Commission Implementing Regulation (EU) 2015/1559 of 18 September 2015 imposing a provisional anti-dumping duty on imports of tubes and pipes of ductile cast iron (also known as spheroidal graphite cast iron), originating in India

THE EUROPEAN COMMISSION,

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

Having regard to Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (‘the basic Regulation’) (1), and in particular Article 7(4) thereof,

After consulting the Member States,

Whereas:

(1) On 20 December 2014, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports into the Union of tubes and pipes of ductile cast iron (also known as spheroidal graphite cast iron) originating in India (‘the country concerned’) on the basis of Article 5 of the basic Regulation. It published a Notice of Initiation in the Official Journal of the European Union (2) (‘the Notice of Initiation’).

(2) The Commission initiated the investigation following a complaint lodged on 10 November 2014 by Saint-Gobain PAM Group, (‘the complainant’) on behalf of producers representing more than 25 % of the total Union production of tubes and pipes of ductile cast iron. The complaint contained evidence of dumping and of resulting material injury that was sufficient to justify the initiation of the investigation.

(3) On 11 March 2015, the Commission initiated an anti-subsidy investigation with regard to imports into the Union of tubes and pipes of ductile cast iron originating in India and commenced a separate investigation. It published a Notice of Initiation in the Official Journal of the European Union (3). That investigation is still on-going.

(4) In the Notice of Initiation, the Commission invited interested parties to contact it in order to participate in the investigation. In particular, the Commission specifically informed the complainants, other known Union producers, the known exporting producers and the Indian authorities, known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

(5) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. No interested party requested a hearing to comment on the initiation.

(6) In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

Sampling of Union producers and importers

(7) No sampling of Union producers was necessary. There are only three companies or group of companies manufacturing the product concerned in the Union and two of them, representing around 96 % of the total Union production, cooperated with the investigation.

(8) As regards importers, to decide whether sampling is necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation. No unrelated importers made themselves known within the time limits set out in the notice of initiation.

Sampling of exporting producers in India

(9) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked all exporting producers in India to provide the information specified in the Notice of Initiation. In addition, the Commission asked the Mission of the Republic of India to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(10) Two exporting producers in the country concerned provided the requested information and agreed to be included in the sample. They covered 100 % of the exports from India during the investigation period. Therefore, the Commission decided that sampling was not necessary.

(11) The Commission sent questionnaires to the two Indian exporting producers that cooperated, to the three Union producers as well as to users that made themselves known within the time limits set out in the Notice of Initiation.

(12) Questionnaire replies were received from the two Indian exporting producers, from two Union producers and several dozen users.

(14) The investigation of dumping and injury covered the period from 1 October 2013 to 30 September 2014 (‘the investigation period’ or ‘IP’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2011 to the end of the investigation period (‘the period considered’).

(15) The product concerned is tubes and pipes of ductile cast iron (also known as spheroidal graphite cast iron) (‘ductile pipes’) originating in India, currently falling within CN codes ex 7303 00 10 and ex 7303 00 90 . These CN codes are given for information only.

(16) Ductile pipes are used for drinking water supply, sewage disposal and irrigation of agricultural land. The transportation of water through ductile pipes may be based on pressure or solely on gravity. The pipes range between 60 mm and 2 000 mm and are 5,5, 6,7 or 8 meters long. They are normally lined with cement or other materials and externally zinc-coated, painted or tape wrapped. The main final users are public utility companies.

(17) The investigation showed that the product manufactured and sold in India as well as the product manufactured and sold in the Union have the same basic physical, chemical and technical characteristics.

(18) The Commission decided at this stage that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

(19) The Commission first examined whether the total volume of domestic sales for each cooperating exporting producer was representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales are representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represents at least 5 % of its total export sales volume of the product concerned to the Union during the investigation period. On this basis, the total sales by each exporting producer of the like product on the domestic market were representative.

(20) The Commission subsequently identified the product types sold domestically that were identical or comparable with the product types sold for export to the Union for the exporting producers with representative domestic sales.

(21) The Commission then examined whether the domestic sales by each cooperating exporting producer on its domestic market for each product type that is identical or comparable with a product type sold for export to the Union were representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales of a product type are representative if the total volume of domestic sales of that product type to independent customers during the investigation period represents at least 5 % of the total volume of export sales of the identical or comparable product type to the Union. On this basis, the Commission established that the domestic sales of some product types were not representative as they represented less than 5 % of the total volume of export sales of the identical or comparable product type to the Union.

(22) The Commission next defined the proportion of profitable sales to independent customers on the domestic market for each product type during the investigation period in order to decide whether to use actual domestic sales for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(24) In this case, the normal value is the weighted average of the prices of all domestic sales of that product type during the IP.

(26) The domestic sales used for the normal value of the two cooperating exporting producers were made directly to independent customers. The analysis of domestic sales showed that some of the domestic sales were profitable and that the weighted average sales price was higher than the cost of production. Accordingly, for the product types that were found to be identical or comparable with product types sold for export to the Union, the normal value was calculated either as a weighted average of the prices of all domestic sales or, where applicable, as a weighted average of profitable sales only.

(27) For the product types for which there were no or insufficient sales of the identical or comparable product type of the like product in the ordinary course of trade, or where a product type was not sold in representative quantities on the domestic market, the Commission constructed the normal value in accordance with Article 2(3) and (6) of the basic Regulation.

(29) The complainant claimed that the Indian export tax on iron ore, which amounted to 30 % in the IP, pushed domestic prices of iron ore down and reduced the cost of the main raw material to the exporting producers to 40 % of world market price, the effect on the CIF EU export prices of ductile pipes allegedly being 40-100 EUR/ton or 8-17 % of the export price. In these circumstances, the complainant requested that the normal value should be adjusted accordingly.

(30) The exporting producers alleged that the prices at which they buy iron ore in India are similar to the price at which iron ore is exported from India. In addition, one of the exporting producers argued, but only after the verification visits in India took place, that it started buying iron ore from third countries after the IP.

(31) The evidence collected so far did not allow the Commission to provisionally establish whether Indian domestic prices of iron ore are suppressed in comparison with other markets.

(32) Accordingly, the Union industry's and exporting producers' claims could not be verified at this stage of the investigation and will be further investigated at the definitive stage of the investigation, as well as in the parallel anti-subsidy investigation.

(33) The exporting producers exported to the Union mainly through related companies acting as importers. Exports made directly to independent customers only represented approximately 1 % of their total exports to the Union.

(34) When the exporting producers exported the product concerned directly to independent customers in the Union, the export price was the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(35) When the exporting producers exported the product concerned to the Union through related companies acting as an importer, the export price was established on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. In this case, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses, and for profits accruing. In the absence of cooperation from unrelated importers, an average profit of 3,7 % was used, based on data from the complaint.

(36) One of the exporting producers claimed that instead of applying Article 2(9) of the basic Regulation, the export price should be based on the transfer prices between the exporting producer and its related companies in the EU. It argued that these prices are reliable since the customs and tax authorities (for VAT purposes and income tax) of some Member States accepted that the transactions between the traders and the mother company are at arm's length.

(37) The Commission provisionally rejected this claim for the following reasons. First, the purpose of the customs authorities' verification differs substantially from the one the Commission carries out in the context of an anti-dumping investigation. In this case, since the customs duties are zero, the customs authorities had no incentive to question the declared export prices. In addition, the Commission did not receive sufficient evidence showing that the tax authorities explicitly accepted the export prices between the exporting producer and its related companies in the EU.

(38) Second, the claim that VAT authorities have accepted the arm's length export prices could not be accepted either since the company is anyway reimbursed for the VAT collected at the moment it resells the goods imported.

(39) Finally, the exporting producer referred to two Council Regulations where transfer prices had been accepted (4). However, in the two cases concerned, the Commission could compare sales via related importers with the sales via unrelated ones, which is impossible in the case at hand since the sales via unrelated importers were not representative (around 1 % of all sales to the EU).

(40) As regards the other exporting producer, part of the total export sales (some 10-17 %) were not resold in the conditions in which they were imported as they were processed by a related company in Italy. This related company imported semi-processed (bare) pipes which were then further processed by adding external (zinc) and internal coating (cement) to the pipes. Both the imported bare pipes and the finished pipes are product concerned. The internal and external coating of the pipes requires substantial investments in machinery and equipment, raw materials as well as a number of employees with specific qualifications.

(42) As regards other products that were imported, both exporting producers had a related importer in the UK which further processed the imported products by adding flanges and cutting the pipes into smaller sizes.

(43) The Commission provisionally constructed the export price of these other products in accordance with Article 2(9) of the basic Regulation, by adjusting the price at which the imported product was first resold to independent customers in the Union by all costs incurred between importation and resale, including the processing costs in the Union, SG&A expenses, and for profit, in order to bring the price back to the price of unprocessed (not cut and/or with no flanges). In the absence of any other reasonable benchmark, an average profit of 3,7 % was used as a level of profit of unrelated importer, based on data from the complaint.

(44) One of the exporting producers argued that for the product types which were not resold in the conditions in which they were imported as they were processed by a related company, the Commission should construct the export price, not on the basis of the prices charged to the first independent customers, but rather on the basis of the exporting producer's direct sales to the EU, possibly complemented with the company's export prices to independent customers in third countries.

(45) The Commission provisionally concluded that the suggested approach should be rejected. First, the direct sales to the EU of the exporting producer were very marginal during the IP both in volume and in value and are thus not representative. Second, the sales to third countries are not a reasonable basis as they do not sufficiently reflect the economic position and behaviour of the exporting producer on the Union market, especially given the fact that the exporting producer did sell to the Union in large quantities via related traders during the same period.

(46) The exporting producer also argued that adjustments should be limited to those ‘incurred between importation and resale’ and should thus reasonably relate to the resale process. Thus, these costs can for instance not include the SG&A costs that are normally borne by a producer, processor or exporter. The SG&A costs of the related companies in the EU would not be reasonable costs for a mere importer. The exporting producer and its related companies in the EU are allegedly a single economic entity, which would have an impact on the kind of adjustments that can be made to construct the export price.

(47) The company further argued that the SG&A and profit to be used to construct the export price should be re-calculated so that they would only relate to the activity of an importer.

(48) As regards the argument that adjustments should be limited to those ‘incurred between importation and resale’ the Commission refers to established case-law of the European Courts according to which Article 2(9) of the basic Regulation does not preclude adjustments being made for costs incurred before importation, inasmuch as those costs are normally borne by the importer. Moreover, it follows from this case-law that the existence of a single economic entity does not affect the applicability and the adjustments set out in Article 2(9) of the basic Regulation. This case-law also implies that the fact that the related companies perform only certain functions is not an obstacle to the application of Article 2(9) of the basic Regulation but is reflected in a lower amount of SG&A to be deducted from the price at which the product concerned is first resold to an independent buyer. In any event, the interested party who intends to dispute the extent of the adjustments made on the basis of Article 2(9) of the Basic Regulation has a burden of proof. Hence, if this party deems the adjustments to be excessive it must supply specific evidence and calculations justifying those claims and, in particular, the alternative rate. As the Commission is of the view that the level of SG&A provisionally used to construct the export price reflects the functions performed by the related companies it provisionally rejected these claims.

(49) The Commission compared the normal value and the export price of the cooperating exporting producers on an ex-works basis.

(50) The complainant requested the Commission to apply the exceptional methodology of targeted dumping laid down in the second sentence of Article 2(11) of the basic AD Regulation because ‘there is a pattern of export prices, which differs significantly among different purchasers and regions, which will result in significantly higher dumping margins (as) the Indian exporters are targeting (…) UK, Spain, Italy and France and certain large customers’.

(51) The Commission provisionally dismissed the allegations of targeted dumping as the complainant failed to submit sufficient evidence in support of its allegation. The only evidence submitted was Eurostat data showing that the majority of the exports to the EU of the exporting producers enter via only four Member States. However, these exports could be subsequently shipped to other Member States as well. In addition, and more importantly, no data was submitted evidencing differences in prices between Member States.

(52) In addition, the Commission could not establish a pattern of export prices, which differs significantly among different purchasers and regions. The investigation showed that the prices of Union producers selling in some Member States were lower than the average for the Union, but this could not be linked to any targeted dumping practices in particular because this was already the case before the Indian exporting producers started exporting to the EU.