Council Regulation (EC) No 367/2006 of 27 February 2006 imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film originating in India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97

• (138) The volume of imports from Israel rose steadily from around 3 600 tonnes in 2001 to around 4 800 tonnes in the IP. The market share held by imports from Israel increased from 1,3 % in 2001 to 1,9 % in the IP. Import prices from Israel declined from around EUR 2 000/tonne in 2001 to around EUR 1 800/tonne in the IP. Again, the Israeli export price during the IP is slightly below import prices from India.

IMPORTS FROM THE REPUBLIC OF KOREA

• (139) As referred to in recital 2, the Council imposed in 2001 definitive anti-dumping measures on imports of PET film originating in the Republic of Korea, in the form of ad valorem duty rates ranging between 0 and 13,4 %. Quantities of PET film imported in the Community from the Republic of Korea declined from around 34 000 tonnes in 2001 to around 23 200 tonnes in the IP, after the imposition of the above measures. The market share held by Korean products declined also by around three percentage points between 2001 and the IP. Prices of Korean products declined by 7 % between 2001 and 2002, increased by three percentage points in 2003, and by a further one percentage point in the IP. Based on Eurostat statistics, Korean export prices were consistently above Indian export prices, but below Community industry's prices.

IMPORTS FROM OTHER COUNTRIES

• (140) The volume of imports from other third countries not mentioned above decreased from around 41 000 tonnes in 2001, corresponding to a market share of 15 %, to around 40 000 tonnes in the IP, corresponding to a market share of 16 %. The market share increased because consumption (the denominator) declined more than the above imports (the numerator). Average prices of imports from other third countries not mentioned above first increased from around EUR 5 300/tonne in 2001 to around EUR 6 000/tonne in 2002, and then declined to around EUR 4 800/tonne in the IP. Such prices are substantially above both Indian and Community industry's prices. Amongst these third countries, the major individual exporting country to the Community was the USA, with exported volumes of around 17 500 tonnes during the IP. Prices to the Community of imports from the USA (around EUR 6 700/tonne in the IP) were also substantially above those of imports from the country concerned and above Community industry prices during the IP.

ECONOMIC SITUATION OF THE COMMUNITY INDUSTRY

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

PRODUCTION

• (142) The Community industry's production increased by 10 % in 2002 compared to 2001, before declining and remaining at the level of 2001 in the following years.

CAPACITY AND CAPACITY UTILISATION RATES

• (143) Production capacity decreased marginally (by 3 %) between 2001 and the IP. As production remained stable, while at the same time capacity declined slightly, the resulting capacity utilisation slightly increased.

STOCKS

• (144) The level of closing stocks of the Community industry, after a considerable increase in 2002 compared to 2001, has steadily decreased since that year. In the IP, the level of stocks was 28 % lower than in 2001. However, as the like product is generally produced to order, the level of stocks is not very meaningful.

SALES VOLUME

• (145) The sales by the Community industry on the Community market to unrelated customers first increased in 2002, after the imposition of measures, but then decreased by 12 percentage points between 2002 and the IP.

SALES VOLUME

• (146) The market share held by the Community industry declined by around two percentage points between 2001 and the IP. Specifically, the Community industry gained around four percentage points in 2002, after the imposition of both countervailing and anti-dumping measures, lost almost five percentage points in 2003 and finally lost a further one1 percentage point in the IP. The trend and the level reached showed certain improvement in relation to the ones observed prior to the imposition of countervailing measures, when the market share held by the Community industry had dropped from around 57 % to around 50 %.

GROWTH

• (147) Between 2001 and the IP, the Community consumption decreased by 7 %. The Community industry lost around two percentage points of market share, whilst the imports concerned gained 2,7 percentage point of market share.

EMPLOYMENT

• (148) The level of employment of the Community industry declined by 8 % between 2001 and the IP.

PRODUCTIVITY

• (149) Productivity of the Community industry's workforce, measured as output per person employed per year, increased by 8 % between 2001 and the IP.

SALES PRICES AND FACTORS AFFECTING DOMESTIC PRICES

• (150) Unit sales prices of the Community industry have increased by 4 % between 2001 and the IP. This price development is broadly in line with that of the cost of production and of the principal raw material, which also showed a rise during the period considered.

WAGES

• (151) Between 2001 and the IP, the average wage per employee increased by 12 %, a figure that exceeds the rate of increase of the average nominal unit labour costs (6 %) observed during the same period in the Community economy at large.

INVESTMENTS

• (152) The annual flow of investments in the product concerned made by the Community industry has constantly decreased since 2002. The increase in 2002 can be explained by investments in plant and machinery for one producer and investment to facilitate the closure of certain production lines for another producer.

PROFITABILITY AND RETURN ON INVESTMENTS

• (153) Profitability of the Community industry, while showing a gradual improvement over the period considered, remained negative between 2001 (5,2 %) and the IP (2,5 %). The return on investments (ROI), expressed as the profit in percent of the net book value of investments, broadly followed the above profitability trend over the whole period considered.

CASH FLOW AND ABILITY TO RAISE CAPITAL

• (154) The cash-flow situation deteriorated between 2001 and the IP, mainly due to other non-cash items such as assets depreciation and inventory movements.

• (155) The investigation has shown that capital requirements of the Community producers have been adversely affected by their difficult financial situation. Although several of these companies are part of large companies, capital requirements are not always met to the desired level, as financial resources are generally allocated within these groups to the most profitable entities. This relative inability to raise capital can be linked to the declining investment documented under recital 152.

MAGNITUDE OF SUBSIDISATION

• (156) As concerns the impact on the Community industry of the magnitude of the actual subsidy margins, given the volume and the prices of the imports from the country concerned, this impact cannot be considered to be negligible, especially in transparent and thus highly price sensitive markets like the one of the product concerned.

RECOVERY FROM THE EFFECTS OF PAST SUBSIDISATION AND OF PAST DUMPING

• (157) While the indicators examined above show some improvement in the economic and financial situation of the Community industry, further to the imposition of definitive countervailing measures in 1999, and further to the imposition of anti-dumping measures in 2001, they also evidence that the Community industry is still fragile and vulnerable.

CONCLUSION

• (158) As shown under recitals 132 to 135, the volume of imports from the country concerned has doubled between 2001 and the IP. Given that consumption declined by 7 % over the same period, this resulted in a sharp rise of the market share held by Indian exporters from 2,3 % in 2001 to 5,0 % during the IP. At the same time, Indian export prices to the Community remained relatively stable at a level of around EUR 2 000/tonne thereby undercutting substantially the prices of the Community industry.

• (159) Between 2001 and the IP, the following indicators developed positively: capacity utilisation and productivity of the Community industry increased and closing stocks decreased. Unit sales prices increased in line with the cost of the raw material between 2001 and the IP, profitability improved but remained negative in the IP, as well as return on investment. Wages developed positively.

• (160) Conversely, the following indicators developed negatively: the market share held by the Community industry declined marginally, production and production capacity declined, sales volumes declined, and employment, total cash flow and investments declined. Therefore, the Community industry show mixed trends since 2001: while some indicators show positive developments, a number of others show a negative trend.

• (161) If one compares the above trends with the ones described in the Regulations imposing provisional and definitive countervailing measures, again the assessment is mixed. As concerns market share, the Community industry lost around two percentage points between 2001 and the IP, whilst it had lost almost seven percentage points in the four years preceding the adoption of the definitive countervailing measures. It can therefore be considered that measures have achieved one of their goal, namely to slow the deterioration of market share. On the other hand, the profitability of the Community industry is worse in the IP than before the imposition of definitive countervailing measures. Had the measures not been circumvented by imports from Brazil and Israel, the situation might have been more favourable. It is further reminded that the efficiency of the measures, and thereby their remedial effect on the injurious situation of the Community industry, was severely undermined by the fact that the undertakings did not properly function, as referred to in recital 135.

• (162) It is therefore concluded that the situation of the Community industry has not improved to the extent that could have been expected after the imposition of the definitive countervailing and anti-dumping measures. The Community industry is therefore still in a fragile situation.

• (163) In addition to the circumvention of the original measures and the fact that the undertaking did not achieve the desired effect, it was also analysed whether other factors, like e.g. imports from other countries, or a hypothetical inefficiency of the Community industry, could explain the persistent poor financial situation of the latter. In this respect it was found that it cannot be excluded that imports from the Republic of Korea and the decreasing consumption have to a certain extent impacted on the fragile situation. But these two factors do not explain in isolation the Community industry's current situation. Moreover, what is ultimately relevant is how the Community industry would develop in the absence of countervailing measures and whether there is a likelihood of a recurrence of injury. This issue is examined in the subsequent section.

• (164) Subsequent to the disclosure, two exporting producers claimed that the imports from the USA, the increase of wages of the Community industry and the decline in Community consumption are factors having a significant effect for the fragile situation of the Community industry. Regarding the imports from the USA, it is recalled (see recital 140), that prices of imports from this country were on average substantially above those of imports from the country concerned and also above Community industry prices during the IP. Moreover, it was established that the prices of imports from this country were substantially higher than those mentioned above during the whole period considered. Therefore, it can be reasonably concluded that this factor did not have any negative effect on the situation of the Community industry. Regarding the increase in the wage cost per employee during the period considered (12 %), it should be noted that any negative effects of this factor on the situation of the Community industry are to a large extent offset by the parallel drop in the level of employment during the period considered, affecting the wage bill only by 3,3 %. Therefore, the claim that this factor had a significant effect on the situation of the Community industry could not be accepted. Regarding the decline in consumption, it is indeed acknowledged above that this factor may to a certain extent have impacted on the fragile situation of the Community industry. However, this factor cannot be considered significant given that the decline in sales volumes to unrelated customers by the Community industry was merely 2 % in contrast to the 7 % decline in consumption. In the light of the findings set out in Sections F and G, and on the basis of the above, it is concluded that imports from the USA cannot have had a negative effect on the situation of the community industry and that the other two aforementioned factors could at best only have played a minor role.

LIKELIHOOD OF CONTINUATION AND/OR RECURRENCE OF INJURYPRELIMINARY REMARKS

• (165) As already seen, the imposition of countervailing measures has allowed the Community industry to recover only to some extent from the injury suffered. Due to several elements mentioned above, it is still in a fragile and vulnerable situation. Different factors were therefore examined in order to determine if the situation of the Community industry would stay unchanged improve or worsen in case measures would be allowed to lapse.

• (166) The examination of whether it would be likely that injury would continue and/or recur should measures be repealed was based in particular on information provided by the cooperating exporting producers. Information relating to the import prices from exporters other than the cooperating exporter, determined on the basis of Eurostat, was also examined. The pricing behaviour of the cooperating exporting producers to other export markets, export prices to the Community, production capacity and stocks were examined. Finally, the likely effect of a repeal of the measures on prices of other imports was also assessed.

RELATIONSHIP BETWEEN EXPORT VOLUMES AND PRICES TO THIRD COUNTRIES AND EXPORT VOLUMES AND PRICES TO THE COMMUNITY

• (167) It was found that the average export price of Indian sales to non-EU countries was significantly below the average export price to the Community and also below the prices on the domestic market. The Indian exporter's sales to non-EU countries were made in significant quantities, accounting for 73 % of total export sales. Therefore, it was considered that, should measures lapse, Indian exporters would have an incentive to shift significant quantities of exports from other third countries to the more attractive Community market, at price levels, which, even if they increased, were likely to be still below the current price levels of export to the Community.

UNUSED CAPACITY AND STOCKS

• (168) On average, the cooperating Indian producers had significant spare capacities representing almost three times the export quantity to the Community during the IP. Likewise, average stocks of finished products are significant and, at the end of the IP, represented 16 % of the volume exported to the Community. Therefore, the capacity to significantly increase export quantities to the EC exists, in particular because there are no indications that third country markets or the domestic market could absorb any additional production. In this regard, it should be noted that it is very unlikely that the domestic market in India, due to the presence of at least four other competing producers, would be able to absorb all of the spare capacity of the four cooperating exporting producers.

CONCLUSION

• (169) The producers in the country concerned have therefore the potential to raise and/or redirect their export volumes to the Community market. The investigation showed that, on the basis of comparable product types, the cooperating exporting producers sold the product concerned at a lower price than the Community industry's (the undercutting margins range between 2 and 21 %). These low prices would most likely continue to be charged or even decrease in line with the lower prices charged to the rest of the world, as mentioned in recital 134, also in order to regain the level of market shares held in the period before the imposition of measures. Such a price behaviour, coupled with the ability of the exporters in the country concerned to deliver significant quantities of the product concerned to the Community market, would in all likelihood have the effect of reinforcing the price-depressive trend on the market, with an expected negative impact on the economic situation of the Community industry.

• (170) As shown above, the situation of the Community industry remains vulnerable and fragile. It is likely that if the Community industry was exposed to increased volumes of imports from the country concerned at subsidized prices, this would result in a deterioration of its sales, market shares, sales prices as well as the consequent deterioration of the financial situation, to the levels found in the original investigation. On this basis, it is therefore concluded, that the repeal of the measures would in all likelihood result in a worsening of the already fragile situation and a recurrence of an even more injurious state of the Community industry.

COMMUNITY INTERESTINTRODUCTION

• (171) According to Article 31 of the basic Regulation, it was examined whether maintenance of the existing countervailing measures would be against the interest of the Community as a whole. The determination of the Community interest was based on an appreciation of all the various interests involved.

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

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

INTEREST OF THE COMMUNITY INDUSTRY

• (174) The Community industry has proven to be a structurally viable industry. This was confirmed by its export sales that have remained stable at a high level since 2001 and the positive development of its economic situation observed after the imposition of countervailing measures in 1999. In particular, the fact that the Community industry virtually stopped its loss of market share in the few years before the IP contrasts sharply with the situation preceding the imposition of the measures. Also, the Community industry saw its losses decrease between 2001 and the IP. It is further recalled that circumvention had been found by imports from Brazil and Israel and that the undertaking did not work as desired. Had these developments not occurred, the situation of the Community industry would have been even more favourable.

• (175) It can reasonably be expected that the Community industry will continue to benefit from the measures currently imposed and further recover, probably by regaining market share and improving its profitability. Should the measures not be maintained, it is likely that the Community industry would suffer injury to a higher extent from increased imports at subsidized prices from the country concerned and that its currently poor financial situation will deteriorate further.

INTEREST OF IMPORTERS/USERS

• (176) As indicated in recital 20, only one importing company, which is also a user of the product concerned, fully cooperated in this investigation. For reasons of confidentiality, exact figures concerning this importer/user can therefore not be disclosed. However, this importer/user is deemed to be representative of the situation of other importers/users in the Community because of its relatively high total turnover. This importer purchases the PET film from a variety of sources, which include India and the Community industry. This company's resales of the product concerned originating in India represented less than 20 % of its turnover during the IP. The profitability of the cooperating importer/user stood between 5 to 10 % over turnover in the IP.

• (177) It is further recalled that, in the original investigation, it was found that the impact of the imposition of measures would not be significant for the importers, nor for the users. Despite the existence of measures for five years, importers/users in the Community continued to source their supply, inter alia, from India. No indications were brought forward either that there would have been any difficulties in finding other sources. Moreover, it is recalled that, as regards the effect of the imposition of measures on users, it was concluded in the original investigation that, given the negligible incidence of the cost of PET film on user industries, any cost increase was unlikely to have a significant effect on the user industry. No indications of the contrary were found after the imposition of measures. It is therefore concluded that the maintenance of the countervailing measures is not likely to have a serious effect on importers/users in the Community.

INTEREST OF UP-STREAM SUPPLIERS

• (178) The original investigation concluded that suppliers of the Community industry would benefit from the imposition of measures. As indicated above, only one supplier cooperated to the investigation and confirms this fact, as it almost only supplies the Community producers and would suffer from a deterioration of its financial health. It is therefore considered that the continuation of measures would continue to have a positive impact for suppliers.

CONCLUSION

• (179) Given the above, it is concluded that there are no compelling reasons on the grounds of Community interest against the maintenance of the current countervailing measures.

COUNTERVAILING MEASURES

• (180) All parties were informed of the essential facts and considerations on the basis of which it is intended to recommend that the existing measures be maintained. They were also granted a period to make representations subsequent to this disclosure.

• (181) It follows from the above that, as provided for by Article 21(2) of the basic Regulation, the countervailing measures applicable to imports of PET film, originating in India should be maintained. It is recalled that these measures consist of ad valorem duties.

• (182) As outlined in recital 4, the countervailing duties in force were extended to cover, in addition, imports of PET film consigned from Brazil and Israel, whether declared as originating in Brazil or Israel or not. The countervailing measures to be maintained on imports of the product concerned, as set out in recital 181, should be the measures as extended to imports of PET film consigned from Brazil and Israel, whether declared as originating in Brazil or Israel or not. The Brazilian and Israeli exporting producers who were exempted from the measures as extended by Regulation (EC) No 1976/2004 and amended by Council Regulation (EC) No 101/2006 should also be exempted from the measures as imposed by this Regulation.

• (183) The individual company countervailing duty rates specified in this Regulation reflect the situation found during the review with respect to the cooperating exporters. Thus, they are solely applicable to imports of the product concerned produced by these companies and thus by the specific legal entities mentioned. Imports of the product concerned manufactured by any other company not specifically mentioned in the operative part of this Regulation with its name and address, including entities related to those specifically mentioned, cannot benefit from these rates and shall be subject to the duty rate applicable to ‘all other companies’.

• (184) Any claim requesting the application of these individual countervailing duty rates (e.g. following a change in the name of the entity or following the setting up of new production or sales entities) should be addressed to the Commission ([^E0019]) forthwith with all relevant information, in particular any modification in the company's activities linked to production, domestic and export sales associated with, for instance, that name change or that change in the production and sales entities. If appropriate, and after consultation of the Advisory Committee, the Regulation will be amended accordingly by updating the list of companies benefiting from individual duty rates.

• (185) In order to ensure proper enforcement of the countervailing duty, the residual duty level should not only apply to non-cooperating exporters but also apply to those companies which did not have any exports during the IP. However, the latter companies are invited, when they fulfil the requirements of Article 20 of the basic Regulation, to present a request for a review pursuant to that Article in order to have their situation examined individually,

HAS ADOPTED THIS REGULATION:

Article 1

Terphane Ltda BR 101, km 101, City of Cabo de Santo Agostinho, State of Pernambuco, Brazil (TARIC additional code A569);

Jolybar Filmtechnic Converting Ltd (1987), Hacharutsim str. 7, Ind. Park Siim 2000, Natania South, 42504, POB 8380, Israel (TARIC additional code A570);

Hanita Coatings Rural Cooperative Association Ltd, Kibbutz Hanita, 22885, Israel (TARIC additional code A691);

S.Z.P. Plastic Packaging Products Ltd, PO Box 53, Shavei Zion, 22086 Israel (TARIC additional code A964).

Article 2

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

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

[^E0001]: OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regulation No 461/2004 (OJ L 77, 13.3.2004, p. 12).

[^E0002]: OJ L 316, 10.12.1999, p. 1.

[^E0003]: OJ L 227, 23.8.2001, p. 1.

[^E0004]: OJ L 227, 23.8.2001, p. 56.

[^E0005]: OJ C 40, 17.2.2005, p. 8.

[^E0006]: OJ L 342, 18.11.2004, p. 1. Regulation as last amended by Regulation (EC) No 101/2006 (OJ L 17, 21.1.2006, p. 1).

[^E0007]: OJ L 342, 18.11.2004, p. 8. Regulation as amended by Regulation (EC) No 101/2006.

[^E0008]: OJ C 154, 28.6.2002, p. 2.

[^E0009]: See page 1 of this Official Journal.

[^E0010]: OJ C 281, 22.11.2003, p. 4.

[^E0011]: OJ C 1, 4.1.2005, p. 5.

[^E0012]: OJ L 218, 23.8.2005, p. 3.

[^E0013]: OJ C 62, 11.3.2004, p. 4.

[^E0014]: OJ C 306, 10.12.2004, p. 2.

[^E0015]: OJ C 189, 9.8.2002, p. 34.

[^E0016]: OJ C 297, 2.12.2004, p. 2.

[^E0017]: Notification No 1/2002-2007 of 31 March 2002 of the Ministry of Commerce and Industry of the GOI.

[^E0018]: Council Regulation (EC) No 1628/2004, OJ L 295, 18.9.2004, p. 4 (recital 13).

[^E0019]: European Commission, Directorate-General for Trade, Directorate B, J-79 5/17, B-1049 Brussels.