Commission Implementing Regulation (EU) 2020/1408 of 6 October 2020 imposing a definitive anti-dumping duty and definitively collecting the provisional duty imposed on imports of certain hot rolled stainless steel sheets and coils originating in Indonesia, the People’s Republic of China and Taiwan

3.2.2.5.   Manufacturing overheads, SG&A and profits

• (147) The construction of manufacturing overhead costs and the source of SG&A and profit used in the normal value calculation were described in recitals (201) and (202) of the provisional Regulation.

• (148) Following provisional disclosure STSS claimed that by inclusion of certain factors of production into overheads, as described in recitals (194) and (201) of the provisional Regulation, the Commission inflated the manufacturing overheads and thus the final cost of production. Furthermore, the company pointed out that the Commission did not provide any evidence that these factors of production were distorted.

• (149) The Commission rejected this claim. No separate proof of distortion is needed for the inputs which are moved to manufacturing overheads. In recitals (103) to (157) of the provisional Regulation, the Commission clearly explained why all costs of the product under investigation, including the costs of those inputs that were moved to manufacturing overheads are considered distorted. Also, as explained in recital (194) of the provisional Regulation, these inputs were negligible in terms of costs and the Commission moved them to manufacturing overheads because the sampled exporting producers were not able to determine the consumption volume in their records or no proper benchmark could be established in the representative country.

• (150) After provisional disclosure, both FSS and STSS raised several claims with regard to the level of SG&A costs and profit used in the calculation of the normal value.

• (151) FSS claimed that the Commission did not provide any legal or factual explanation that SG&A costs in China are distorted. However, as already explained in recital (149) above, no such separate evidence is needed for the particular types of costs, as the Commission clearly concluded that distortions exist with regard to all costs of the product under investigation.

• (152) The company further claimed that the SG&A costs of the Brazilian producer of the product under investigation, used in the normal value calculation, should be reduced by the equity costs of the company and the financial costs of its subsidiaries.

• (153) The Commission calculated SG&A costs and profit as a percentage of the Costs of Goods Sold on the basis of publicly available data, that is audited accounts of the Aperam Inox do Sul S.A. On the basis of the information available, it cannot be concluded that part of the financial costs is not linked to the product under investigation. FSS did not provided any evidence or indication that these costs would be overstated. Furthermore, it should be noted that the deduction of part of these financial costs reducing the SG&A costs would necessarily increase the profit accordingly. Consequently, the final result would not change.

• (154) STSS pointed out that while certain labour costs of the Chinese exporting producers (e.g. R&D and Quality Control department labour costs) were moved to the costs of manufacturing, there was no evidence that such labour costs were not included in the SG&A of the representative country producer, which could have led to double counting of these costs in the construction of the normal value.

• (155) SSTS however provided no evidence that such costs were included in the SG&A costs of the producer in the representative country. Therefore, the Commission upheld its approach in this regard.

• (156) Finally, FSS invoked Article 2.2.2(iii) of ADA which states that the profit for the purpose of the construction of the normal value might be established by using ‘any other reasonable method, provided that the amount of profit so established shall not exceed the profit normally realized by the exporters or producers on sales of products of the same general category in the domestic market of the country of origin’. The company pointed out that the Commission failed to calculate such in-China cap for profit while applying for the calculation of normal value profit of the representative country company at the level of 7,65 %.

• (157) In reply to this claim, the Commission recalled that the normal value was constructed on the basis of Article 2(6a)(a) of the basic Regulation because it determined, as explained in recitals (103) to (157) of the provisional Regulation, that it was not appropriate to use domestic prices and costs in the exporting country due to the existence of significant distortions in that country. All costs and prices, including profits, which by definition are affected by the underlying costs and prices in the domestic country, are therefore considered distorted. Article 2(6a)(a) of the basic Regulation establishes that the constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profits. As explained above in recital (98), the provisions in Article 2(6a) of the basic Regulation are fully in line with the EU’s international obligations, including all the relevant provisions of the WTO ADA. Therefore, this claim was rejected.

• (158) In the absence of any further comments with respect to the manufacturing overheads, SG&A costs and profit, the Commission confirmed recitals (201) and (202) of the provisional Regulation

3.2.2.6.   Calculation of the normal value

• (159) In the absence of comments with regard to the calculation of the normal value, recitals (203) to (210) of the provisional Regulation are confirmed.

3.2.3.   Export price

• (160) In the absence of comments concerning the establishment of the export price, recitals (211) to (213) of the provisional Regulation are confirmed.

3.2.4.   Comparison

• (161) The Commission compared the normal value and the export price of the Chinese sampled exporting producers on an ex-works basis as described in recitals (214) to (216) of the provisional Regulation.

• (162) Following provisional disclosure, STSS challenged the fact that the Commission deducted certain freight related expenses from the export price, while these expenses were not deducted from the SG&A costs of the producer in the representative country.

• (163) SSTS however provided no evidence that such expenses were included in the SG&A costs of the producer in the representative country. Therefore, this claim was rejected.

• (164) To calculate the export price for STSS, the Commission carried out an adjustment pursuant to Article 2(10)(i) to those sales made via a related trader located in another country. Following provisional disclosure, the exporting producer contested this adjustment and claimed that the producer and its related trader located in a third country constitute a single economic entity, where the related trader carries out functions of an internal sales department. Accordingly, the exporting producer requested the Commission not to carry out this adjustment.

• (165) The Commission recalled that under EU case law, a single economic entity exists where a producer entrusts tasks normally falling within the responsibilities of an internal sales department to a distribution company for its products which it controls economically ¹⁷. The Court of Justice has also established that ‘the EU institutions are required to take account of all factors relevant to the determination as to whether or not that distributor carries out the functions of an integrated sales department within that producer’ ¹⁸.

• (166) Accordingly, the Commission analysed the evidence at its disposal and made the following findings. In the first place, the Commission noted that the company structure showed the existence of numerous sales companies within the group, including the related trader subject to the contested adjustment. In this vein, the Commission confirmed that there was more than one related company involved in the sales of the product under investigation to the Union. The Commission assessed the contracts between the exporting producer and the related trader in question and identified certain provisions governing the relations between the producer and the related trader that are difficult to reconcile with the notion that those companies form a single economic entity. ¹⁹

• (167) Moreover the Commission noted that it was another department, and not the related trader in question, which was involved in sales-related aspects. Also, the Articles of Association and business licence of the related trader in question included certain provisions of a nature that falls outside the scope of the tasks usually entrusted to an internal sales department ²⁰. Furthermore, the negotiation process between the producer and the related trader described in the questionnaire reply, notably with regard to terms of sales ²¹, casted further serious doubts that they would form a single economic entity. Therefore, this claim was rejected.

• (168) To ensure that the normal value was expressed at the same level of taxation as the export price, the normal value was adjusted upward by that part of VAT charged on exports of the product under investigation that was not refunded to the Chinese exporting producers. Following provisional disclosure, FSS and STSS contested this adjustment. The companies claimed that the adjustment is either not warranted at all, as the Commission is not using Chinese domestic prices as a normal value, or the adjustment should be done to actual costs of production rather than the undistorted costs.

• (169) In this regard it is noted that the Commission adjusted the normal value in line with the Judgment of the General Court in Case T-423/09 ²². Therefore, these claims were rejected.

• (170) In absence of further comments regarding the comparison, recitals (214) to (216) of the provisional Regulation are confirmed.

3.2.5.   Dumping margins

• (171) As detailed in recitals (121) to (170) above, the Commission took into account some of the comments from STSS and FSS and recalculated the dumping margins for the companies in question.

• (172) The dumping margin of the cooperating non-sampled Chinese companies, Xiangshui Defeng Metals Co., Ltd and Fujian Dingxin Technology Co., Ltd, being the weighted average between the two individual dumping margins for the sampled companies, was adjusted accordingly.

• (173) The Commission considered the high level of cooperation of Chinese exporting producers, representing 92 % of the total Chinese exports of the product under investigation to the Union, appropriate to set the residual dumping margin applicable to all other (non-cooperating) exporting producers. Therefore, the Commission considered appropriate to set the dumping margin for ‘all other companies’ at a level corresponding to the highest individual dumping margin of the sampled Chinese companies, excluding the company which received Article 18, as explained in recitals (77) to (82).

• (174) Subsequently, the definitive dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

• (175) The calculations of individual dumping margins after corrections and adjustments made following the comments of the Chinese exporting producers after provisional disclosure were disclosed to the companies in question.

3.3.   Taiwan

3.3.1.   Normal value

• (176) The details for the calculation of the normal value are set out in recitals (227) to (237) of the provisional Regulation.

• (177) In its comments to pre-disclosure and provisional disclosure, the Yusco group claimed that the Commission incorrectly dismissed its request to grant an adjustment for exchange rate difference in the calculation of the SG&A ratio and an adjustment for recycled scraps as cost deduction of the raw material cost. The Commission examined those claims.

• (178) The repeated claim to adjust for exchange rate difference in the calculation of the SG&A expenses ratio was rejected because Yusco was not able to justify that these differences were related to the domestic sales. The claim was reiterated after final disclosure, but again without any further substantiation. However, in view of newly submitted arguments, which could be reconciled with information provided during the verification, the adjustment for recycled scraps, which concerned both Yusco and its related producer Tang Eng, was accepted. The revised cost of manufacturing was taken into account in the revised dumping calculation.

• (179) In its comments on pre-disclosure and provisional disclosure, Walsin claimed that the Commission incorrectly dismissed its request to grant an adjustment for sales of waste consumables, an adjustment for raw material costs after physical inventory check and an adjustment for processing costs in its Taichung plant. Walsin also contested the Commission’s decision to disregard, for the normal value determination, the domestic sales to bonded factories and to seaports, intended for export. The Commission examined those claims.

• (180) Concerning the claim to adjust normal value for sales of waste consumables, in view of clarifications submitted in this regard by Walsin, the Commission considered the claim well-founded and accepted it because Walsin demonstrated that these waste consumables could not be re-introduced into the production and were sold to customers.

• (181) With regard to the claim that raw material cost should be adjusted after physical inventory check, the Commission assessed the additional information provided and decided to confirm its provisional decision to reject this adjustment claim because the company could not justify the origin of the inventory differences. Moreover, these differences were not registered in the cost accounting system, and this adjustment could not be matched with either the trial balance or the response to the questionnaire.

• (182) Concerning the claim to adjust the processing costs in Taichung plant by deducting the estimated profit generated by Taichung plant, the Commission considered the claim unfounded. Walsin could not demonstrate that its internal invoicing for annealing and pickling processing costs covered only costs and did not include any profit margin and the adjustment claimed was not recorded in company cost accounting system.

• (183) Finally, with regard to the claim to include the sales to bonded factories and to seaports in the normal value determination, the Commission rejected it. Indeed, the company itself considered these sales as indirect sales for export in its questionnaire reply and they were therefore not reported in the domestic sales transactions. After the provisional disclosure Walsin changed its opinion and claimed that these sales should be considered as intended for domestic consumption since it did not know if the products were eventually consumed domestically or exported. Absent any more concrete information on this point, the Commission could not determine, on the basis of the evidence provided, whether these sales were consumed domestically or exported. As provided by Article 2(2) of the basic Regulation, the wording ‘intended for domestic consumption’ is not based on a subjective intention of the seller or on the fact that the exporting producer does not have knowledge if the product is subsequently exported by the trader/bonded factory, but on an objective destination of the product, an objective fact which can be established at any point in time until the final destination is eventually reached and the goods are sold for the purpose of consumption in the domestic market. Therefore, the claim was rejected.

• (184) No further claims were received therefore recitals (227) to (237) of the provisional Regulation were confirmed.

3.3.2.   Export price

• (185) In the absence of any comments regarding the export price, recitals (238) to (239) of the provisional Regulation were confirmed.

3.3.3.   Comparison

• (186) In the absence of any comments regarding the comparison, recitals (238) to (239) of the provisional Regulation were confirmed.

3.3.4.   Dumping margins

• (187) The level of cooperation in this case was considered high and no other exporting producers could be identified. Consequently, the Commission considered it representative to set the residual dumping margin at the level of the exporting producer with the highest dumping margin. The definitive dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

4. INJURY

4.1.   Definition of the Union industry and Union production

• (188) In the absence of any comments with respect to the definition of the Union industry and Union production, the Commission confirmed its conclusions set out in recitals (246) to (248) of the provisional Regulation.

4.2.   Determination of the relevant Union market

• (189) The Chinese exporting producer FSS claimed that the Union industry’s production volume was driven by captive demand and not by free market sales, which represented a mere fraction of the total production. According to FSS this was shown by the fact that Union industry’s production volumes increased from 2016 to 2017 despite the decrease of 94 000 tons in free market sales.

• (190) The Chinese exporting producer STSS claimed, with regard to the relation between free and captive market, that under the market share assessment it should be considered that the market share of the Union industry was 62 % in the free market, but this segment only accounted for about 22 % of the total Union market. Thus in the remaining 78 % of the market, which was captive, the Union industry had a 100 % market share. Moreover, according to STSS, this had to be seen in connection with the only market share that conversely increased – that of Indonesia.

• (191) These claims had to be rejected. As set out in recitals (251) and (252) of the provisional Regulation, only the free market sales of vertically integrated producers, such as the sampled Union producers, are in direct competition with imports. It is therefore the consistent case practice of the Commission not to consider captive production and sales in some injury indicators of such cases, since the captive market is shielded from imports. However, as products for both the captive and free markets are produced on the same production lines, the production and production capacity analysis should also include products destined for the captive market. Indeed, in a capital intensive sector such as steel, capacity utilisation rates should be maintained at their highest level in order to dilute fixed costs and keep production costs at their lowest levels. Moreover, market share evolutions of individual exporting countries should not be regarded in isolation, since in the current investigation the conditions for a cumulative assessment of imports from all countries concerned are met (see section 4.4 below).

• (192) In the absence of any other comments with respect to the determination of the relevant Union market, the Commission confirmed its conclusions set out in recitals (249) to (255) of the provisional Regulation.

4.3.   Union consumption

• (193) In the absence of any comments with respect to the Union consumption, the Commission confirmed its conclusions set out in recitals (256) to (262) of the provisional Regulation.

4.4.   Imports from the countries concerned

• (194) The Chinese exporting producer FSS claimed that the cumulation of imports from China, Indonesia and Taiwan was inconsistent. As the present anti-dumping investigation was conducted while a separate anti-subsidy investigation concerning the same product was also ongoing, the injury assessment should be the same for both cases. However, Taiwan was not among the countries concerned in the separate anti-subsidy investigation. Therefore, any cumulative assessment in the present anti-dumping investigation, including imports from Taiwan, would subsequently be in conflict with any cumulative assessment in that anti-subsidy investigation, where imports from China and Indonesia would be cumulated but imports from Taiwan not. Moreover, FSS submitted that the cumulation of imports from China and Indonesia was not warranted. Whereas Chinese imports declined, Indonesian imports increased, which allegedly showed that Chinese imports did not compete with Indonesian imports. In addition, in 2017, when Chinese imports were the highest in volume with a 21 % market share and Indonesian imports were absent from the market, the Union industry had its best year as evidenced by the sales and profitability data. These claims had to be rejected.

• (195) First, there is no inconsistency in the fact that in the present investigation imports from three countries, i.e. China, Indonesia and Taiwan are assessed cumulatively whereas in the separate anti-subsidy investigation, imports from only two of these countries, namely China and Indonesia, are assessed cumulatively. Each case is assessed on its own merits. In both cases, the legal conditions for a cumulative assessment of imports are met.

• (196) Second, with regard to the Commission’s decision to assess imports from the countries concerned cumulatively in the current anti-dumping investigation, it is recalled that imports from each of the three countries increased over the period considered. For the reasons set out in recital (269) of the provisional Regulation, even if the development of imports from China was different over the period considered than the development of imports from Indonesia, the conditions of a cumulative assessment in accordance with Article 3(4) of the basic Regulation are met.

• (197) The Chinese exporting producer STSS claimed that the cumulation of imports from China, Indonesia and Taiwan was not warranted because different conditions of competition between China and Taiwan on the one hand, and Indonesia on the other hand, exist. Whereas Indonesia has direct access to nickel, one of the main raw materials needed to produce stainless steel, China and Taiwan had to rely on imports, which were less available than previously due to an Indonesian export ban. This claim had to be rejected. A similar access to raw materials is not amongst the conditions for a cumulative assessment as laid down in Article 3(4) of the basic Regulation. Where exporters in different countries may face different conditions for sourcing inputs (such as raw materials or human resources), they can still compete with each other for the same sales destinations on the output side. This is the case here, as illustrated by the fact that in the current case one important cooperating user imported significant volumes from China, Indonesia and Taiwan.

• (198) The exporting producer STSS further claimed that both the prices of Union industry sales and the volumes of Chinese imports increased at the same time, i.e. in 2017. Similarly, there was no correlation between Chinese import volumes and sales volumes of the Union industry. The slight increase in Chinese imports over the period considered (+28 000 tons) could mathematically not have caused the more than four times higher decrease of sales of Union producers on the open market (– 116 000 tons). Moreover, in the investigation period Chinese imports accounted for only 4,6 % of the total Union consumption.

• (199) These claims were rejected. As set out in recitals (263) to (270) of the provisional Regulation, Chinese imports should not be assessed in isolation but in cumulation with imports from Indonesia and Taiwan. Cumulated imports from the countries concerned increased over the period considered by 147 000 tons, which clearly exceeds the 116 000 tons loss by the Union industry over the same period. Moreover, the market share achieved by Chinese imports in the investigation period, as a result of the practiced injurious dumping, amounted to 18,3 %, i.e. not 4,6 %, which is the Chinese market share if the volume of the captive market would have been added to the Union market for this investigation.

• (200) In the absence of any other comments with regard to imports from the countries concerned, the Commission confirmed all other conclusions set out in recitals (263) to (270) of the provisional Regulation.

4.4.1.   Volume and market share of imports from the countries concerned

• (201) In the absence of any comments with regard to the volume and market share of imports from the countries concerned, the Commission confirmed all conclusions set out in recitals (271) to (277) of the provisional Regulation.

4.5.   Economic situation of the Union industry

4.5.1.   General remarks

• (202) In the absence of any comments, the Commission confirmed its conclusions set out in recitals (278) to (282) of the provisional Regulation.

4.5.2.   Macroeconomic indicators

• (203) Further to table 7 of the provisional Regulation, the GOI claimed that the increase in production capacity by the Union industry showed that the industry was in excellent shape. The same claim was reiterated following final disclosure. The Commission noted that production capacity increased by 1 % over the period considered, which supports the conclusion that production capacity remained practically stable over the period considered (recital (284) of the provisional Regulation). The claim was therefore deemed unfounded.

• (204) With reference to table 8 of the provisional Regulation, STSS pointed at the downturn in captive use and sales volumes of the Union producers between 2018 and the investigation period, which it attributed to the decrease in the disproportionately large captive market. This claim was rejected. The Commission noted that there is no connection between the volumes evolution in the free and captive markets, in particular as throughout the period considered the Union industry was operating with a spare production capacity of more than 30 %. Moreover, STSS’s allegation seems factually flawed because the evolution in the captive market was stable over the period considered (table 9 and recitals (290) to (292) of the provisional Regulation), whereas the Union industry lost important market share (9,3 percentage points) on the free market during the same period.

• (205) The GOI noted, with reference to table 10 of the provisional Regulation, that the decrease in productivity was caused by an increase in employment. The same claim was reiterated following final disclosure. However, it cannot be deduced that such decrease in productivity, even if only caused by a slight increase in employment by 4 % over the period considered, was responsible for the injury suffered by the Union industry. The material injury suffered was shown by other indicators as set out in recitals (307) to (310) of the provisional Regulation. The Commission recalled that, in accordance with Article 3(5) of the basic Regulation, no any one or more of those factors can necessarily give decisive guidance.

• (206) The GOI claimed, with reference to table 14 of the provisional Regulation, that the effect of the ‘captive sales’ made by the Union producers was absent in the profitability assessment. The same claim was reiterated following final disclosure. This claim was rejected. The Commission recalled that, in line with the consistent case practice, where an industry is engaged in production for free market sales and production for captive use, the latter are, for the sake of assessing several injury factors, excluded from the scope of the investigation. This was already duly explained in recitals (254) and (255) of the provisional Regulation.

• (207) The GOI further claimed that the share of free market sales made by the Union industry was too small (20 % of total Union sales), as compared to captive consumption, to affect the overall situation of the Union industry and hence there was no injury. The same claim was reiterated following final disclosure. As already mentioned in recital (191) above, the Commission recalled that in line with its consistent case practice, where an industry is equally engaged in free market sales and captive use, the latter are, for the sake of assessing most of the injury factors, excluded from the scope of the investigation. For the following economic indicators relating to the Union industry, it was found that a meaningful analysis and evaluation had to focus on the situation prevailing on the free market: sales volume and sales prices on the Union market, market share and profitability. Where possible and justified, these findings were subsequently compared with the data for the captive market, in order to provide a full picture of the situation of the Union industry.

• (208) In the absence of any other comments with respect to the macroeconomic indicators, the Commission confirmed its conclusions set out in recitals (283) to (296) of the provisional Regulation.

4.5.3.   Microeconomic indicators

• (209) The Chinese exporting producer FSS claimed that the Commission has based its finding on an end-to-end analysis without assessing the positive developments in the situation of the Union industry as regards sales prices up until 2018, i.e. over the largest part of the period considered, and by ignoring that the decline in sales occurred when the Union industry was in the most profitable situation. According to FSS, the Commission cannot base its injury findings on the 4 % decline in the sales prices of the Union industry between 2018 and the investigation period versus the 2 % decline in the costs during the same period. In other words, a finding of material injury cannot be sustained on the net 2 % price decline in an isolated period (the investigation period). In addition, so FSS invoked, from 2018 to the investigation period the Union industry was selling comfortably above its production cost. This claim had to be rejected. The Commission agreed that from 2016 to 2018 prices and costs developed in parallel, as shown by an increase by 22 % each, but this was no longer true between 2018 and the investigation period, when prices fell by 5 percentage points but costs only by 2 percentage points. The market of SSHR is very price-sensitive and the Union industry had, due to the further strong increase of low priced dumped imports, no choice but to not fully account for the increase in costs when setting its sales prices. This translated into a strong deterioration of its financial indicators, including a fall in profits from 5,1 % to 3,5 %, as shown in table 14 of the provisional Regulation.

• (210) The Chinese exporting producer FSS claimed that the cost of production of the Union industry had the most significant increase between 2016 and 2017. In the same period, there was the highest increase in the volume of imports from the countries concerned and the price differential between these imports and the Union industry’s sales was around EUR 200 per ton, such as it was in the investigation period. Nevertheless, from 2016 to 2017 the Union industry was able to increase its sales prices by 19 % and pass on the full cost increase to its customers. This claim was rejected. From 2016 to 2017, not only the Union producers but also producers in the export countries increased their prices, notably by 21 % or EUR 316 per ton (see table 6 of the provisional Regulation). This shows that in a market environment characterised by at least stable demand, the Union producers could only partly reap the benefit of this trend because they were already under pressure from imports from the countries concerned that undercut the Union industry sales prices. Moreover, due to this pressure and to keep profitability levels, the Union industry lost a considerable market share to the benefit of imports from the countries concerned from 2016 to 2017.

• (211) The Chinese exporting producers FSS and STSS claimed that, while in the investigation period the Union industry claimed to have significantly lower profits than in 2016, their investments were 57 % higher than in 2016. This point was already addressed in recital (306) of the provisional Regulation. The Commission recalled that the increased investment levels did not translate into corresponding capacity increases (see table 7 of the provisional Regulation). Subsequently, the investments merely aimed at retaining the existing capacities and making due replacements of necessary production assets.

• (212) With reference to table 11 of the provisional Regulation, STSS claimed that the minor decrease in sales prices of the Union producers between 2018 and the investigation period would have to be seen in connection with a surge of low-priced imports from Indonesia. The Commission recalled that the conditions for a cumulative assessment of imports from all three countries concerned were met, and therefore imports from one country cannot be regarded in isolation from imports from the other countries concerned.

• (213) With reference to table 13 of the provisional Regulation, the GOI claimed that the decrease in inventory between 2018 and the investigation period pointed at a positive sales performance of the Union industry. The same claim was reiterated following final disclosure. This claim was rejected. Sales on the free Union market decreased by 13 % over the period considered, as shown in table 8 of the provisional Regulation. The small decrease in inventory in that period, as claimed by Indonesia, was not representative and is not apt to question the observed sales trend.

• (214) The GOI claimed, with reference to table 14 of the provisional Regulation, that the injury suffered by the Union industry was caused by a high level of investments in 2017, which constituted a financial burden in the period thereafter, i.e. in 2018 and the investigation period. The same claim was reiterated following final disclosure. This claim was rejected. Investments are typically funded from retained cash or loans. In terms of costs and the impact on profits, such investments are depreciated over a long period of at least five years. As a consequence, a profit decrease of more than EUR 50 million, as observed from 2017 to 2018, or even more than EUR 80 million, as it occurred between 2017 and the end of the investigation period, cannot be ascribed to the investments made in 2017, which amounted as a whole to EUR 48 million but which were depreciated over at least five years.

• (215) The Chinese exporting producer STSS claimed that a capacity utilisation of ca. 70 % was not a sign of injury, as this was similar to the overall average capacity established in all steel categories in the steel safeguard investigation. This claim was rejected. First, the Commission pointed out that the capacity utilisation rate of the Union industry decreased over the period considered from 69 % to 66 %. Second, anti-dumping and safeguard investigations are subject to different legal frameworks. Any observations or conclusions made in a safeguard investigation can therefore not be transposed into an anti-dumping investigation. The Commission must assess all relevant economic factors and indices having a bearing on the state of the industry in accordance with Article 3(5) of the basic Regulation, and while no any one or more indicators can necessarily give decisive guidance, in the current investigation the evolution as well as the level of capacity utilisation point at injury caused by the dumped imports.

• (216) In the absence of any other comments with respect to the microeconomic indicators, the Commission confirmed its conclusions set out in recitals (297) to (306) of the provisional Regulation.

4.5.4.   Conclusion on injury

• (217) In the absence of any other comments with respect to the conclusion on injury, the Commission confirmed its conclusions set out in recitals (307) to (310) of the provisional Regulation.

5. CAUSATION

5.1.   Effects of the dumped imports

• (218) Further to the claim referred to under recital (189) above, the exporting producer FSS claimed that the decrease in Union industry’s sales (–94 000 MT) and market share (– 7,3 %) was most pronounced in 2017. However, the Union industry was not injured in that year but made exceptional profits. In FSS’s view, it was because of the voluntary withdrawal of sales by the Union industry from the Union free market (driven by increased focus on downstream) that the imports in question increased. This claim was rejected. It cannot be held that the Union industry was under any pressure to withhold sales from the free market. By contrast, the Union industry had throughout the period considered ample spare capacities to sell larger quantities on the free market than it actually did (see recitals (283) to (285) and table 7 of the provisional Regulation).

• (219) With reference to table 7 of the provisional Regulation, the GOI claimed that the increase in imports from the countries concerned had no significant effect on the production of the Union industry as that decreased by 3 % only over the period considered. The same claim was reiterated following final disclosure. The Commission noted that a 3 % decrease is not insignificant although other injury factors showed an even more deteriorating trend over the period considered and refers in that regard to recitals (307) to (311) of the provisional Regulation.

• (220) With reference to table 8 of the provisional Regulation, the GOI claimed that the Union industry’s free market sales stabilised after 2017 and increased from 2018 to the investigation period, which would show that the imports of the product under investigation had no impact on the Union industry sales. The same claim was reiterated following final disclosure. The Commission noted that the market share of the Union industry fell from 71,2 % to 63,9 % between 2016 and 2017, and that the decrease between 2017 and the investigation period from 63,9 % to 61,9 % was less pronounced. Even though the overall decrease was indeed more important in the first part of the period considered, it cannot be held that the market share of the Union industry returned to a healthy level, as overall there was a decrease from 71,2 % to 61,9 %. The claim was therefore rejected.

• (221) The Chinese exporting producers FSS and STSS claimed that imports from China did not cause injury to the Union producers but imports from Indonesia did so. They argued that profits of the Union producers were not affected by Chinese imports, because the profit fell from 10,2 % to 5,1 % between 2017 and 2018, which coincided with the surge of imports from Indonesia, whereas in the same timespan Chinese imports decreased. These claims were rejected. As set out in recitals (263) to (270) of the provisional Regulation, the conditions for a cumulative assessment were met. Therefore imports from China cannot be regarded in isolation from imports from Indonesia, or Taiwan.

• (222) In the absence of any other comments with respect to attribution of the injury found to the subject imports, the Commission confirmed its conclusions set out in recital (312) of the provisional Regulation.

5.2.   Effects of other factors

• (223) With reference to table 11 of the provisional Regulation, STSS claimed that the cost of production incurred by the Union industry increased by 20 % over the period considered, alleging that this increase was responsible for the injury suffered by the Union industry. This claim was rejected. In recital (319) of the provisional Regulation, it was already explained that, at some point, the Union industry was not anymore able to pass on the global increase in raw material costs to its sales prices due to the price pressure exerted by the dumped imports. Therefore, what caused injury was not the increase in the cost of production as such, but the inability to pass it on due to the dumped imports.

• (224) The GOI claimed that the captive market development caused injury, not the free market development. The same claim was reiterated following final disclosure. This claim was rejected. The development of the captive market did not attenuate the causal link between the dumped imports and the injury suffered by the Union industry. Free market sales decreased by 13 % (– 150 000 tons) over the period considered whereas captive consumption was relatively stable (–20 000 tons).

• (225) The GOI further claimed that the Commission did not address the internal sales prices by the Union industry, as they should have caused the injury. The same claim was reiterated following final disclosure. This claim was rejected. The Commission has established that the internal sales were not made on an arm’s length basis and therefore they have not been taken into account for the sake of assessing injury.

• (226) The exporting producer STSS claimed that, subsequent to the imposition of anti-dumping duties, different sources of imports are likely to emerge, e.g. the Republic of Korea. However, as average import prices from the Republic of Korea have constantly been significantly lower than those from China, Union producers would be even more harmed by these imports, rather than by imports from China. This claim was rejected. First, there is not sufficient evidence of injurious dumping with regard to these imports which, as this investigation has evidenced, is different with regard to imports from China. Secondly, although average SSHR import prices from China were higher than prices from the Republic of Korea throughout the period considered, Chinese imports nevertheless constantly undercut Union industry sales. These undercutting calculations, which have not been contested by any interested party, have been made by comparing similar product types which cannot be done on the basis of the statistical data in Eurostat – and the South Korean prices referred to are Eurostat prices. Thirdly, the injury was also caused by the Chinese imports due to their volume, which increased by 14 % over the period considered whereas the volume of imports from the Republic of Korea decreased by 49 % over the same period. Moreover, the volume of Chinese imports was about three times higher in 2016 and about seven times higher in the investigation period as compared to the volume of imports from the Republic of Korea.

• (227) The exporting producer STSS reiterated the claim that overcapacity in the Union was a cause of injury to the Union industry. This claim was rejected for the reasons set out in recital (322) of the provisional Regulation.

• (228) In the absence of any other comments with respect to the attribution of the injury found to factors other than the subject imports, the Commission confirmed its conclusions set out in recitals (319) to (325) of the provisional Regulation.

5.2.1.   Conclusion

• (229) On the basis of the above and in the absence of any other comments, the Commission concluded that none of the other factors examined at provisional stage as well as at definitive stage was capable of having any relevant impact on the injurious situation of the Union industry. Thus, none of the factors, analysed either individually or collectively, attenuated the causal link between the dumped imports and the injury suffered by the Union industry to the effect that such link would no longer be genuine and substantial, confirming the conclusion in recitals (326) and (327) of the provisional Regulation.

6. LEVEL OF MEASURES

6.1.   Examination of the margin adequate to remove the injury to the Union industry for Taiwan

• (230) The Chinese exporter FSS claimed that the target price computed for the sake of assessing the underselling margins was inflated by subsidies that the Union producers received. In view of the subsidies received, there was no reason to add an amount for future compliance costs. Likewise, the research and development expenses and labour costs should be reduced to the extent of the subsidies received in the investigation period. Failing this would amount to giving a double benefit to the sampled companies.

• (231) This claim was rejected. First, it was not substantiated by appropriate evidence. Second, there is no double-counting because the verified cost of production data for the Union industry in the investigation period already takes account of any subsidies received by Union producers as well as of their current compliance costs, while any addition only concerns future compliance costs in the sense of Article 7(2d) of the basic Regulation, that will be incurred in a different time period. In line with this, the Commission deducted, where necessary, current costs already taken into consideration to arrive at the future cost.

• (232) After provisional disclosure and again after final disclosure, several parties questioned the application of a target profit of 8,7 %, which was the average of the profit margins achieved by the Union industry in 2016 (7,2 %) and 2017 (10,2 %). The parties argued in particular that the Commission had stated that 2017 was an exceptional year for the Union industry and the profitability of that year was therefore likely to be tainted. The same had also been stated in the Regulation imposing definitive safeguard measures on steel products. Moreover, the market share of imports from the countries concerned in 2017 was already 25 % while in 2016 the market share of those imports was considerably lower than in 2017 (18,3 %). Therefore, the Commission should only use a profit margin of 6 %, or the profit margin achieved in 2016 instead. By contrast, Eurofer stipulated that the Union industry lost in 2017 significant market share (7,3 percentage points) as compared to 2016 in view of the increased level of imports, and that the profitability of 10,2 % achieved in that year was therefore not exceptionally high and should be used as target profit.

• (233) The Commission confirmed that the use of a target profit of 8,7 % is justified for the reasons set out in recital (331) of the provisional Regulation. As provided for in Article 7(2c) of the basic Regulation, the target profit used shall be established taking into account factors such as the level of profitability before the increase of imports from the countries concerned, the level of profitability needed to cover full costs and investments, research and development (R&D) and innovation, and the level of profitability to be expected under normal conditions of competition. Even though imports from the PRC and Taiwan were already manifestly present, in 2017 imports from Indonesia were still at a very low level ²⁴ and, therefore, the 2017 profit figure reflects the level of profitability before the increase of imports from all countries concerned. Moreover, the combined market share of imports from the countries concerned was in 2017 at 25 %, which indeed is already significant, and therefore the profit margin achieved by the Union industry in that year is likely to be depressed, which could make it an unsuitable year for establishing an appropriate target profit. However, as explained in recital (331) of the provisional Regulation, 2017 was an exceptional year and thus even if the Union industry’s profit margin was depressed, it was still at a sufficiently high level, even if it is derived from a year which does not fully reflect normal conditions of competition. Therefore the Commission confirmed that including 2017 in the equation and establishing the target profit on the basis of an average of the profits of 2016 and 2017 fully complies with the requirements of Article 7(2c) of the basic Regulation.

• (234) Moreover, further to final disclosure, Marcegaglia claimed that the Commission should have set the target price of black SSHR based on a lower target profit reflecting the specific features of semi-finished black SSHR as opposed to finished white SSHR.

• (235) This claim was rejected. As provided for in recital (30) above and recital (46) of the provisional Regulation, black and white coils share the same basic physical and chemical characteristics and both are therefore considered product concerned. The target profit used by the Commission is therefore based on profit data for both and thus reflects the specific features of semi-finished black SSHR as opposed to finished white SSHR.

• (236) Eurofer claimed that the injury margins established in the provisional Regulation were underestimated. Specifically, Eurofer submitted new evidence that should justify an increase in the adjustments made under Articles 7(2c) and 7(2d) of the basic Regulation, with reference to recitals (332) and (333) of the provisional Regulation. These claims were partly accepted. As a result, the adjustments were corrected upwards with regard to investments foregone (Article 7(2c)) for one Union producer, and also with regard to future compliance costs (Article 7(2d)) for two Union producers. After final disclosure, two claims with regard to one of the sampled producers were reiterated but no further adjustments could be accepted.

• (237) Following final disclosure, Eurofer reiterated its claim that the adjustments to the Union industry’s target price made by the Commission under Articles 7(2c) and 7(2d) of the basic Regulation were insufficient. In its view, the Commission should remain flexible and allow companies to present additional evidence supporting their claims, even after on-spot verifications when such information cannot be anymore verified.

• (238) This claim was rejected. The majority of those claims (excluding the claims that were found to be justified and partly accepted and for which an adjustment was granted, as explained in recital (236) above) was raised for the very first time only after provisional disclosure, as the sampled producers had not replied to the relevant questions in the questionnaire, nor raised such claims during on-spot verifications, and no objective reason was provided for the inability to submit this information in a timely manner. Therefore, the Commission considered that the very late submission of information by the sampled producers, consisting in many cases of completely new figures and claims which were impossible to verify at that stage of the investigation, was unjustified.

• (239) As regards to adjustments under Article 7(2d) of the basic Regulation on future social and environmental costs, Eurofer accused the Commission of adopting a discriminatory approach against the Union industry, as the Commission refused to extrapolate data from one sampled producer and to apply it to the other two sampled producers, whereas the Commission had calculated an individual dumping margin for the Chinese exporting producer Zhenshi by using information available from other exporting producers in the PRC.

• (240) This claim was rejected. Eurofer is referring to two different situations – the calculation of an exporting producer’s dumping margin under the framework of Article 18(3) and the calculation of an individual company-specific target price – that are therefore not comparable. As explained in recitals (87) to (92) above, the calculation of Zhenshi’s normal value was made in accordance with Article 18(3) of the basic Regulation using facts available only for some data, whereas regarding the target price of Union producers there was no issue of non-cooperation and the Commission had all the facts to establish its findings. Moreover, the future environmental investments and operational costs at issue here were of a company-specific nature thus rendering any extrapolation to the other companies of the sample inadequate.

• (241) Eurofer further claimed that the situation of injury further aggravated after 30 June 2019, i.e. after the end of the investigation period, and that the Commission should take account of this aggravation when deciding on the level of definitive measures. In this respect, Eurofer referred to Articles 14(5), 9(4) and 7(2c) and (2d) of the basic Regulation. The Commission noted that adjustments under Article 7(2c) and (2d) were granted as set out under recital (236) above and recital (330) to (334) of the provisional Regulation. Moreover, imports were registered but the conditions for a retroactive collection were not met (see recitals (321) to (325)). Also, the Commission found that no further substantial rise in imports subject to the investigation occurs during the period of pre-disclosure in light of Article 9(4), which if complied, would have called for reflecting the additional injury resulting from such increase in the determination of the injury margin. The claim was therefore considered groundless.

• (242) In view of the above changes to the underselling calculations and the changes to the dumping margins mentioned in recitals (178) and (180) above, the table under recital (336) of the provisional Regulation is updated as follows:

• (243) In the absence of any other comments with respect to the examination of the margin adequate to remove the injury to the Union industry for Taiwan, the Commission confirmed its conclusions set out in recitals (330) to (336) of the provisional Regulation.

6.2.   Examination of the margin adequate to remove the injury to the Union industry for Indonesia and the PRC

6.2.1.   Underselling and the comparison between underselling margin and dumping margin

• (244) With reference to the judgement of the General Court of 10 April 2019 in Case T-301/16 Jindal Saw Ltd and Jindal Saw Italia S.p.A. v European Commission (‘Jindal Saw’) ²⁵, the Chinese exporter FSS claimed that the comparison between export prices and Union industry sales prices might not have been made at the same level of trade, as Union producers typically sold through subsidiaries (i.e. related undertakings). In this respect, FSS requested to disclose further details on the injury margin calculation. With regard to this claim, the Commission clarifies that for the sake of computing undercutting margins, only Union producers’ sales to unrelated undertakings were taken into account. With regard to the underselling calculations, the sales prices of the Union industry have not been used as the target prices were based on the sampled producers’ cost of production. Moreover, no other information on file pointed to the need of applying any level of trade adjustment. Last, the Commission must not disclose the underlying data obtained from the Union producers as these data are confidential within the meaning of Article 19 of the basic Regulation.

• (245) Further to the provisional disclosure and after final disclosure, STSS claimed that in comparing its sales prices with the sales prices of the Union industry the Commission should not have deducted SG&A and profit of its related importer, as that would be in violation of Jindal Saw, as confirmed by the Judgment of the General Court of 2 April 2020 in Case T-383/17 Hansol Paper Co. Ltd v European Commission (‘Hansol Paper’) ²⁶.

• (246) The Commission rejected this claim. When it comes to the elements taken into account for calculation of undercutting (in particular the export price), the Commission has to identify the first point at which competition takes (or may take) place with Union producers in the Union market. This point is in fact the purchasing price of the first unrelated importer because that company has in principle the choice to source either from the Union industry or from overseas suppliers.

• (247) In this case, the import price for some of the export sales cannot be taken at face value because the exporting producer and the importer are related. Therefore, in order to establish a reliable import price at arm’s length basis, such price has to be constructed by using the resale price of the related importer to the first independent customer as a starting point. In order to carry out this reconstruction, the rules on the construction of the export price as contained in Article 2(9) of the basic Regulation are pertinent, and are applied by analogy, just as they are pertinent for the determination of the export price for dumping purposes. The application by analogy of Article 2(9) of the basic Regulation allows arriving at a price that is fully comparable to the price that is used when examining sales made to unrelated customers and also comparable to the sales price of the Union industry.

• (248) Therefore, in order to allow for a fair comparison, a deduction of SG&A and profit from the resale price to unrelated customers made by the related importer is warranted in order to arrive to a reliable price. ²⁷

• (249) Such deduction must also be applied to the calculation of underselling. Indeed, the target price of the Union industry is based on its cost of production plus the target profit, without taking into consideration whether it is then sold in the Union to related or unrelated customers, and therefore it must be compared to the CIF (landed) price of the exports, which does not include by definition the SG&A and profit of related importers in the Union.

• (250) Further to the provisional disclosure, FSS submitted that as 32 % of its exported volumes constituted PCNs which were not sold by the sampled Union producers and they were therefore not accounted for in the undercutting and underselling calculations, these calculations would be in violation of the judgement of the General Court of 24 September 2019 in Case T-500/17 Hubei Xinyegang Special Tube Co. Ltd v European Commission (‘Hubei Xinyegang’), para. 74 ²⁸. STSS made a similar claim with regard to 8 % of its Union sales volumes. These claims were reiterated after final disclosure.

• (251) The Commission rejected these claims. First, Hubei Xinyegang is under appeal before the Court of Justice. Therefore, the findings of the judgment regarding the issue subject to the claim are not final. Second, the Commission noted that when assessing undercutting and underselling margins, the models exported to the Union from the countries concerned constitute the reference for comparison. It lies in the nature of comparing export sales of exporting producers with sales of the Union industry that not all models exported were sold by the Union industry. In the current case, the matching rate was 84 % for all investigated Chinese exporting producers, which the Commission considered sufficient to ensure a broad and fair comparison of the exported models and those sold by the Union industry. Third, the basic Regulation does not require the Commission to carry out the price analysis for each product type separately. Rather, the legal requirement is a determination at the level of the like product. Finally, the Commission concluded that all PCNs were part of the product concerned and competed with each other, at least to a certain extent. Therefore, the percentage of the exports of the sampled exporting producers not sold by the Union industry does not constitute a separate category of the product concerned but competes in full with the remaining grades for which a matching was found.

• (252) Referring to para. 71 of Hubei Xinyegang, STSS observed that the Union industry sample’s sales volumes used for the undercutting and underselling calculations did not constitute the total Union industry sales of the like product by the sampled parties. It claimed that this would not be allowed according to para. 71 of that judgement. As mentioned in recital (250) above, this judgement is under appeal. On substance, the Commission noted that it cannot add to the comparison Union industry sales of certain PCNs which are not sold by the exporting producers. Indeed, in order to ensure a fair comparison, the Commission compared like with like and thus did not account for models falling under the product definition and sold by the Union industry, but which were not exported by STSS. Second, as mentioned in the previous recital, the basic Regulation does not require the Commission to carry out the price analysis for each product type separately. Rather, the legal requirement is a determination at the level of the like product. While PCNs are used as the starting point for such assessment, it does not mean that different PCNs are not in competition. Thus, the fact that certain PCNs of the Union industry were not compared to imports into the Union from STSS does not mean that they do not suffer price pressure from these imports. Third, the Commission further underlined that the Union industry sales volumes of the matching PCNs which are used in the calculations with regard to STSS represented approximately two times the sales volume of STSS on the Union market and it is therefore largely representative. The claim was therefore rejected.

• (253) The GOI questioned whether import prices and Union industry sales prices were comparable in terms of product mix. The Commission clarified that the calculations of undercutting and underselling margins were based on a comparison that takes into account the PCNs, which ensures that only like products within the meaning of Article 1(4) of the basic Regulation are compared with each other. In any event, the imports from the countries concerned compete with all products sold by the Union industry, and there is no evidence showing that the minor part of total imports which cannot be directly compared to product types sold by the sampled Union producers is not capable of exercising competitive pressure on the Union industry.

• (254) Following the changes to the dumping margins, as explained in section 3 above, and the changes to the underselling margins, as explained in section 6.1 above, the table under recital (337) of the provisional Regulation is updated as follows:

6.2.2.   Raw material distortions

(a) Indonesia

• (255) In the absence of comments concerning the existence of raw material distortions in Indonesia and the share of the distorted raw material on the costs of production of the product under investigation, the Commission confirmed its conclusions set out in recitals (342) to (346) of the provisional Regulation.

(b) The PRC

• (256) Following disclosure of provisional findings, two Chinese exporting producers submitted claims with regard to the Commission’s application and findings under Article 7(2a) of the basic Regulation. The Commission accepted one claim and rejected the rest, as explained in the following recitals. In addition, the Commission corrected a clerical error affecting one Chinese exporting producer, which nevertheless had no impact on the findings ²⁹.

• (257) One Chinese exporting producer claimed that, when comparing the price difference between the benchmark price and the actual purchase price of the distorted raw material by this company (as mandated by Article 7(2a) second paragraph), the Commission had compared these prices on different delivery terms resulting in an artificially higher difference between the two prices.

• (258) The Commission agreed with this claim, and revised the calculation accordingly. The Commission provided a revised calculation in the specific disclosure to the company concerned. This change however did not alter the finding that the price of the raw material was significantly lower as compared to the undistorted benchmark price.