Commission Regulation (EC) No 112/2009 of 6 February 2009 imposing a provisional anti-dumping duty on imports of wire rod originating in the People's Republic of China and the Republic of Moldova

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (1) (the basic Regulation), and in particular Article 7 thereof,

After consulting the Advisory Committee,

Whereas:

(1) On 25 March 2008, the Commission received a complaint concerning imports of bars and rods, hot-rolled, in irregularly wound coils, of iron, non-alloy steel or alloy steel other than of stainless steel, (wire rod), originating in the People’s Republic of China (the PRC), the Republic of Moldova (the RM) and Turkey.

(2) The complaint was lodged pursuant to Article 5 of the basic Regulation by EUROFER (the complainant) on behalf of producers representing a major proportion, in this case more than 25 %, of the total Community production of wire rod.

(3) The complaint contained prima facie evidence of dumping and of material injury caused by such dumping which was considered sufficient to justify the opening of a proceeding.

(4) On 8 May 2008, a proceeding was initiated by the publication of a notice of initiation in the Official Journal of the European Union (2) (the notice of initiation).

(5) The Commission officially advised the exporting producers in the PRC, the RM and Turkey, importers, traders, users and associations known to be concerned, the authorities of the PRC, the RM and Turkey, the complainant Community producers and other Community producers known to be concerned of the initiation of the proceeding. 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. All interested parties who so requested and showed that there were particular reasons why they should be heard were granted a hearing.

(6) In order to allow exporting producers to submit a claim for market economy treatment (MET) or individual treatment (IT), if they so wished, the Commission sent claim forms to the Chinese and Moldovan exporting producers known to be concerned and to the authorities of the PRC and RM. Two exporting producers from the PRC, both consisting of groups of related companies, and one from the RM, requested MET pursuant to Article 2(7) of the basic Regulation, or IT should the investigation establish that they do not meet the conditions for MET.

(7) In view of the apparent high number of exporting producers in the PRC and Turkey, importers and producers in the Community, the Commission indicated in the notice of initiation that sampling methods might be applied for the determination of dumping and injury, in accordance with Article 17 of the basic Regulation.

(8) In order to enable the Commission to decide whether sampling would be necessary and, if so, to select a sample, all exporting producers in the PRC and in Turkey, Community importers and Community producers were asked to make themselves known to the Commission and to provide, as specified in the notice of initiation, basic information on their activities related to the product concerned.

(9) Given the limited number of responses to the sampling exercise, it was decided that sampling was not necessary for Chinese and Turkish exporting producers, or for Community producers and importers within the Community.

(10) Questionnaires were sent to all companies in the PRC, and Turkey who responded to the sampling exercise, to the sole Moldovan exporting producer, to all Community producers, users and importers who responded to the sampling exercise, and to all other parties known to be concerned. Replies were received from two groups of exporting producers in the PRC, one exporting producer in the RM, six exporting producers in Turkey, 20 Community producers, one importer and eight users in the Community.

(13) The investigation of dumping and injury covered the period from 1 April 2007 to 31 March 2008 (investigation period or IP). The examination of the trends relevant for the assessment of injury covered the period from 1 January 2004 to the end of the investigation period (period considered).

(14) The product concerned is bars and rods, hot-rolled, in irregularly wound coils, of iron, non-alloy steel or alloy steel other than of stainless steel originating in the PRC, the RM and Turkey (the product concerned or wire rod), normally declared within CN codes 7213 10 00 , 7213 20 00 , 7213 91 10 , 7213 91 20 , 7213 91 41 , 7213 91 49 , 7213 91 70 , 7213 91 90 , 7213 99 10 , 7213 99 90 , 7227 10 00 , 7227 20 00 , 7227 90 10 , 7227 90 50 and 7227 90 95 . The product concerned does not include stainless steel wire rod.

(15) To produce wire rod, steel billets produced from an electric arc furnace (EAC) or a blast furnace melt shop are rolled through a rolling mill. Billets are progressively reduced in cross-section by passing through a series of rolls and then coiled. The EAC process uses metal scrap, while the blast furnace process uses metal scrap and iron ore.

(16) Wire rod is used for welded mesh in the construction industry (pre- or post-stressing wires and wire strands used for reinforcement of concrete), and has many other uses after been drawn into wire, including in the tyre industry (tyre cord), in the nut and bolt industry (fasteners), fencing products, supermarket trolleys, steel cord, electrodes, cables, bed springs, suspension springs and welding wire.

(17) The investigation showed that the wire rod produced and sold by the Community industry in the Community, wire rod produced and sold on the domestic market in Brazil, which served as an analogue country, and wire rod produced in the PRC, the RM and Turkey and sold to the Community and sold on the domestic Turkish market have essentially the same basic physical and technical characteristics and the same basic use.

(18) All the aforementioned wire rod is therefore considered to be alike within the meaning of Article 1(4) of the basic Regulation.

(19) One Chinese exporting producer submitted a sampling form, MET claim and answer to the anti-dumping questionnaire in due time, but failed to reply to the deficiency letter of the Commission, even after receiving a reminder.

(20) The company was informed about the proposed application of Article 18 of the basic Regulation and was given the opportunity to comment.

(21) The company claimed that the Commission had granted them too short deadlines for them to be able to submit full information in their submissions and to cooperate. Based on the fact that the company did not indicate to the Commission any time constraints within the applied deadlines, it was considered that no decisive arguments were submitted or evidence provided to reverse the decision to apply Article 18 of the basic Regulation.

(22) The company made an appeal to the Hearing Officer. After hearing the arguments of the company and the observations of the Hearing Officer, it was confirmed that the company did not signal in good time any time constraints and consequently did not cooperate with sufficient diligence in the investigation.

(23) It has been therefore considered appropriate to reject the information submitted by this company and base the findings on facts available.

(24) Pursuant to Article 2(7)(b) of the basic Regulation, in anti-dumping investigations concerning imports originating in the PRC and the RM, normal value shall be determined in accordance with paragraphs 1 to 6 of the said Article for those producers which are found to meet the criteria laid down in Article 2(7)(c) of the basic Regulation.

(26) Following the initiation of the proceeding, two Chinese and one Moldovan exporting producers requested MET pursuant to Article 2(7)(b) of the basic Regulation and replied to the MET claim form within the given deadline.

(27) For one Chinese exporting producer, Article 18 of the basic Regulation had to be applied (see recitals (19) to (23)), and therefore its claim for MET was rejected.

(28) As regards the remaining Chinese exporting producer, the company could not demonstrate that it met criteria 2 and 3. Regarding criterion 2, it was found that several accounting policies of the company were not in line with IAS. These problems were found to be systemic and were not reflected in the auditors' report. Regarding criterion 3, it was found that the company was not paying the principal of certain loans, long after the term initially foreseen in the loan contracts. The company was also found to benefit from significant income tax reductions during the IP.

(29) Consequently, it was concluded that the Chinese exporting producer did not demonstrate that it fulfilled the conditions set out in Article 2(7)(c) of the basic Regulation.

(30) Following disclosure of the MET analysis, the Chinese exporting producer submitted a response where the company agreed on non-compliance with criterion 2 but disagreed with the negative conclusion on criterion 3. In particular, the company argued that non-repayment of the principal of a loan did not constitute a distortion carried over from the non-market economy system but a sign that the company enjoyed high credit rating. After detailed examination it was found that, during the IP, the loans in question were not covered by any contract, therefore the company was under no legal obligation to pay either interest or principal. The existence of such loans significantly distorts the financial situation of the company, and de facto constitutes a debt write off. Additionally, the non-repayment of the principal of a loan is not in line with market economy principles. This argument was therefore rejected.

(31) Furthermore, it was argued that the income tax reduction was not a subsidy and therefore could not be treated as a distortion carried over from the non-market economy system. This argument was rejected as the application of the income tax reduction is contingent upon use of domestic equipment over imported one, and therefore constitutes a specific subsidy.

(32) The Moldovan producer could not demonstrate that it met any of the MET criteria. Regarding decision making and costs (criterion 1) it was found that the company's top management held key positions in the administration of the Transnistrian region of Moldova, the breakaway but not internationally recognised ‘Transnistrian Moldovan Republic’ (hereinafter TMR), and that there were significant distortions regarding costs. With regard to criterion 2, it was found that the company did not have a clear set of independently audited accounting records, and serious shortcomings were identified with regard to the accuracy and consistency of the accounts, thus rendering the accounts unreliable. Regarding criterion 3, there were distortions carried over from the non-market economy system which affected the costs. The most significant was that the privatisation process of the company was made at a price below market value. It was also detected that the company is frequently involved in barter trade practices. Regarding criterion 4, concerning the legal certainty and stability of operations, it was found that the company does not for the most comply with the Moldovan legal framework. Finally, it was also found that the company operates, inter alia, in a currency not internationally recognised and whose exchange rate is not freely set in response to market signals (criterion 5).

(33) Consequently, it was concluded that the Moldovan exporting producer did not demonstrate that it fulfilled the conditions set out in Article 2(7)(c) of the basic Regulation.

(34) The Moldovan exporting producer opposed this decision. In general, it claimed that the application of Article 2(7) of the basic Regulation to the RM constitutes a violation by the Community of its WTO commitments vis-à-vis the RM.

(35) In reply to this argument, it should be re-called that the note to Article VI of the GATT acknowledges that, in cases of imports from certain countries where difficulties may exist in determining price comparability for the purposes of establishing whether dumping is taking place, WTO members may consider that a comparison with domestic prices in such a country may not always be appropriate. In the case of the RM, it is considered that such difficulties exist. In these circumstances, normal value will be determined in accordance with Article 2(7) of the basic Regulation. Furthermore, it is noted that Article 2(7)(a) specifically mentions the RM in the list of non-market economy countries to whom this provision applies.

(36) It also claimed that mandatory time-limits set out in the basic Regulation were not respected. The Applicants claimed that the decision to reject MET should be annulled because the Commission failed to make the MET determination within the three-month period set forth in Article 2(7)(c) of the basic Regulation.

(37) It is correct that the Commission did not make the MET determination within the three-month period following the initiation of the investigation. However, this does not constitute a ground for the annulment of the decision to reject MET. While Article 2(7)(c) of the basic Regulation stipulates that the MET determination shall be made within three months following the initiation of the investigation, the provision does not stipulate that missing the three-month period has any specific consequences. In particular, the provision does not stipulate that if the Commission failed to decide within the three-month period on an exporter’s MET request, (i) the exporter will automatically get MET or (ii) that the institutions may no longer impose measures against the exporter. Thus, it follows that the mere fact that the Commission did not respect the three-month period does not render the decision to reject MET unlawful.

(38) The Moldovan exporting producer further claims that there has been discrimination in comparison with Ukrainian and Russian exporting producers in prior proceedings and that the Commission's assessment is based on political grounds. Additionally it claims that there are a number of errors due to lack of evidence or because the conclusions are insufficiently reasoned, and that the principle of sound administration was thus violated. The company does not detail specific reasons for such a breach.

(39) Concerning a claim of discrimination against the RM in regard to how MET assessments were made in previous cases against Ukraine and Russia, it must be stated that MET assessments are made on a case-by-case basis. Decisions in past cases concerning these countries cannot be automatically applied to the current proceeding. It must also be pointed out that neither Ukraine nor Russia is currently listed in Article 2(7) of the basic Regulation as non-market economy countries, therefore the current situation is not comparable with the Republic of Moldova. In light of the above, the allegation of discrimination in treatment between the RM and other former non-market economy countries is rejected.

(40) The Moldovan company contested the Commission's analysis of compliance with the five MET criteria.

(41) Regarding criterion 1, the company argues that there is no State interference as, for the purpose of the proceeding, references to State cannot be made with reference to the TMR authorities, which are not recognised as a State. However, it is considered that, for the purpose of this criterion, the reference to the State should be understood as the authorities effectively controlling the region, whether recognised or not, who have the capacity to interfere with the company's decision making processes. This argument was therefore dismissed.

(42) The company also disagrees with the assessment of criterion 2, claiming the company has only one set of basic accounting records, which are independently audited in line with IAS.

(43) However, it was found that the company had a first set of accounts which were prepared according to the so-called TMR accounting standards, which do not include a provision for bad debts, and which were not audited. The company had a second set of accounts, which were consolidated with other related companies accounts and audited, allegedly in line with IAS. This second set of accounts received a qualified opinion from the auditors, who expressed reservations on the valuation of the assets by the company in 2003 and 2005. The exact reasons for those reservations could not be made sufficiently clear during the investigation. The company later claimed that the reservations expressed by the auditors were not material, but did not provide evidence in this respect.

(44) Therefore, the above arguments of the company in respect of criterion 2 had to be dismissed.

(45) As for criterion 3, the company claimed that the privatisation process of the company was irrelevant for the purpose of pointing out possible distortions carried over from the non market economy system, as the company was subsequently re-sold at arm's length and fair market value. However this could not be demonstrated since the re-sale of the companies holding MMZ shares could have included other assets and no properly documented evaluation of those operations was submitted.

(46) The company also claimed that, concerning barter trade practices, the amounts of barter trade found in the investigation were not material in view of this criterion. It is considered, however, that the materiality level of such practices is not a valid criterion for analysis, as the real value of the traded goods is only known to the parties involved on the barter trade operation. Therefore the relevant argument is that such practices, which are typical of non-market economies, were found to have been regularly employed by the company. Thus the argument of the company had to be dismissed.

(47) Concerning a loan from a related company for which the Moldovan company could not, despite being requested to do so, produce on spot any evidence of repayment, the company claimed that this loan had been fully repaid. The company subsequently submitted copies of documents allegedly as evidence of payment, but gave no explanation on why they were not made available on spot. The fact stays that this evidence was not available during on spot verifications and that this type of submission cannot be verified at this stage of the proceeding. Therefore the claim of the company had to be dismissed.

(48) Regarding criterion 4 the company claimed that the fact that the company was temporarily registered in the RM, and its exports took place via the RM customs should ensure that it complied with the RM legal framework. It further argued that the fact that the accounts were audited showed that the applicable laws would be sufficient to ensure legal certainty and stability. It should be noted, however, that neither the temporary registration of a company in the RM nor the auditing are conditional on the application of the RM’s legal framework, and that the current ownership of the company is not legally recognised in the RM. Those claims were therefore dismissed.