percentage points in 2004 and by 6 percentage points in the IP. Overall, the rise in market shares was 70 % between 2002 and the IP.

(34)

Finally, average prices of dumped imports decreased by around 5 % between 2002 and the IP, and on a model-to-model comparison, dumped imports undercut the Community industry's prices by between 34,4 % and 42 %, depending on the exporter concerned.

(35)

Similarly, recital 68 of the provisional Regulation is superseded as follows. The volume of dumped imports of the product concerned originating in the Republic of Korea increased significantly by 266 % between 2002 and the IP and the corresponding market share held by dumped imports increased by around 20 percentage points between 2002 and the IP. The average prices of dumped imports were consistently lower than those of the Community industry during the period considered. On a model-to-model weighted average comparison, dumped imports undercut the Community industry's prices by between 34,4 % and 42 %, depending on the exporter concerned, while for some models, price undercutting was even larger.

(36)

In the absence of any further new and substantiated information or argument on the aspect of injury, recitals 41 to 71 of the provisional Regulation are hereby confirmed, with the exception of recitals 44 to 47 and recital 68 which have been addressed above.

(37)

As stated above, it was found that Samsung had a de minimis dumping margin during the IP. However, the significant increase in the volume of dumped imports by 266 % between 2002 and the IP, the increase of the corresponding market share by around 20 percentage points, as well as the undercutting found coincided with the deterioration of the economic situation of the Community industry.

(38)

Since Samsung had a de minimis dumping margin during the IP, it was necessary to examine whether imports from Samsung could, nevertheless, have caused any injury to the Community industry. In order to preserve confidentiality, data concerning Samsung are presented below in an indexed format.

(39)

The volume of imports originating from Samsung increased by 88 % between 2002 and the IP. Specifically, it rose by 56 % between 2002 and 2003, by a further 27 percentage points in 2004 and by a further 5 percentage points in the IP. During the IP, the volume of imports originating from Samsung stood between 100 000 and 170 000 pieces.

(40)

The corresponding market share held by imports originating from Samsung decreased by around 5 percentage points between 2002 and the IP, to reach a level comprised between 28 % and 36 % during the IP. In terms of indices, the market share grew by 3 % in 2003, but then declined by 13 percentage points in 2004 and by a further 2 percentage points in the IP. Overall, the decline in market shares was 12 % between 2002 and the IP.

(41)

Finally, average prices of imports originating from Samsung decreased by around 14 % between 2002 and the IP, and on a model-to-model comparison, imports originating from Samsung undercut the Community industry's prices by 34,1 %.

(42)

Given the rise in the volume of imports originating from Samsung and the undercutting found, it cannot be excluded that those imports contributed to the injury suffered by the Community industry. However, it is also observed that: (i) imports originating from Samsung increased at a far slower pace than other imports originating in the Republic of Korea during the period 2002 to the IP; (ii) in contrast to other Korean imports, imports originating from Samsung lost around 5 percentage points of market share between 2002 and the IP; (iii) the resulting presence, during the IP, of imports originating from Samsung on the Community market in terms of both volume and market share was substantially smaller than that of other Korean imports; and (iv) the model-to-model price comparison showed that Samsung's prices, albeit lower than those of the Community industry, were consistently higher than those of the other Korean imports.

(43)

As a consequence, it is concluded that imports originating from Samsung contributed to the injury caused to the Community industry, but to a substantially lesser degree than that of dumped imports from the remaining two Korean producers. The impact linked to imports originating from Samsung is therefore considered not sufficient to break the causal link between dumped imports and the resulting injury experienced by the Community industry.

(44)

In the absence of any further new and substantiated information or argument, recitals 72 to 96 of the provisional Regulation are hereby confirmed, with the exception of the first sentence of recital 73 as seen above.

(45)

In the absence of any new and substantiated information or argument in this particular respect, recitals 97 to 114 of the provisional Regulation are hereby confirmed.

(46)

In view of the conclusions reached with regard to dumping, injury, causation and Community interest and in accordance with Article 9(4) of the basic Regulation, a definitive anti-dumping duty should be imposed at the level of the dumping margin found, but should not be higher than the injury margin presented in recital 119 of the provisional Regulation and confirmed in the present Regulation. As the injury margins were always higher than the dumping margins, the measures should be based on the latter.

(47)

The definitive duties will therefore be as follows:

(48)

In view of the magnitude of the dumping margins found for the exporting producers in the Republic of Korea and given the level of the injury caused to the Community industry, it is considered necessary that the amounts secured by way of provisional anti-dumping duty imposed by the provisional Regulation should be definitively collected to the extent of the amount of definitive duties imposed. As the three-door model is now excluded from the product definition (see recitals 12 to 16) and definitive duties are lower than the provisional duties, amounts provisionally secured on imports of the three-door model or in excess of the definitive rate of anti-dumping duties shall be released.

(49)

The individual company anti-dumping duty rates specified in this Regulation were established on the basis of the findings of the present investigation. Therefore, they reflect the situation found during that investigation with respect to these companies. These duty rates (as opposed to the country-wide duty applicable to ‘all other companies’) are thus exclusively applicable to imports of products originating in the country concerned and produced by the companies and thus by the specific legal entities mentioned. Imported products produced 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’.

(50)

Any claim requesting the application of these individual company anti-dumping 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 Commission forthwith with all relevant information, in particular any modification in the company's activities linked to production, domestic sales and export sales associated with e.g. that name change or that change in the production and sales entities. If appropriate, the Regulation will accordingly be amended by updating the list of companies benefiting from individual duties,

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