(1)

In January 1997, Council Regulation (EC) No 119/97 (2) imposed a definitive anti-dumping duty on imports of certain ring binder mechanisms (‘RBM’) originating, inter alia, in the People's Republic of China (‘PRC’ or ‘country concerned’). The rate of the definitive duty applicable to the net, free-at-Community-frontier price, before duty, was 32,5 % for World Wide Stationery Mfg (‘WWS’), a company which was granted individual treatment and 39,4 % for all other companies in the PRC. These rates of duty were applicable to RBM other than those with 17 or 23 rings (TARIC codes 8305100011, 8305100012 and 8305100019), while RBM with 17 and 23 rings (TARIC codes 8305100021, 8305100022 and 8305100029) were subject to a duty equal to the difference between the minimum import price (‘MIP’) of EUR 325 per 1 000 pieces and the free-at-Community-frontier price, before duty, whenever the latter was lower than the MIP.

(2)

In September 2000, following a request for an anti-absorption review of the abovementioned measures, lodged pursuant to Article 12 of the basic Regulation, the rates of duty applicable to RBM other than those with 17 or 23 rings (TARIC codes 8305100011, 8305100012 and 8305100019) were revised upwards by Council Regulation (EC) No 2100/2000 (3) to 51,2 % for WWS and to 78,8 % for all other companies in the PRC.

(3)

Anti-dumping and countervailing measures are in force since June 2002 on imports of RBM originating in Indonesia. These measures, which are not subject to the current review, were imposed by Council Regulation (EC) No 976/2002 and Council Regulation (EC) No 977/2002 of 4 June 2002 (4), respectively.

(4)

Following an investigation concerning the alleged circumvention of anti-dumping measures imposed by Council Regulation (EC) No 119/97 by imports of RBM consigned from Vietnam, the measures were extended to imports consigned from Vietnam by Council Regulation (EC) No 1208/2004 (5).

(5)

An investigation concerning the alleged circumvention of anti-dumping measures imposed by Council Regulation (EC) No 119/97 by imports of RBM consigned from Thailand, whether declared as originating in Thailand or not, was initiated in April 2004 (6).

(6)

Both investigations mentioned in the previous two recitals were independent of the results of the present investigation.

(7)

Following the publication of a notice of impending expiry of the anti-dumping measures in force on imports of certain RBM originating in the PRC (7), the Commission received, on 23 October 2001, a request to review these measures pursuant to Article 11(2) of the basic Regulation.

(8)

The request was lodged by two Community producers, Koloman Handler AG and Krause Ringbuchtechnik GmbH (‘the applicants’), representing a major proportion of the total Community production of RBM. The request was based on the grounds that the expiry of the measures would be likely to result in higher volumes of injurious dumped imports originating in the PRC.

(9)

Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of a review pursuant to Article 11(2) of the basic Regulation, the Commission initiated a review (8).

(10)

The Commission officially advised the exporting producers, importers and users known to be concerned, the representatives of the exporting country, the applicant Community producers and the other known Community producer of the initiation of the expiry review. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set out in the notice of initiation.

(11)

All parties who so requested within the above time limit and who demonstrated that there were particular reasons why they should be heard were granted the opportunity to be heard.

(12)

Questionnaires were sent to all the parties that were officially advised of the initiation of the review and to those who requested a questionnaire within the time limit set out in the notice of initiation. In addition, one producer in India (analogue country) was contacted and received a questionnaire.

(13)

Replies to the questionnaires were received from the two applicant Community producers and one exporting producer in the country concerned, as well as from one producer in the analogue country and two unrelated importers in the Community.

(14)

All parties concerned were informed of the essential facts and considerations on the basis of which it was intended to recommend the imposition of definitive anti-dumping duties. They were granted a period within which to make representations subsequent to disclosure. The comments of the parties were considered and where appropriate, the findings have been modified accordingly.

(15)

All the information deemed necessary for the purpose of determination of the likelihood of a continuation or recurrence of dumping and injury and of the Community interest was sought and verified. Verification visits were carried out at the premises of the following companies:

(16)

The investigation on the likelihood of a continuation or recurrence of dumping covered the period from 1 January 2001 to 31 December 2001 (‘investigation period’ or ‘IP’). The examination of trends relevant for the assessment of the likelihood of a continuation or recurrence of injury covered the period from 1 January 1998 up to the end of the IP (‘period considered’).

(17)

The product concerned is the same as in the original investigation, i.e. certain ring binder mechanisms made of two rectangular steel sheets or wires with at least four half-rings made of steel wire fixed on them and which are kept together by a steel cover. They can be opened either by pulling the half-rings or with a small steel-made trigger mechanism fixed to the RBM. The rings can have different shapes, the most common ones being round and D-shaped. RBM are currently classified within CN code ex 8305 10 00 (TARIC codes 8305100011, 8305100012 and 8305100019 for mechanisms other than those with 17 or 23 rings and TARIC codes 8305100021, 8305100022 and 8305100029 for mechanisms with 17 and 23 rings). Lever-arch mechanisms (‘LAM’) classified within the same CN code are not included in the scope of this investigation.

(18)

RBM are used to make paper, cardboard and plastic-coated office files, presentation and other bound files.

(19)

A large number of different types of RBM were sold in the Community during the IP. The differences between these types were determined by the width of the base, the type of mechanism, the number of rings, the opening system, the nominal paper holding capacity, the ring diameter, the shape of the rings, the length and the ring spacing. Given the fact that all types have the same basic physical and technical characteristics and within certain ranges, are interchangeable, it was established that all RBM constitute one single product for the purpose of the present proceeding.

(20)

It was found that RBM produced and sold on the domestic market in the analogue country (India) and those exported to the Community from the PRC had the same basic physical and technical characteristics and uses.

(21)

It was also found that there was no difference in the basic physical and technical characteristics and uses between RBM imported into the Community originating in the PRC and RBM produced by the Community industry and sold on the Community market.

(22)

It was therefore concluded that RBM produced and sold on the domestic market in the analogue country, RBM originating in the PRC exported to the Community and RBM produced and sold by the Community industry on the Community market were all like products within the meaning of Article 1(4) of the basic Regulation.

(23)

In accordance with Article 11(2) of the basic Regulation, it was examined whether the expiry of the existing measures would be likely to lead to a continuation or recurrence of dumping.

(24)

Of the three Chinese exporting producers named in the complaint, only WWS, which was granted individual treatment in both the original and the anti-absorption investigations, cooperated. The two other exporting companies stated that they had not exported the product concerned to the Community during the IP. However, one of these companies appears to be involved in circumvention practices via Thailand, which has been investigated by the European Anti-Fraud Office (OLAF) (see recitals (42) and (43)).

(25)

The volume of export sales of the sole cooperating company represented all imports originating in the PRC during the IP, according to Eurostat. This volume represents 1,9 % of the total Community consumption during the IP of the current investigation, compared with 45 % of the total Community consumption during the IP of the original investigation, i.e. from 1 October 1994 to 30 September 1995.

(26)

Compared with the original investigation, only the choice of analogue country has changed, otherwise the methodology for calculating the dumping margin has remained the same.

(27)

Since the PRC is an economy in transition, normal value was determined on the basis of information obtained in an appropriate market economy third country (the ‘analogue country’) selected in accordance with Article 2(7)(a) of the basic Regulation.

(28)

In the original investigation Malaysia was chosen as analogue country. In view of the fact that production in Malaysia has ceased and been transferred, inter alia, to India, another representative country had to be chosen. In the expiry review request, India was suggested as analogue country for the purpose of establishing normal value. This choice was not contested. It was also found that the reasons for selecting India, i.e. the size of its domestic market, the openness of its market and its degree of access to basic materials, ensured normal conditions of competition. The Indian producer contacted agreed to cooperate and had representative domestic sales. This company was related to the cooperating Chinese exporting producer, but no reasons were found to consider that this could have an impact on the determination of normal value. Therefore, in accordance with Article 2(7)(a) of the basic Regulation, India was considered to be an appropriate analogue country for establishing normal value.

(29)

Domestic sales of the like product in the analogue country were found to be profitable and representative during the IP. Therefore, the normal value was based on the price paid or payable in the ordinary course of trade by independent customers in the analogue country, i.e. India.

(30)

Since the product concerned was exported to independent customers in the Community, the export price was established in accordance with Article 2(8) of the basic Regulation, i.e. on the basis of the export price actually paid or payable.

(31)

For the purposes of a fair comparison, and in accordance with Article 2(10) of the basic Regulation, due allowance, in the form of adjustments, was made for differences in respect of inland freight, discounts and deferred rebates, handling and loading, transport and credit costs, commissions and insurance which affected prices and price comparability.

(32)

In this respect it should, however, be noted that following the imposition of anti-dumping measures, the volume and the variety of the types of RBM exported to the Community fell sharply. Therefore, the types of the like product sold on the domestic market of the analogue country during the IP were comparable with only 10 % of the types directly exported from the PRC by the sole cooperating exporting producer. Whereas, in the original investigation the comparison was based on 75 % of total sales volume. Indeed, most of the direct exports from the PRC during the IP of the current investigation covered ‘niche segments’ such as 17 and 23 ring mechanisms subject to the MIP.

(33)

In accordance with Article 2(11) of the basic Regulation, the weighted average normal value was compared with the weighted average export price, at the same level of trade. The comparison showed an absence of dumping.

(34)

With regard to dumping practices, no dumping was found for WWS, the cooperating Chinese exporting producer. However, the volume of export sales of WWS direct to the Community during the IP of the current investigation was significantly smaller than that identified in the original investigation. The exports direct from the PRC by WWS were also centred on the top end of the range of RBM, in particular 17 and 23 ring models subject to a duty in the form of a MIP (see recital (32) above). This means, in effect, that hardly any anti-dumping duties were paid on these imports. This result cannot be compared to the dumping margin calculated in the original investigation because it was not possible to calculate a dumping margin for the models of RBM subject to the anti-dumping duty, which were the models sold most on the Community market and which were not exported direct from the PRC during the IP of the current investigation. Also, in terms of sales volume, a comparison could only be made between the sales of the like product sold on the domestic market of the analogue country and the models that formed 10 % of the sales from the PRC to the Community. In the light of the above, it was considered that a clear conclusion on the continuation of dumping cannot be reached.

(35)

In the absence of a clear conclusion of continuation of dumping, the question of likelihood of a recurrence of dumping was investigated.

(36)

In this respect, the following elements were analysed: (a) the spare capacity and investments of the exporting Chinese producers; (b) the behaviour of the cooperating Chinese exporting producer on third country markets; (c) the structure in volume and prices of the exports of the product concerned to third countries by the non-cooperating companies.

(37)

It is worth recalling that, in the absence of cooperation from exporting producers other than WWS, no information concerning production in the PRC, spare production capacity and sales on the Chinese market was available, except for the cooperating producer.

(38)

The production capacity of the cooperating company remained stable from 1999 to the IP. However, since the production of the product concerned fell by 28 % between 1999 and the IP, it is likely that the cooperating exporting producer has a significant unused production capacity, i.e. one third of its total capacity. Consequently, this producer might quickly increase production and direct it towards any export market, including the Community market, if measures are allowed to expire. It should also be noted that the unused production capacity of the sole cooperating exporting producer is able to meet roughly half of the Community consumption. It can also be reasonably assumed that the other Chinese producers also have significant spare capacities, as overall Chinese exports have decreased and there is no information showing that capacity in the PRC has declined.

(39)

It is noted that the cooperating company maintained a high level of investment in machinery and equipment from 1999 to the IP, although to a gradually decreasing extent.

(40)

Export sales to third countries (excluding the Community) by the cooperating company decreased by 8 % in volume from 2000 to the IP. Its average export price to third countries decreased by 12 % during the same period.

(41)

With regard to the companies which did not cooperate in the present investigation, findings had to be based on facts available in accordance with Article 18 of the basic Regulation. In the absence of any cooperation, US and Chinese statistics were consulted in order to establish volumes and prices of Chinese exports to other countries. Even if the absolute volume of the Chinese exports differs according to the source of information, both statistics confirm that there was a significant decrease in RBM exports from China in the period between 1999 and the IP all over the world. According to Chinese statistics, the volume of RBM exported in 1999 to the world market was around 662 million pieces, which decreased to 523 million pieces during the IP. The average export price, although covering various product types with widely differing prices, remained more or less stable during the same period. As mentioned in recital (38), in the absence of information on a hypothetical decrease in production capacity of the non cooperating Chinese exporting producers, it is likely that they still have significant unused capacities. In these circumstances, it is reasonable to consider that if the anti-dumping measures were allowed to expire, the Community market would become a very attractive target for these Chinese exporters, who would then resume their exports to the Community market in considerable quantities.

(42)

Furthermore, it is important to note that OLAF carried out an investigation to determine whether imported RBM declared as originating in Thailand did actually originate in that country or, as it is alleged, were actually of PRC origin.

(43)

Investigations by OLAF and the Member States concerned have concluded that the RBM were not of Thai origin. The investigations further established that a substantial part of that traffic was of Chinese non-preferential origin and thus liable to anti-dumping duties.

(44)

In this respect, it should be noted that the product types exported via Thailand included the models of RBM sold most on the Community market during the IP, rather than the 17 and 23 ring models sold directly from the PRC. This allowed a comparison to be made using the models sold most on the Community market. As such, a comparison was made between RBM exported from Thailand to the Community and a number of comparable product types sold on the domestic market of the analogue country. The result should be viewed with caution, since in the absence of a full investigation on imports of RBM from Thailand, the calculation could only be based on a FOB Bangkok price offer provided by the Community industry for product types exported from Thailand to the Community during and after the IP. However, the calculation appeared to show that the export prices of the RBM exported from Thailand were lower than the prices on the Indian domestic market, and therefore it cannot be excluded that these RBM were sold to the Community at dumped prices.

(45)

In addition, it should be recalled that in October 2000, following the original investigation which imposed a duty of 32,5 % for WWS and 39,4 % for all other Chinese companies, an anti-absorption investigation led to an increase in the level of duty to 51,2 % for WWS and 78,8 % for all other companies.

(46)

No third countries apply trade defence measures to imports of RBM from the PRC.

(47)

The investigation has shown that both the cooperating exporting producer and most likely also the other two Chinese exporting producers have considerable spare capacity in view of the significant decrease in their exports from 1999 to the IP. Moreover, the unused production capacity of the sole cooperating exporting producer is able to meet roughly half of the Community consumption.

(48)

The apparent Community consumption in the IP was around 270 million pieces, of which only 5 million pieces were declared as originating in the PRC. In the IP of the original investigation (1 October 1994 to 30 September 1995) Chinese exporting producers exported 126 million pieces to the Community. Therefore, and in view of the spare capacity of the Chinese exporting producers, it is likely that imports from the PRC to the Community market could resume in significant quantities if the anti-dumping measures were allowed to expire. In addition to the pressure on the Chinese companies to export in the light of their huge spare capacity, these exports will most likely be at dumped prices. Indeed, although the comparison for the cooperating company did not show dumping, this was based on a small sample not comparable with the calculation of dumping in the original investigation. On the other hand, one of the Chinese companies that did not cooperate in this investigation exported RBM to the Community market via a related company located in Thailand. Calculations have shown the possibility that these sales were at dumped prices. Therefore it cannot be excluded that only one year after an anti-absorption investigation the dumping practices have continued.

(49)

Based on all these findings and events, it is likely that in the event of resumption of exports by Chinese exporters to the EU, these exports would be priced below the normal value. Consequently, it must be expected that, in the absence of the present duties, the dumping from China would recur.

(50)

During the IP RBM were manufactured in the Community by the following producers:

(51)

The first two producers are the applicants and cooperated in the investigation. The cooperating Community producers represented more than 90 % of the total Community production of RBM in the IP. It was therefore considered that these producers represent the Community industry within the meaning of Articles 4(1) and 5(4) of the basic Regulation. They are hereinafter referred to as the ‘Community industry’. After the IP, these two companies became part of the same company group, but their production was maintained in the Community. This company group is unrelated to the Chinese exporting producers.

(52)

The questionnaire replies of the cooperating Community producers were used to establish the Community industry's sales of RBM on the Community market. Other information available was also used to calculate the sales of the Community producer not included in the definition of the Community industry.

(53)

For imports originating in the PRC and imports declared as originating in Thailand, Eurostat figures were used with the exception of the figures regarding imports declared as originating in the PRC in the IP, for which the information provided by the cooperating Chinese exporting producer was used.

(54)

As to the imports originating in other third countries, the figures on imports originating in India and Indonesia, with the exception of those related to the IP, have been obtained from the anti-dumping proceeding concerning these two countries. Eurostat information was used to calculate the volume of imports not available in the questionnaire replies or in previous proceedings. For imports originating in Hungary, the questionnaire reply of one cooperating Community producer was used. For third countries other than Hungary and the countries referred to in this recital, Eurostat information was used. It should also be noted that Eurostat figures had to be converted from tonnes into pieces.

(55)

On this basis, the apparent Community consumption decreased by 9 % during the period considered, from 297 million pieces (figures rounded to the million) in 1998 to 270 million pieces in the IP. The figures for 1999 and 2000 were 306 million pieces and 316 million pieces, respectively.

(56)

The imports declared as originating in the PRC decreased sharply, from 44 million pieces in 1998 to 24 million pieces in 1999, to 10 million pieces in 2000 and to 5 million pieces in the IP. The market share of the imports declared as originating in the PRC fell in each year of the period considered, from 14,8 % in 1998 to 7,8 % in 1999, to 3 % in 2000 and to 1,9 % in the IP.

(57)

The average price of the imports declared as originating in the PRC increased by 96 % between 1998 (EUR 141) and the IP (EUR 278). The upward trend of the prices of imports declared as originating in the PRC reflects the growing weight of more expensive product types subject to an MIP (RBM with 17 and 23 rings) rather than a genuine price increase.

(58)

It was mentioned above, based on the findings of the OLAF investigation, that a substantial part of imports declared as originating in Thailand was in fact of Chinese origin. Imports declared as originating in Thailand increased from one million pieces in 1998 to 16 million pieces in 1999, to 17 million pieces in 2000 and to 20 million pieces in the IP. The market share of the imports declared as originating in Thailand increased in each year of the period considered, from 0,3 % in 1998 to 5,2 % in 1999, to 5,3 % in 2000 and to 7,4 % in the IP. The average price of the imports declared as originating in Thailand fell by 9 % in the same period, from EUR 100 to EUR 91. More detailed price information available for imports declared as originating in Thailand concern resale prices of a European distributor of RBM exported via Thailand. It was found that these resale prices were on average around 12 % below the sales prices of the Community industry.

(59)

The production of the Community industry decreased by 17 % over the period considered from 100 (index number) in 1998 to 91 in 1999, to 89 in 2000 and to 83 in the IP. Koloman Handler AG's decision to transfer part of its production to Hungary in 2000 accounts for the decrease of production in that year. In the IP, Koloman Handler AG filed for bankruptcy and its production decreased significantly in the second half of 2001.

(60)

The production capacity of the Community industry decreased by 7 % in the period considered. It increased in 1999 to 107 (index number) and then fell to 93 in 2000 as a result of Koloman Handler AG's decision to transfer part of its production to Hungary. Production capacity stabilised in the IP.

(61)

Capacity utilisation fell from above 80 % in 1998 to 70-75 % in 1999, then increased to 76-80 % in 2000 and decreased again to 70-75 % in the IP.

(62)

The Community industry's closing stocks fell by 37 % in the period considered, having fallen in each year of that period. The main factor contributing to this decrease was the slowdown of Koloman Handler AG's production after filing for bankruptcy. The period during which stocks were kept before being sold was reduced by 10 days in the period considered.

(63)

The Community industry's sales on the Community market decreased by 8 % over the period considered, from 119 million pieces in 1998 to 109 million pieces in the IP. Sales had also fallen in 1999 to 115 million pieces and remained almost at the same level in 2000.

(64)

The market share held by the Community industry grew slightly during the period considered, from 40,1 % in 1998 to 40,4 % in the IP, although it had fallen significantly in 1999 and 2000 to 37,6 % and 36,2 %, respectively.

(65)

While the Community consumption decreased by 9 % in the period considered, the sales volume of the Community industry decreased by 8 %. On the other hand, the aggregated volume of imports declared as originating in the PRC and in Thailand fell by 44 % in the period considered. The Community industry thus slightly increased its market share, whereas the imports declared as originating in the PRC lost market share and the imports declared as originating in Thailand increased their market share.

(66)

The weighted average selling price of RBM sold by the Community industry on the Community market to unrelated customers decreased in each year of the period considered, from EUR 206 per thousand pieces in 1998 to EUR 190 in 1999, to EUR 177 in 2000 and to EUR 174 in the IP, i.e. by 16 % in the period considered. Anti-dumping measures against imports from Indonesia were only taken in June 2002, i.e. it cannot be excluded that dumped RBM from Indonesia could have an impact on the price development over the period considered.

(67)

The selling price of the main raw materials (steel strip and steel wire) did not follow the downward trend. On the other hand, unit labour costs, which account for more than two-fifths of the total unit cost, decreased significantly over the period considered.

(68)

As the impact of certain items that do not reflect the regular performance of the business (especially depreciation for goodwill following an acquisition) was significant, the operating profit margin before depreciation for goodwill was considered to be a better indicator than the pre-tax profit margin to assess the profitability of the Community industry. The Community industry has consistently registered a poor operating profit margin on its sales to unrelated customers in the Community. Profitability improved from 0-3 % in 1998 to 3,1 %-6 % in 1999 and then fell abruptly to between 0 % and -3 % in 2000 and it was lower than -3 % in the IP. This negative performance certainly contributed to the fact that the two companies concerned went into bankruptcy: Koloman Handler AG in July 2001 and Krause Ringbuchtechnik GmbH in April 2002 (i.e. soon after the end of the IP).

(69)

The analysis of investment focussed on investment in plant and machinery, representing more than 90 % of total investment in the IP. The investment in goodwill was not taken into consideration since it does not reflect the regular performance of the Community industry over several years, as that investment was the result of an acquisition which was a one-off event. Investment in plant and machinery decreased by 65 % in the period considered. It fell to 52 (index number) in 1999, to 48 in 2000 and to 35 in the IP.

(70)

The ability of the Community industry to raise capital was dented by its consistently poor profitability.

(71)

As equity became negative in 2000 and both Community producers subsequently filed for bankruptcy, the return on total assets (‘ROTA’) was used to measure the return on investment. ROTA was stable in 1998 and 1999 at between 0 and 3 %, then fell abruptly to between 0 % and -5 % in 2000 and it was lower than -10 % in the IP.

(72)

An analysis of a simplified net operating cash flow, i.e. operating profit plus depreciation (excluding depreciation of goodwill), shows that the trend is similar to that of the operating profit margin. Cash flow increased from 100 (index number) in 1998 to 126 in 1999, and then decreased sharply to 62 in 2000 and to -65 in the IP.

(73)

Employment (full-time units) fell in each year of the period considered, from 100 (index number) in 1998 to 86 in 1999, to 82 in 2000 and to 77 in the IP.

(74)

Productivity, measured in thousand pieces per employee, improved by 8 % over the period considered, while labour costs per unit of output, measured in EUR per kg, decreased by 12 % in the same period.

(75)

There is no finding of actual dumping during the IP for imports declared as originating in the PRC as the findings for these imports relate to a small and not representative range of RBM. Furthermore, no full determination on dumping for imports declared as originating in Thailand could be made due to a lack of investigation on dumping (the OLAF investigation concerned the determination of origin and did not relate to the issue of dumping). Therefore, no conclusion could be reached on the magnitude of the actual margin of dumping.

(76)

The Community industry continued to be in a precarious situation during the period considered. This is illustrated by its declining profitability (or, in other words, by its growing losses after 1999) on lower sales volumes at decreasing unit prices.

(77)

The precarious situation of the Community industry in the IP resulted from various past events such as: (i) dumping of imports originating in the PRC until the imposition of measures in January 1997; (ii) absorption of these measures as determined in October 2000; (iii) dumping of imports originating in Indonesia until the imposition of anti-dumping measures in June 2002; (iv) circumvention through Thailand (OLAF investigation). In addition, following an investigation into circumvention, the anti-dumping measures imposed by Council Regulation (EC) No 119/97 were extended to imports consigned from Vietnam (see recital (4)). This shows that during the period considered the Community industry always suffered from dumping and had no opportunity to recover. The decrease in consumption on the Community market was limited and cannot, therefore, explain in itself the precarious situation of the Community industry.

(78)

In the IP of the original investigation (i.e. in the period between 1 October 1994 and 30 September 1995), the Chinese exporting producers sold 126 million pieces on the Community market (WWS's sales accounting for more than two-fifths of this volume). In 2001, the IP of the current investigation, they sold 5 million pieces declared as originating in the PRC. The facts that there is significant spare capacity in the PRC (while Chinese exports to third countries are decreasing in volume) and that the behaviour of Chinese exporting producers has consistently shown that they are willing to sell at dumped and injurious prices to gain market share, clearly indicate that there is a likelihood of recurrence of injurious dumping through imports originating in the PRC if the anti-dumping measures expired.

(79)

The Community is the only market where Chinese exporting producers could still increase market share, as the other markets are already supplied by Chinese producers or producers in third countries controlled by Chinese producers. The Community industry's presence is not significant in the most important markets outside the Community where almost all of the RBM sold are manufactured in the PRC or by companies controlled by the Chinese exporting producers. The price pressure exerted by the imports concerned would most probably significantly increase, as suggested by the analysis of the anti-absorption investigation, if the existing measures were allowed to expire. If WWS was able to absorb a significant part of its 32,5 % anti-dumping duty and the other Chinese companies did the same of their 39,4 % duty, then it is most likely that in the absence of anti-dumping measures they would be in a position to increase their strong downward pressure on the prices of RBM sold in the Community.

(80)

It is recalled that the average price of RBM declared as originating in Thailand fell by 9 % over the period considered and a comparison between average selling price of a European distributor of RBM declared as originating in Thailand and the Community industry's weighted average selling price showed that the former was around 12 % lower than the latter.

(81)

As to imports from other third countries, Hungary is part of the Community since 1 May 2004 onwards. As concerns India and Indonesia, exporting producers in both of these countries are controlled by Chinese exporting producers. If the measures on imports originating in the PRC expire, the incentive to export RBM from India and Indonesia to the Community would be reduced, as it is likely that in this case there would be a sharp increase in dumped imports coming directly from the PRC.

(82)

Given the already precarious situation of the Community industry, the aforementioned substantial increase of imports from the PRC at dumped prices combined with substantial price undercutting would undoubtedly have serious consequences for the Community industry. Indeed, and also in view of the experience concerning past anti-dumping and anti-subsidy investigations with regard to RBM, the expiry of the measures concerning RBM imports originating in the PRC would in all likelihood lead to a further and material deterioration of the situation of the Community industry.

(83)

On the basis of the above, it is likely that the expiry of the anti-dumping measures on imports of RBM originating in the PRC would result in a sharp increase in the volume of these imports into the Community, combined with a significant decline in selling prices. It should be noted that the bulk of the products on the RBM market is highly standardised and competition takes place to a great extent in terms of prices.

(84)

In this context, given the findings regarding the situation on the Community market, it is thus likely that an increase in the volume of imports at low, dumped prices will depress the prices of the Community industry. This will in turn lead to a further deterioration of the financial situation of the Community industry. The consequence for the Community industry would most probably be bankruptcy and the closure of its remaining plant.

(85)

The expiry of the measures would remove the most important barrier to impede the Chinese exporting producers to sell at injurious dumped prices on the Community market.

(86)

Therefore, it is concluded that there is a likelihood of a recurrence of injury caused by dumped imports originating in the PRC.

(87)

It was examined whether compelling reasons existed that could lead to the conclusion that it is not in the Community interest to renew the anti-dumping measures in force. For this purpose, and in accordance with Article 21 of the basic Regulation, the impact of the renewal of the measures on all parties involved in this proceeding and the consequences of the expiry of the measures were considered on the basis of all evidence submitted.

(88)

In order to assess the impact of the possible maintenance of measures, all interested parties were given the opportunity to make their views known pursuant to Article 21(2) of the basic Regulation. Only the cooperating Community producers and two unrelated importers replied to the questionnaire. Three users made some comments, but they neither replied to the questionnaire nor provided any evidence to substantiate their comments.

(89)

Article 21(7) of the basic Regulation establishes that information shall only be taken into account where it is supported by actual evidence which substantiates its validity. In this context, no conclusion could be drawn from the comments made by users suggesting that it was not in the Community interest to maintain the anti-dumping measures, as they were not substantiated.

(90)

As to the effect of the anti-dumping measures previously imposed, there was a sharp decline in imports declared as originating in the PRC, especially after the increase in the measures following the findings on absorption, combined with a sharp increase in imports originating or declared as originating in other third countries.

(91)

The company group to which the applicants belong is the only Community producer of RBM with a significant production. They are facing a difficult environment in which low-priced, often dumped and subsidised injurious imports from third countries remain a threat. They restructured their operation after having filed for bankruptcy, but this was not enough to avoid the further bankruptcy procedures in the last quarter of 2003. The Community industry is making an effort to build a sound business able to compete with Chinese exporting producers on a world-wide basis. The expiry of the anti-dumping measures on imports originating in the PRC could seriously undermine that strategy, as Chinese exporting producers have shown in the past that they would push prices down to dumped levels in order to gain market share. Bearing in mind that the effects of the measures in place have been partially undermined by absorption practices and by dumped or subsidised RBM imports from Indonesia, the possible expiry of such measures would most likely make the current restructuring efforts of the Community industry impossible.

(92)

The Community industry has a long tradition, but it is very likely that it would cease to exist if the current restructuring efforts fail. Robert Krause GmbH & Co. KG filed for bankruptcy in January 1998. Its successor, Krause Ringbuchtechnik GmbH, owned by Wilhelm vom Hoffe Drahtwerke GmbH since June 1998, filed for bankruptcy in April 2002. After having acquired the assets and taken over the personnel of the latter, Ringbuchtechnik Produktionsgesellschaft GmbH will probably not resume production after its application for the opening of bankruptcy procedures. SX Bürowaren Produktions- und Handels GmbH continues the tradition of Koloman Handler AG. Another bankruptcy would likely be the end of the Community industry. Once the Community industry stops manufacturing RBM, the skills accumulated during more than a century and the jobs left would be lost.

(93)

The renewal of the measures would most probably enable the Community industry to increase its market share, to decrease its unit manufacturing costs and to increase profitability. Prices would probably not change significantly, but sales volumes could grow substantially. The restructuring of the Community industry is intended to boost its competitive position, allowing for better planning of the RBM types to be produced, increasing its negotiating power vis-à-vis its suppliers, and streamlining its sales operations. All these measures would contribute to a reduction in costs. The Community industry is viable, as even after several bankruptcies it is still in a position to supply an important part of the Community market, in particular, in conjunction with the production site located in Hungary, which became part of the Community production on 1 May 2004.

(94)

SX Bürowaren Produktions- und Handels GmbH's acquisition of Bensons, a long time trader of RBM with companies located in the Netherlands, Singapore, the United Kingdom and the USA, clearly shows the will of the Community industry to enhance its access to the market on a world-wide basis and the seriousness of its restructuring efforts.

(95)

There were two main issues raised after disclosure. Firstly, a possible abuse of a dominant position by the Community industry. In this respect, the Commission is not aware of any anti-trust procedure concerning the companies concerned.

(96)

Secondly, it was alleged that the Community industry is now related to a Chinese exporter and that Bensons, the importer that is now part of the Community industry group, is an exclusive distributor of products sold by WWS, a Chinese exporter that also controls the production in India.

(97)

It was found that there is a supply agreement between Bensons and WWS that initially foresaw the transfer of Intellectual Property Rights from WWS to Bensons and the transfer of some of Benson's shares to WWS. These transfers have, however, not taken place. The supply agreement foresees no exclusivity between Bensons and WWS, but stipulates that Bensons is given priority to be the exclusive distributor if a given supplier ceases its activity. Therefore, the alleged relationship cannot be confirmed.

(98)

The only two cooperating unrelated importers were acquired by SX Bürowaren Produktions- und Handels GmbH in August 2002, thus becoming related to the Community industry after the IP. Normally, events after the IP are not taken into account. However, since this acquisition is a significant and lasting event, it should, in this particular case, be taken into account. The interests of these importers are now the same as those of the Community industry as they are all related companies.

(99)

No other unrelated importer cooperated in the investigation. This suggests that, although measures have been in place, the other unrelated importers were not significantly affected by these measures.

(100)

No user cooperated in the investigation. This suggests that, although measures have been in place, users were not significantly affected by these measures. The situation of users is thus unlikely to deteriorate as a result of the maintenance of anti-dumping measures.

(101)

In the period considered, some binder manufacturers reduced their production or closed their plants in the Community. In certain cases, they moved or expanded their production capacity outside the Community, mainly in Eastern European countries. The reasons behind the decisions of these users were mainly motivated by lower labour costs and the proximity of those countries to the Community market, combined with the perspective that these countries will become members of the European Union on 1 May 2004. The prices of RBM sold by the Community industry have followed a downward trend and imports of low-priced RBM, shipped from India, Indonesia, and Thailand not subject to anti-dumping duties have been available during the period considered.

(102)

It should be stressed that should the Community industry cease to exist, users would become almost totally dependent on imports originating in the PRC and/or on imports from Chinese subsidiaries in other countries. At that moment, Chinese exporting producers would have an incentive to substantially increase prices in markets outside the PRC, which could seriously endanger the competitiveness of user industries. The Community industry has no interest in having a price policy that would contribute to the closure of Community binder manufacturers, as it would be in a much weaker position when competing outside the Community with Chinese exporting producers and their subsidiaries.

(103)

Should measures be renewed, there will be alternative sources of supply. It is worth noting that the current anti-dumping measures on imports originating in the PRC did not entail any shortage of imported RBM on the Community market.

(104)

Suppliers of steel wire and steel strip sell a negligible percentage of their production to the Community industry and as such, are not affected by the outcome of this proceeding. None of them made itself known as an interested party.

(105)

With respect to the effects of possible expiry of the measures on competition in the Community, it should be noted that there are only a few producers of RBM world-wide, which are mostly Chinese or controlled by Chinese exporting producers. The disappearance of the remaining few producers not controlled by Chinese companies would thus have negative effects on competition in the Community.

(106)

Taking into account the above factors and considerations, it is concluded that there are no compelling reasons against the maintenance of the current anti-dumping measures.

(107)

In the light of the foregoing, it is considered that, as provided for by Articles 11(2) and 11(6) of the basic Regulation, the anti-dumping measures on imports of RBM originating in the PRC imposed by Council Regulation (EC) No 119/97, as last amended by Council Regulation (EC) No 2100/2000, should be maintained.

(108)

Because of the long duration of the investigation, it is considered appropriate that the measures be limited to four years,

(1)

The Council, by Regulation (EC) No 2164/98 (2), imposed a definitive countervailing duty on imports of certain broad spectrum antibiotics, namely amoxicillin trihydrate, ampicillin trihydrate and cefalexin not put up in measured doses or in forms or packings for retail sale (the product concerned) falling within CN codes ex 2941 10 10, ex 2941 10 20 and ex 2941 90 00 originating in India. The measures took the form of an ad valorem duty ranging between 0 % and 12 % on individual exporters, with a residual duty rate of 14,6 % for non-cooperating exporters.

(2)

Following the imposition of definitive measures, the Commission received a request for the initiation of an accelerated review of Regulation (EC) No 2164/98 pursuant to Article 20 of the basic Regulation, from an Indian producer of the product concerned, Nestor Pharmaceuticals Limited (the applicant). The applicant claimed not to be related to any other exporters of the product concerned in India. Furthermore, it asserted that it had not exported the product concerned during the original investigation period (i.e. from 1 July 1996 to 30 June 1997), but had exported the product concerned to the Community subsequently. On the basis of the above, it requested that an individual duty rate be established for it, in case subsidisation was to be found.

(3)

The Commission examined the evidence submitted by the applicant and considered it sufficient to justify the initiation of a review in accordance with the provisions of Article 20 of the basic Regulation. After consultation of the Advisory Committee and after the Community industry concerned had been given an opportunity to comment, the Commission initiated by a notice in the Official Journal of the European Union (3) an accelerated review of Regulation (EC) No 2164/98 with regard to the applicant.

(4)

The product covered by this review is the same product as the one under consideration in Regulation (EC) No 2164/98.

(5)

The investigation of subsidisation covered the period from 1 April 2002 to 31 March 2003 (the review investigation period).

(6)

The Commission officially advised the applicant and the Government of India (the GOI) of the initiation of the investigation. Furthermore, it gave other interested parties an opportunity to make their views known in writing and to request a hearing. However, no such views or any request for a hearing was received by the Commission.

(7)

The Commission sent a questionnaire to the applicant and received a full reply within the set deadline. The Commission sought and verified all information it deemed necessary for the purpose of the investigation and carried out verification visits at the premises of the applicant in New Delhi and in Hyderabad.

(8)

As no request for a review of the findings on injury was made by the applicant, the review was limited to subsidisation.

(9)

The Commission examined the same subsidy schemes which were analysed in the original investigation. It also examined whether the applicant had used any other subsidy schemes, or had received ad hoc subsidies in relation to the product concerned.

(10)

The applicant was able to satisfactorily demonstrate that it was not related, directly or indirectly, to any of the Indian exporting producers subject to the countervailing measures in force with regard to the product concerned.

(11)

The investigation confirmed that the applicant had not exported the product concerned during the original period of investigation, i.e. from 1 July 1996 to 30 June 1997, and that it had begun exporting to the Community after this period.

Furthermore, the applicant was not individually investigated during the original investigation for reasons other than a refusal to cooperate with the Commission.

Consequently, it is confirmed that the applicant should be considered as a new exporter. Therefore, in accordance with Article 20 of the basic Regulation, the Commission examined whether an individual countervailing duty rate could be determined for the applicant.

(12)

On the basis of the information contained in the applicant’s reply to the Commission’s questionnaire and further collected in the course of the investigation, the following schemes were investigated:

(13)

It was established that the applicant received benefits under the DEPBS on a post-export basis. The detailed description of the scheme is contained in paragraph 4.3 of the Export and Import Policy 2002-2007 (EXIM-policy 02-07) and in Chapter 4 of the complementing Handbook of Procedures Volume I 2002-2007 (HOP I 02-07) (4). The EXIM-policy 02-07 is based on the Foreign Trade (Development and Regulation) Act 1992 (No 22 of 1992).

(14)

Any manufacturer-exporter or merchant-exporter is eligible for this scheme. It can apply for DEPBS credits which are calculated as a percentage of the value of products exported under this scheme. Such DEPBS rates have been established by the Indian authorities for most products, including the product concerned. They are determined on the basis of Standard Input/Output Norms (SION), taking into account a presumed import content of inputs in the export product and the customs duty incidence on such presumed imports, regardless whether actually import duties have been paid or not.

(15)

To be eligible for benefits under this scheme, a company must export. At the point in time of the export transaction, a declaration must be made by the exporter to the authorities in India indicating that the export is taking place under the DEPBS. In order for the goods to be exported, the Indian customs authorities issue during the dispatch procedure an export shipping bill. This document shows, inter alia, the amount of DEPBS credit which is to be granted for that export transaction. At this point in time, the exporter knows the benefit it will receive. Once the customs authorities issue an export shipping bill, the GOI has no discretion over the granting of a DEPBS credit. The relevant DEPBS rate to calculate the benefit is that which applied at the time the export declaration is made. Therefore, there is no possibility for a retroactive amendment to the level of the benefit.

(16)

It was also found that in accordance with Indian accounting standards, DEPBS credits can be booked on an accrual basis as income in the commercial accounts, upon fulfilment of the export obligation.

(17)

Such credits can be used for payment of customs duties on subsequent imports of any goods unrestrictedly importable, except capital goods. Goods imported against such credits can be sold on the domestic market (subject to sales tax) or used otherwise.

DEPBS credits are freely transferable and valid for a period of 12 months from the date of issue.

(18)

An application for DEPBS credits can cover up to 25 export transactions and if electronically filed, an unlimited amount of export transactions. De facto no strict deadlines to apply exist, because the time periods mentioned in Chapter 4.47 of the HOP I 02-07 are always counted from the most recent export transaction included in a given DEPBS application.

(19)

The main characteristics of the DEPBS have not changed since the original investigation. The scheme is a subsidy contingent in law upon export performance. Therefore, it was determined during the original investigation that it is deemed to be specific and countervailable under Article 3(4)(a) of the basic Regulation.

(20)

In the original investigation the DEPBS subsidy amount was calculated on the basis of best information available in accordance with Article 28(1) of the basic Regulation and pro rata temporis the DEPBS rate was regarded as the corresponding subsidy rate. Because of the cooperation of the applicant, which is considered as a change of circumstances within the meaning of Article 22(4) of the basic Regulation, this methodology should not be applied to its detriment.

(21)

In accordance with Articles 2(2) and 5 of the basic Regulation, the amount of countervailable subsidies was calculated in terms of the benefit conferred on the recipient, which is found to exist during the investigation period. In this regard, it was considered that the benefit is conferred on the recipient at the point in time when an export transaction is made under this scheme. At this moment, the GOI is liable to forego the customs duties, which constitutes a financial contribution within the meaning of Article 2(1)(a)(ii) of the basic Regulation. As stated in recital 15, once the customs authorities issue an export shipping bill which shows, inter alia, the amount of DEPBS credit which is to be granted for that export transaction, the GOI has no discretion as to whether or not to grant the subsidy and it has no discretion as to the amount of the subsidy. Also, as stated in the same recital, any change of the DEPBS rates between the actual export and the issuance of a DEPBS licence has no retroactive effect on the level of the benefit granted. Furthermore, as stated in recital 16, companies can, in line with Indian accounting standards, book the DEPBS credits on an accrual basis as income at the stage of export transaction. Finally, by virtue of the fact that a company is aware that it will receive a subsidy under the DEPBS, and indeed benefits under other schemes, the company is already in a competitively more advantageous position, because it can reflect the subsidies through offering lower prices.

(22)

The rationale for imposing a countervailing duty, though, is to redress unfair trading practices based on illicit competitive advantage. In light of the above, it is considered appropriate to assess the benefit under the DEPBS as being the sum of the credits earned on all export transactions made under this scheme during the investigation period. In accordance with Article 7(1)(a) of the basic Regulation, fees necessarily incurred to obtain the subsidy were deducted.

(23)

The applicant claimed that only DEPBS credits generated by export transactions of the product concerned are relevant when calculating the subsidy margin in the present investigation. However, under the DEPBS no obligation exists which limits the use of the DEPBS credits to import duty-free input material linked to a specific product. On the contrary, DEPBS credits are freely transferable, can even be sold and be used for imports of any unrestrictedly importable goods (the input materials of the product concerned belong to this category), except capital goods. Consequently, the product concerned can benefit from all DEPBS credits generated.

(24)

It further claimed that the sales tax payable on the transfer of DEPBS credits should be deducted as an expense when establishing the amount of the subsidy. However, the sales tax is not a cost necessarily incurred in order to qualify for, or to obtain the subsidy within the meaning of Article 7(1)(a) of the basic Regulation. The sales tax is only the consequence of a purely commercial decision to dispose of an already obtained DEPBS credit by selling it, instead of using it free of sales tax to offset duties payable for subsequent imports. Application fees for obtaining the DEPBS credits, though, have been considered as necessary expenses and deducted.

(25)

The amount of the total subsidy (nominator) has been allocated over total export sales during the review investigation period (denominator) in accordance with Article 7(2) of the basic Regulation, since this subsidy was not granted by reference to the quantities manufactured, produced, exported or transported. The subsidy margin for the applicant under this scheme was 3,3 %.

(26)

It was established that the applicant received the benefit of a partial income tax exemption on profits from export sales during the review investigation period. The legal basis for this exemption is set by Section 80HHC of the Income Tax Act 1961.

(27)

Section 80HHC of the Income Tax Act 1961 was abolished for the assessment year 2005 to 2006 (i.e. for the financial year from 1 April 2004 to 31 March 2005) onwards. Consequently, this scheme will not confer any benefits on the applicant after 31 March 2004. In accordance with Article 15(1) of the basic Regulation, this scheme shall therefore not be countervailed.

(28)

It was found that the applicant had not received benefits under the PBS, which on 1 April 1997 was abolished and replaced by its successor, the DEPBS.

(29)

It was established that the applicant had not imported capital goods under the EPCGS and therefore, had not availed itself of this scheme.

(30)

It was established that the applicant was not located in an EPZ nor did it operate under the EOU scheme and as a result, had not availed itself of these schemes.

(31)

It was established that the applicant received benefits under this scheme during the review investigation period. The detailed description of the scheme is contained in paragraphs 4.1.1 to 4.1.7 of the EXIM-policy 02-07 and Chapters 4.1 to 4.30 of the HOP I 02-07.

(32)

Manufacturer-exporters and merchant-exporters ‘tied to’ supporting manufacturers are eligible for this scheme.

(33)

The ALS physical exports allows for the duty-free import of input materials which have to be physically incorporated in the resultant export goods. For verification purposes by the Indian authorities, the exporter is legally obliged to maintain ‘a true and proper account of licence-wise consumption and utilisation of imported goods’ in a specified format (Chapter 4.30 and Appendix 18 of the HOP I 02-07), i.e. an actual consumption register. Both import allowance and export obligation are fixed in volume and value by the GOI and are documented on a licence. In addition, at the time of import and of export, the corresponding transactions are to be documented by government officials on the licence. The volume of imports allowed under this scheme is determined by the GOI on the basis of standard norms, i.e. on SIONs, allegedly reflecting the most efficient use possible to produce a reference quantity of the resultant export product. SIONs exist for most products including the product concerned and are published in the HOP II 02-07. Imported input materials are not transferable and have to be used to produce the resultant export product. The export obligation must be fulfilled within a prescribed time frame (18 months with two possible extensions of six months each).

(34)

In the course of the review investigation it was established that the input materials, imported duty-free under this scheme by the applicant according to the SION import allowance, exceeded the material it needed to produce the reference quantity of the resultant export product. Thus, the SION for the product concerned was not sufficiently accurate. Furthermore, the applicant maintained the actual consumption register not in conformity with its real consumption. Instead it recorded in this register, incorrectly, its consumption according to GOI’s more generous SIONs, although de facto it consumed less input material for the reference resultant export production. Neither the applicant nor the GOI were able to demonstrate that the import duty exemption did not lead to an excess remission.

(35)

The exemption from import duties is a subsidy within the meaning of Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation, i.e. a financial contribution of the GOI which conferred a benefit upon the applicant. In addition, the ALS physical exports is contingent in law upon export performance, and therefore deemed to be specific and countervailable under Article 3(4)(a) of the basic Regulation.

(36)

This scheme can not be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 2(1)(a)(ii) of the basic Regulation. It does not conform to the strict rules laid down in Annex I item (i), Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution drawback) to the basic Regulation. The GOI did not effectively apply its verification system or procedure to confirm whether and in what amounts inputs were consumed in the production of the exported product (Annex II(II)(4) to the basic Regulation and in the case of substitution drawback schemes, Annex III(II)(2) to the basic Regulation). The SIONs for the product concerned were not sufficiently precise and cannot be considered a verification system of actual consumption. An effective control based on a correctly kept actual consumption register did not take place. Besides, the GOI did neither carry out a further examination based on actual inputs involved, although this would normally need to be carried out in the absence of an effectively applied verification system (Annex II(II)(5) and Annex III(II)(3) to the basic Regulation), nor did it prove, that no excess remission took place.

(37)

Upon disclosure, the applicant claimed that the ALS physical exports operated as a permitted drawback or substitution drawback system. It argued, without providing new factual evidence or substantiating its claims, that the GOI installed an adequate verification in conformity with the basic Regulation. To this end, the applicant referred to the following verification elements available to the GOI: allegedly precise SIONs for the product concerned, quantity information on input material and resultant products on import and export documents (export shipping bill, import bill of entry), customs bond register of imports and exports under the ALS physical exports, the actual consumption register (see recital 33), a Duty Entitlement Export Certification book (DEECB) and additional verification mechanisms applied by the Indian authorities in the context of their excise duty administration (i.e. safeguarding that no excise duty credits on input materials (CENVAT-credits) are claimed unjustly for inputs imported duty-free under the ALS). Further, it argued that the Commission would have to quantify the imprecision of the SION. In addition, the applicant contended that a verification system does not need to ascertain on a shipment by shipment basis the link between import materials and resultant products in order to be in conformity with the basic Regulation. Finally, the applicant claimed that the Commission is bound by the results of past investigations not to countervail the ALS.

(38)

The position of the applicant summarised in recital 37 does not change the Commission’s conclusions on the ALS physical exports. The applicant has not refuted that in the present case de facto, not de jure, the verification system of actual consumption was not applied effectively by the GOI. It was established during the investigation on the basis of actual consumption data provided by the applicant, that the SION for the product concerned is not sufficiently precise (see recital 34). The applicant is aware of this fact and confirmed this during the investigation to the verification team. It is not the task of the Commission to establish the exact amount of imprecision of the SION, but only to refute, on the basis of sufficient evidence, the alleged precision of the standard norms. Further, the applicant did not provide any evidence that it kept records or other documentation for ALS verification purposes by the GOI which reflected its actual consumption, i.e. not just standard norm consumption. Thus, for verification purposes of quantities consumed in export production, the GOI depended on its imprecise standard norms. This is considered by the Commission insufficient to satisfy the requirements of an effective verification system in accordance with Annexes II and III to the basic Regulation.

(39)

The applicant did not substantiate that excise controls of CENVAT-credits provide any information about the nexus between input materials and resultant export products. Consequently, such controls are not considered by the Commission as part of the verification system in accordance with Annexes II and III to the basic Regulation. Further, the DEECB was abolished by the EXIM-policy 02-07 and thus can no longer, contrary to the claim of the applicant, constitute a relevant verification element. In addition, it was not substantiated that actual consumption data were recorded in the DEECB by the applicant. No evidence was provided that in any other way a system was effectively applied by the GOI to establish the nexus between imported input materials and the resultant export products with the necessary precision, i.e. in another way than on the basis of overly generous standard norms. In this context, it should be noted that indeed a verification system should be based on a shipment per shipment basis in order to reflect the standard set by the EXIM-policy 02-07 as cited under recital 33. In addition, only such a standard allows the controlling authorities to verify that the strict rules for either a drawback system or a substitution drawback system, as appropriate, are met. It should be recalled that in accordance with Annex I item (i) to the basic Regulation a substitution drawback system is only permissible in particular cases and, inter alia, only during a two-year period between the import of substitute inputs and export.

(40)

Finally, the Commission is not bound by any precedent concerning the ALS physical exports. The scheme was never analysed on a basis of facts comparable with those established during the present investigation, in particular in view of the imprecision of the SION for the product concerned.

(41)

Consequently, in the absence of a permitted duty drawback system or substitution drawback system and in view of the fact that the verification system is not applied effectively for the purpose intended, the countervailable benefit is the remission of total import duties normally due upon importation.

(42)

The subsidy amount was calculated on the basis of import duties foregone (basic customs duty and special additional customs duty) on the material imported under the ALS physical exports for the product concerned during the review investigation period with fees necessarily incurred to obtain the subsidy deducted in accordance with Article 7(1)(a) of the basic Regulation (nominator). This amount has been allocated over the export turnover generated by the product concerned during the review investigation period in accordance with Article 7(2) of the basic Regulation (denominator), since this subsidy was not granted by reference to the quantities manufactured, produced, exported or transported. On this basis, the subsidy obtained was 22 %.

(43)

Taking account of the findings relating to the schemes as set out above, the amount of countervailable subsidies for the applicant is as follows:

(44)

In accordance with Article 15(1) of the basic Regulation, the amount of the countervailing duty should be less than the total amount of countervailable subsidies, if such lesser duty were to be adequate to remove the injury to the Community industry. In the original investigation an average injury elimination level of 14,6 % was established. The applicant did not request a review of the findings on injury. Therefore, the originally established injury elimination level limits in the present review the amount of the countervailing duty.

(45)

On the basis of the findings made during this review investigation, it is considered that imports of the product concerned into the Community produced and exported by the applicant should continue being subject to a countervailing duty rate corresponding to the injury elimination level as established during the original investigation.

(46)

Given that this duty rate is the rate already applicable to all companies not individually mentioned in Article 1(2) of Regulation (EC) No 2164/98, this Regulation should not be amended. The accelerated review concerning the applicant should be therefore terminated.

(47)

The applicant and the GOI were informed of the essential facts and considerations upon which it was intended to propose the termination of the accelerated review. They were also given a reasonable time to comment. The GOI did not make any comments. The applicant’s remarks on the disclosure, which only concern the ALS physical exports, were taken into consideration as set out under recitals 37 to 40,