Commission Implementing Regulation (EU) 2017/2093 of 15 November 2017 terminating the investigation concerning possible circumvention of the anti-dumping measures imposed by Council Implementing Regulation (EU) No 1331/2011 on imports of certain seamless pipes and tubes of stainless steel originating in the People's Republic of China by imports consigned from India, whether declared as originating in India or not, and terminating the registration of such imports imposed by Commission Implementing Regulation (EU) 2017/272

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 13(3) thereof,

Whereas:

(1) By Implementing Regulation (EU) No 1331/2011 (2) (‘the original Regulation’), the Council imposed a definitive anti-dumping duty of 71,9 % on imports of certain seamless pipes and tubes of stainless steel (‘SSSPT’) originating in the People's Republic of China (‘the PRC’) for all other companies than the ones mentioned in Article 1(2) and Annex I to that Regulation.

(2) These measures will be referred to as ‘the measures in force’ and the investigation that led to the measures imposed by the original Regulation will be referred to as ‘the original investigation’.

(3) On 3 January 2017 the Defence Committee of the seamless stainless steel tubes industry of the European Union (‘the applicant’) submitted a request for an anti-circumvention investigation to the European Commission, indicating that the anti-dumping measures on imports of certain seamless pipes and tubes of stainless steel originating in the PRC were being circumvented via India.

(4) The request provided prima facie evidence that, following the imposition of the measures in force, a significant change in the pattern of trade involving exports from the PRC and India to the Union occurred, which seemed to be caused by the imposition of the measures in force. There was allegedly insufficient due cause or justification other than the imposition of the measures in force for such a change.

(5) Furthermore, the evidence pointed to the fact that the remedial effects of the measures in force were being undermined both in terms of quantity and price. The evidence showed that the increased imports from India were made at prices below the non-injurious price established in the original investigation.

(6) Finally, there was evidence that SSSPT consigned from India were dumped in relation to the normal value established for the like product during the original investigation.

(7) Having determined, after having informed the Member States, that sufficient prima facie evidence existed for the initiation of an investigation under Article 13 of the basic Regulation, the European Commission (‘the Commission’) initiated an investigation by Commission Implementing Regulation (EU) 2017/272 (3) (‘the initiating Regulation’).

(8) Following Articles 13(3) and 14(5) of the basic Regulation, the initiating Regulation also directed customs authorities in the Union to register imports of SSSPT consigned from India.

(9) The Commission advised the authorities of the PRC and India, the exporting producers and traders in those countries, the importers in the Union known to be concerned and the Union industry of the initiation of the investigation. Questionnaires were sent to the producers/exporters in the PRC and India known to the Commission or which made themselves known within the deadlines specified in recital 15 of the initiating Regulation. Questionnaires were also sent to importers in the Union.

(10) 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 initiating Regulation. Several hearings with the applicant took place, including one hearing with the Hearing Officer in trade proceedings.

(11) Twenty nine companies from India, one company from the PRC, nine unrelated importers, two related importers, one agent and five Union industry producers made themselves known.

(12) Twenty one Indian companies submitted a questionnaire reply and requested an exemption from the possible extended measures, in accordance with Article 13(4) of the basic Regulation.

(13) The Commission individually examined all exemption requests. Verification visits were carried out at fourteen companies which were either significant exporters to the Union or which based on an initial analysis of their reply fulfilled the conditions under Article 13(2) of the basic Regulation to be eligible for a potential exemption.

(14) Four unrelated importers in the Union and one Chinese exporting producer unrelated to any of the Indian producers provided questionnaire replies.

(16) The investigation period covered the period from 1 April 2009 to 30 September 2016 (‘the investigation period’). For the period of 1 October 2015 to 30 September 2016 (‘the reporting period’) more detailed data were collected in order to examine the possible undermining of the remedial effect of the measures in force and existence of dumping.

(18) The product concerned by the possible circumvention is ‘SSSPT’: certain seamless pipes and tubes of stainless steel (excluding such pipes and tubes with attached fittings suitable for conducting gases or liquids for use in civil aircraft) originating in the People's Republic of China (‘the product concerned’). It is currently falling within CN codes ex 7304 11 00, ex 7304 22 00, ex 7304 24 00, ex 7304 41 00, ex 7304 49 10, ex 7304 49 93, ex 7304 49 95, ex 7304 49 99 and ex 7304 90 00. This is the product to which the measures that are currently in force apply.

(19) The product under investigation is the same as the ‘product concerned’ defined in the previous recital, but consigned from India, whether declared as originating in India or not, currently falling within the same CN codes as the product concerned.

(20) The investigation showed that SSSPT exported to the Union from the PRC and SSSPT consigned from India to the Union have the same basic physical and technical characteristics and have the same uses, and are therefore to be considered as like products within the meaning of Article 1(4) of the basic Regulation.

(21) There was a very high level of cooperation from Indian exporting producers. The 21 cooperating producers accounted for 92 % of total SSSPT imports from India to the Union in the reporting period.

(22) The fourteen verified companies represented 91 % of the total exports of the cooperating companies and 84 % of the total imports of SSSPT from India into the Union.

(23) Article 18(1) of the basic Regulation was applied to one cooperating Indian exporting producer to the extent that it did not provide the information necessary to meaningfully assess the activities of its related companies. Thus, best facts available were used to supplement the data provided by this company so that the Commission had the reliable data needed for assessing its imports and exports to the Union.

(24) In the PRC there was a low level of cooperation by producers/exporters, with only one exporting producer submitting a questionnaire reply. Therefore findings in respect of SSSPT exports from the PRC to the Union, and from the PRC to India, had to be made on the basis of Eurostat data and Chinese trade statistics.

(25) The alleged circumvention practice as described in the request goes back to the production process. There are two major production stages of the SSSPT: hot forming and cold forming.

(26) There are two common ways of achieving the first, hot formed stage: either using a hot extrusion process or a hot piercing process.

(27) The resulting hot formed tube is an intermediary product, which requires further processing before its final use, with the exception of some hot formed tubes manufactured using the hot extrusion process.

(28) The applicant claimed that the SSSPT exported by the PRC to India were already cold formed tubes. This assertion was supported by the Chinese export statistics and by the assumption that producers in the PRC use a hot piercing process after which the tubes must be immediately and mandatorily cold processed.

(29) Whilst indeed the Chinese export statistics showed that almost all exported SSSPT were declared as cold formed, upon the import into India only 2 % were declared as cold formed.

(30) The discrepancy can be explained by the VAT refund scheme applied by the PRC, where the cold formed SSSPT benefit from a 13 % VAT refund compared to a 9 % refund for the hot formed tubes.

(31) The verifications confirmed that the Indian producers had almost exclusively purchased hot formed tubes and carried out the cold forming in India.

(32) The investigation also confirmed that hot formed tubes can be easily transported before undergoing cold forming.

(33) The investigation further showed that the cold forming performed in India substantially transforms the product and irreversibly alters its essential characteristics. During the process the product changes its dimensions and its physical, mechanical and metallurgical properties.

(35) The imports of the product concerned from the PRC to the Union substantially decreased over the investigation period, showing a steep decrease after the imposition of measures in force in 2011.

(36) This decrease in the imports from the PRC following the imposition of the measures was steadily absorbed by the increase of imports from India in the subsequent years.

(37) These changes in trade flows constitute a change in the pattern of trade between the above mentioned countries and the Union. The development of Indian imports from the PRC increased at a stable pace over the investigation period, showing the bulk of the increase already before the imposition of the measures.

(38) The data above shows that after the initiation of the original investigation in 2010, and the imposition of the measures in force in December 2011, imports of SSSPT from India have to a large extent replaced the imports of the product concerned from the PRC to the Union.

(39) The Commission examined whether, as alleged, the above change in the pattern of trade stems from a practice, process or work for which there is insufficient due cause or economic justification other than the imposition of the duty.

(40) The following table shows the imports of the Indian cooperating companies from the PRC, compared with their total sales and exports to the Union. The Commission notes that those data concern companies accounting for the vast majority of the Indian SSSPT exports to the Union as explained in recital 21 above.

(42) The increase of Indian imports from the PRC was significantly lower than the increase of Union imports from India. Between the year of initiation of the original investigation in 2010 and the reporting period, the cooperating Indian exporting producers increased their imports from the PRC from 15,1 to 19,6 thousand tons (+ 29 %) and their exports to the Union from 6,6 to 18,6 thousand tons (+ 180 %).

(43) The investigation showed that the evolution of imports from the PRC was more closely correlated with the evolution of total sales than with the evolution of Indian exports to the Union.

(44) When Indian exports to the Union start to be a key sales driver, they logically correlate with the increase of Chinese imports. Yet the same would have occurred if sales had developed on the domestic or other export market.

(45) Despite the fact that the share of exports to the Union on total sales increased from 25 % in 2009-10 to 51 % in the reporting period, the ratio of Chinese imports on the total Indian sales remained stable around 50 %.

(46) This clearly shows the Indian producers were consistently using a combination of input material from the PRC and from other sources and the imposition of the original duties did not have any significant impact on this.

(47) The business model of the companies accounting for the vast majority of exports to the Union has not changed since the imposition of the duties. They started the practice in question before the initiation of the original investigation against the PRC in September 2010.

(48) A due economic justification for this practice existed during the investigation period, shown by the fact that these companies were profitable before the initiation of the original investigation and remained profitable until and including the reporting period.

(49) It is important to note that the capability to produce the cold formed tubes requires significant investment in fixed assets, being depreciated over several years. The majority of the companies were equipped by the necessary fixed assets already before the initiation of the original investigation.

(50) The average price of Indian SSSPT imported to the Union before the initiation of the original investigation was 10 % below the price of the SSSPT imported from the PRC. After the imposition of a duty following the original investigation, the Indian imports remained the cheapest source of imports on the Union market. The Commission notes that due to the possibly different structure of the product mix the average prices are not directly comparable. They however give a good indication of the price levels.

(51) After the imposition of the measures and the significant price increase of the Chinese imports, the Union demand naturally opened the opportunity for other exporting countries, which the Indian products at competitive prices were well placed to exploit.

(52) Even when the share of exports to the Union increased over the investigation period, the Union market was already an important export destination for Indian producers before the initiation of the original investigation.

(53) Therefore, it was concluded that there were reasonable economic grounds, other than the imposition of duties on imports of SSSPT originating in the PRC, for the change in the pattern of trade referred to in chapter 2.3.3 above.

(54) All interested parties were informed of the essential facts and considerations leading to the above conclusions and were invited to comment. The applicant submitted additional information in its comments to final disclosure.

(55) The applicant questioned the Commission's decision not to verify the sole cooperating Chinese producer. The Commission did not verify the data provided by the cooperating Chinese producer as its exports to India represented a negligible share of the Chinese exports to India and would not have brought any added value to the investigation. Consequently, this claim was rejected.

(56) The applicant alleged that the Commission dismissed the fact that the majority of Chinese exports to the USA are declared as cold formed. The Commission confirmed that the Chinese exports to the USA were not in the scope of its investigation and did not see any relevance of the Chinese exports to the USA to the current case. The Commission thus dismissed this claim.

(57) The applicant further claimed that the production equipment used by some Indian producers only allows them to produce the product under investigation starting from cold formed tubes. The verification of the production facilities of the Indian exporting producers showed that they are capable of producing the SSSPT they exported to the Union from hot formed tubes. Consequently, this claim was rejected.

(58) The applicant also questioned the Commission's conclusion concerning the unchanged business model of the exporting producers accounting for the vast majority of exports to the Union. The Commission rejected this claim as all verified companies exporting to the Union in the reporting period (except one producer which sold an insignificant quantity to the Union) started the practice in question, that is importing hot formed tubes from the PRC and producing and selling SSSPT domestically and for export, before the initiation of the original investigation.

(59) The applicant also stated that the Commission based its findings on the classification of imports from the PRC to India as reported by Indian import data, rather than considering the classification reported in the Chinese export statistics. As set out above, the Chinese statistics shows export of cold formed tubes, whereas the Indian statistics shows import of hot formed tubes. The applicant further argued that if the Commission was to base its conclusions on the Indian import statistics, then the Commission should have found circumvention of the measures in force, as 45 % of the like products imported from the PRC into India in 2015 were declared as line pipes. According to the applicant, no processing that could take place in India would change the origin of these pipes from Chinese origin. Finally, the applicant noted that no further research was undertaken nor conclusion reached with regard to the accuracy of the data in the Indian import statistics.

(60) Due to the contradicting data provided by both the Chinese export and Indian import statistics, the Commission did not base its findings on this statistical data. In fact, given the very high degree of cooperation, the Commission's conclusions were based on the verified information provided by the cooperating Indian producers. The investigation focused on the actual company-specific data, confirming the nature of the semi-finished products that enter the Indian mills, the degree of their processing in those mills and the economic justification for such activity.

(61) As regards the customs legislation regarding rules of origin, the Commission noted that an anti-circumvention investigation takes into account but does not rely exclusively on customs legislation to determine whether circumvention of the measures in force is taking place or not. Furthermore, the applicant refers only to imports of line pipe from the PRC into India. Indeed, the export volume of line pipes from India to the Union is almost 90 % lower than the imports of line pipe from the PRC to India alleged by the applicant. However, the investigation found no evidence that these limited exports of line pipe from India to the Union were circumvented within the meaning of Article 13(1) of the basic Regulation. Consequently, these claims were rejected.

(62) The applicant suggested that the Commission's conclusion that the Indian producers have almost exclusively bought hot formed tubes was reached exclusively on the basis of their purchase orders. The Commission rejected this claim, as it reached its conclusions on the basis of all information at its disposal, not merely on the basis of the purchase orders. During the verification in India the Commission examined the semi-finished input material as well as the production process and the finished product of each verified Indian producer. Consequently, this claim was rejected.