24.3.2011   

EN

Official Journal of the European Union

L 78/1

(1)

By Regulation (EEC) No 2737/90 (2), the Council imposed a definitive anti-dumping duty of 33 % on imports of tungsten carbide and fused tungsten carbide originating in the People’s Republic of China (‘PRC’). By Decision 90/480/EEC (3) the Commission accepted undertakings given by two major exporters concerning the product subject to measures.

(2)

Following the withdrawal of the undertakings by the two Chinese exporters concerned, the Commission imposed by Regulation (EC) No 2286/94 (4) a provisional anti-dumping duty on imports of the product concerned.

(3)

By Regulation (EC) No 610/95 (5), the Council amended Regulation (EEC) No 2737/90 and imposed a definitive duty of 33 % on imports of tungsten carbide and fused tungsten carbide. Following a review which had been initiated pursuant to Article 11(2) of the basic Regulation (‘the previous review investigation’), these measures were extended for another five-year period by Council Regulation (EC) No 771/98 (6).

(4)

By Regulation (EC) No 2268/2004 (7), following an expiry review, the Council imposed an anti-dumping duty of 33 % on imports of tungsten carbide and fused tungsten carbide originating in the People’s Republic of China (‘PRC’).

(5)

By Regulation (EC) No 1275/2005 (8), the Council amended the definition of the product scope to also cover tungsten carbide simply mixed with metallic powder.

(6)

Following the publication of a notice of impending expiry (9) of the definitive anti-dumping measures in force, the Commission received on 30 September 2009 a request for the initiation of an expiry review of these measures pursuant to Article 11(2) of the basic Regulation. The request was lodged by the European Association of Metals (Eurometaux) (‘the applicants’) on behalf of Union producers representing a major proportion, in this case more than 85 %, of the total Union production of tungsten carbide, tungsten carbide simply mixed with metallic powder and fused tungsten carbide.

(7)

The request was based on the grounds that the expiry of the measures would be likely to result in a continuation or recurrence of dumping and recurrence of injury to the Union industry.

(8)

Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of an expiry review, the Commission announced on 30 December 2009, by a notice published in the Official Journal of the European Union  (10) (‘the notice of initiation’), the initiation of an expiry review pursuant to Article 11(2) of the basic Regulation.

(9)

The investigation of continuation or recurrence of dumping covered the period from 1 January 2009 to 31 December 2009 (‘the review investigation period’ or ‘RIP’). The examination of the trends relevant for the assessment of the likelihood of a recurrence of injury covered the period from 1 January 2006 to the end of the RIP (‘the period considered’).

(10)

The Commission officially advised the applicant, other known Union producers, exporting producers, importers and users known to be concerned, producers in the analogue country and the representatives of the PRC 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 interested parties, who so requested and showed that there were particular reasons why they should be heard, were granted a hearing.

(12)

The Commission sent questionnaires to all parties known to be concerned and to those who made themselves known within the deadlines set in the Notice of initiation. Replies were received from seven Union producers, one exporting producer in the PRC, one exporting producer in the analogue country and three users.

(13)

None of the importers replied to the sampling exercise nor supplied the Commission with any information or made themselves known in the course of the investigation. As only one exporting producer from the PRC came forward with the requested information, it was not necessary to select a sample.

(14)

The Commission sought and verified all the information it deemed necessary for a determination of the likelihood of continuation or recurrence of dumping and resulting injury and of the Union interest. Verification visits were carried out at the premises of the following companies:

(15)

The product concerned by the present review is tungsten carbide, tungsten carbide simply mixed with metallic powder and fused tungsten carbide originating in the PRC and currently falling within CN codes 2849 90 30 and ex 3824 30 00.

(16)

Tungsten carbide, tungsten carbide simply mixed with metallic powder and fused tungsten carbide are compounds of carbon and tungsten produced by heat treatment (carburisation in the first case, fusion in the third). These products are intermediate products, used as input materials in the manufacture of hard metal components such as cemented carbide cutting tools and high-wear components, in abrasion-resistant coatings, in bits for oil drilling and mining tools as well as in dies and tips for the drawing and forging of metals.

(17)

The present investigation confirmed that the product concerned manufactured and sold by the exporting producer to the Union is identical in terms of physical and chemical characteristics and uses to the product produced by the Union producers and sold on the Union market or to the one produced and sold in the analogue country and are, therefore, considered to be like products within the meaning of Article 1(4) of the basic Regulation.

(18)

In accordance with Article 11(2) of the basic Regulation, it was examined whether dumping was currently taking place and, if so, whether or not the expiry of the existing measures would be likely to lead to a continuation or recurrence of dumping. It is recalled that in the context of investigation under this Article, market economy treatment (‘MET’) is not reconsidered.

(19)

As explained above, it was not necessary to apply sampling in respect of exporting producers in the PRC.

(20)

At the sampling stage, the sole cooperating Chinese exporting producer appeared to represent less that 5 % of total Chinese exports to the Union. The Chinese authorities and the other interested parties were notified of the possibility that Article 18 of the basic Regulation might be applied due to a low level of cooperation by the exporting producers. The Commission did not receive any answer to this communication.

(21)

However, further in the investigation, in the reply to the questionnaire, the cooperating exporting producer corrected the error in reporting its export sales to the Union and revised upwards its export volume to the Union. In parallel, the volumes of the product concerned exported to the Union from the PRC were further analysed based on Eurostat figures. As a result, and after the verification of the questionnaire reply, it was established that the export volume of the cooperating exporting producer was very high (11). On the basis of these findings, it was concluded that cooperation was high.

(22)

Since no exporting producer from PRC was granted MET in the previous investigations, the normal value for China was established in accordance with the provisions of Article 2(7)(a) of the basic Regulation.

(23)

In the notice of initiation, it was envisaged to use the USA as an appropriate analogue country for the purpose of establishing normal value for the PRC. Interested parties were invited to comment on the appropriateness of this choice. No comments or objections were received from any parties in that respect. The USA was used also as an analogue country in the original investigation and no new or changed circumstances which would justify a change appeared to exist nor were any such circumstances communicated to the Commission. It was considered that the USA was representative as a reference market, especially in view of the openness and competitiveness of the US domestic market. In addition, one producer from the USA agreed to cooperate within the present review.

(24)

Therefore, the USA has been used as an analogue market economy country for the purpose of this review.

(25)

Pursuant to Article 2(7) of the basic Regulation, normal value was established on the basis of the verified information received from the cooperating US producer in the analogue country, i.e. on the basis of prices paid or payable on the domestic market in the USA, for product types which were found to be sold in the ordinary course of trade.

(26)

As a result, normal value was established as the weighted average domestic sales price to unrelated customers by the cooperating producer in the USA.

(27)

It was first established whether the total domestic sales of the like product to independent customers of the US cooperating producer were representative in accordance with Article 2(2) of the basic Regulation, i.e. whether they accounted for 5 % or more of the total sales volume of the product concerned exported to the Union. The domestic sales of the cooperating US producer were found to be sufficiently representative during the review investigation period.

(28)

It was subsequently examined whether the domestic sales of the like product could be regarded as being sold in the ordinary course of trade pursuant to Article 2(4) of the basic Regulation. This was done by establishing for the like product sold on the US market the proportion of profitable domestic sales to independent customers during the RIP.

(29)

Since the volume of profitable sales of the like product represented less than 80 % of the total sales volume of the like product, normal value was based on the actual domestic price, calculated as a weighted average of profitable sales.

(30)

As explained above, in view of the fact that the cooperating exporting producer represented more than 90 % of total Chinese imports to the Union, the export price was examined on the basis of data provided by that exporting producer, i.e. the duly adjusted price actually paid or payable for the product concerned when sold for export to the Union.

(31)

The weighted average normal value was compared with the weighted average export price for each type of product concerned, on an ex-works basis, at the same level of trade and the same level of taxation. In accordance with Article 2(10) of the basic Regulation, and for the purpose of ensuring a fair comparison, differences in factors which were claimed and demonstrated to affect price and price comparability were taken into account. Adjustments were made for ocean and domestic freight, insurance, bank charges and packaging costs. Further, a 5 % adjustment on the export price for the export tax was made and the adjustment for Value Added Tax (VAT) on the normal value.

(32)

In accordance with Article 2(11) of the basic Regulation, the dumping margin was established per product type on the basis of a comparison of the weighted average normal value with the weighted average export price at the same level of trade. This comparison showed the existence of dumping during the RIP amounting to more than 80 %, hence at a significantly higher level than in the last review investigation (31 %). The precise dumping margin cannot be disclosed due to confidentiality reasons. The calculations have been based on data provided by one exporting producer in the PRC and one producer in the analogue country. Disclosure of the dumping margin would allow both the cooperating exporting producer in the PRC and the producer in the analogue country to deduce respectively the other’s normal value and export price, which would amount to a clear breach of both parties right to confidentiality.

(33)

The data included in this section were obtained through the analysis of the data provided by the cooperating exporting producer, by Eurostat and by the review request.

(34)

Data on spare capacity provided by the cooperating Chinese exporting producer were presented with a 20 % increase or decrease to respect confidentiality. The production capacity in the PRC amounted to around 21 000 tonnes in 2006 and 2007 and increased substantially to around 35 000 tonnes in 2008 and the RIP, an increase of more than 80 % over the period considered. These figures can be considered as conservative, as the review request reported a production capacity in the vicinity of 50 000 tonnes.

(35)

In addition the cooperating exporting producer reported a substantial increase in capacity during the period considered.

(36)

On the basis of the information collected during the investigation, the total Chinese production capacity exceeded considerably the actual Chinese production (by at least more than 20 000 tonnes in 2008 and in the RIP).

(37)

In the RIP the PRC had a spare capacity amounting to a six fold of the Union consumption (25 000 tonnes as related to 3 800 tonnes of Union consumption).

(38)

In view of the above, it is clear that a large part of the spare capacity available in the PRC could be used to increase exports to the Union in the absence of anti-dumping measures.

(39)

Moreover, information submitted during the investigation indicated important distortions in the raw materials market used to manufacture the product concerned. Firstly, raw materials are subject to quotas granted by the Chinese authorities. Secondly, the Chinese authorities limit the access to raw materials through the imposition of export taxes and VAT rebate policies, which as indicated in recital 31 also applied to the product concerned. These factors constitute additional elements pointing to the likelihood of continuation of dumping in the present case.

(40)

Price information provided by the cooperating exporter, which cannot be disclosed due to confidentiality reasons, shows that the Union constitutes indeed an interesting market for the Chinese exporting producers. Throughout the period considered the prices achieved on other third-country markets were below (except in 2007) those charged to the Union (roughly between 10 and 20 % lower in different years throughout the period considered).

(41)

On these grounds, it can be concluded that in terms of prices achievable, the EU market is definitely an attractive alternative for the Chinese exporters.

(42)

On that basis, Chinese exporting producers have an incentive to direct their exports to the Union market, should measures be repealed. The high prevailing prices in the Union market would allow the Chinese exporting producers to achieve better profit margins.

(43)

In 2005 the measures have been extended to an additional CN code as it was found that Chinese exporters were circumventing the measures by adding small quantities of another metallic powder (mostly cobalt) to tungsten carbide powder (12). This confirmed circumvention practice is yet another element pointing to the conclusion of likelihood of continuation of dumping. It constitutes clear evidence that the European market continues to be attractive for the Chinese exporting producers who would likely direct higher volumes of tungsten carbide into the EU in the absence of anti-dumping measures.

(44)

The foregoing analysis demonstrates that Chinese imports continued to enter the Union market at dumped prices with very high dumping margins. Given most notably the analysis of price levels on the EU and other third-country markets as well as the capacities available in the PRC, it can be concluded there is a likelihood of continuation of dumping should measures be removed.

(45)

Within the Union, the like product is manufactured by seven companies or groups of companies.

(46)

They are therefore deemed to constitute the Union industry within the meaning of Article 4(1) and Article 5(4) of the basic Regulation and will hereinafter be referred to as the ‘Union industry’.

(47)

Data relating to imports of the product concerned into the Union originating in the PRC had to be indexed in order to preserve confidentiality pursuant to Article 19 of the basic Regulation.

(48)

Regarding import volumes under TARIC code 3824300010, due to the inclusion of products other than the product concerned in the import data available at CN code level from Eurostat (CN code 3824 30 00), the following analysis has been made on the basis of import data at TARIC code level, supplemented by information from data collected in accordance with Article 14(6) of the basic Regulation. TARIC data are considered confidential as they provide a level of detail which allows for identification of the parties. For this reason some information was presented in ranges.

(49)

Union industry data were obtained from the questionnaire responses of the seven Union producers.

(50)

Union consumption was established on the basis of the sales volumes of the Union industry on the Union market, and import data from Eurostat.

(51)

Between 2006 and the RIP, Union consumption decreased by 62 %, with the main decrease occurring between 2008 and the RIP. In the RIP, consumption decreased by 63 % compared to 2008.

Table 1

Consumption

(52)

The volumes, market shares and average prices of dumped imports from the PRC developed as set out below. The following quantity and price trends are based on Eurostat data.

Table 2

Imports from PRC

(53)

The volume of dumped imports of the product concerned originating in the PRC has decreased by 89 % over the period considered and reached a level of around 80 tonnes during the RIP. Their market share also dropped from 7,1 % in 2006 to 2,1 % in the RIP.

(54)

A possible explanation for this decrease is a substantial increase of PRC’s domestic consumption during the period considered. In addition, through a system of export quotas and export tariffs Chinese authorities appear to pursue a policy of conserving PRC’s tungsten resources.

(55)

Prices of Chinese imports decreased by 14 % during the period considered. This evolution reflects the general trend also observed with regard to the Union industry prices.

(56)

The comparison also showed that imports from the PRC were undercutting the prices of the Union industry by more than 10 %, after deduction of the anti-dumping duty in place. These results are the same as in the last review investigation (13).

(57)

The volume of imports from other countries during the period considered are shown in the table below. The quantity and price trends are based on Eurostat data.

Table 3

Imports from other countries

(58)

The imports from third countries decreased by 36 % over the period considered. They followed a general market trend triggered by the shrinking consumption (a drop by 62 %), but not at the same pace. Thereby the market share of these imports has increased from 10,5 % to 17,9 %. However, the impact of those imports on the Union industry cannot be considered negative as demonstrated in recitals 85 to 88 below.

(59)

It should be noted that the market share of the Republic of Korea (‘Korea’) doubled during the period considered, reaching 4,4 %. The Korean average import prices decreased during the period considered, however remaining consistently higher than the average selling price of Chinese export sales.

(60)

Pursuant to Article 3(5) of the basic Regulation, the Commission examined all relevant economic factors and indices having a bearing on the state of the Union industry.

(61)

The Union industry’s production first increased by 5,8 % in 2007 and 11,6 % in 2008, compared to 2006, and then declined sharply during the RIP, by 56 % compared to 2008.

Table 4

Total Union production

(62)

Production capacity increased by 10,8 % between 2006 and the RIP. As production decreased, in particular during the RIP, the resulting capacity utilisation showed an overall decrease of 57 % between 2006 and the RIP, reaching a 39 % capacity utilisation during the RIP.

Table 5

Production capacity and capacity utilisation

(63)

The level of closing stocks of the Union industry increased by 20 % in 2008 compared to 2006 and then decreased by 26 % during the RIP.

Table 6

Stocks

(64)

The sales of the Union industry on the Union market to unrelated customers slightly increased between 2006 and 2008 and then decreased by 61 % between 2008 and the RIP. Sales volumes increased in 2007 and 2008 but declined sharply, during the RIP. This development is in line with the general trend of decreasing consumption on the Union market.

Table 7

Sales to unrelated customers

(65)

The market share held by the Union industry was rather stable between 2006 and 2008, to increase thereafter by 4 percentage points between 2008 and the RIP. Overall, there has been an increase of 5 percentage points during the period considered.

Table 8

EU Market share

(66)

As the decrease in sales was slightly lower than the decrease in consumption, the Union industry was able to gain some market share.

(67)

The level of employment of the Union industry declined by 17 % between 2006 and the RIP. Employment decreased also in the period 2006-2008, when production slightly increased, showing the efforts made by Union industry to improve its productivity. During RIP however, the sharp decrease of the output lead to a strong deterioration of employment.

Table 9

Employment

(68)

Productivity of the Union industry’s workforce, measured as output per person employed per year, increased in 2007 and 2008 by 7 % and 15 % respectively, compared to 2006, and then decreased by 49 % between 2008 and the RIP.

Table 10

Productivity

(69)

Average ex-works sales price of the Union industry to unrelated customers in the Union followed a declining trend over the period considered. Overall, the Union industry had to decrease its prices by 15,4 % between 2006 and the RIP.

(70)

As explained in recitals 55 and 56, the prices of dumped imports from the PRC followed a similar trend to that of the Union industry, but were consistently lower than the prices of the Union industry. During the RIP, prices from the PRC were more than 10 % lower than the Union industry’s prices.

Table 11

Unit price EU market

(71)

Between 2006 and the RIP, the average wage per employee increased by 4,8 %.

Table 12

Labour cost

(72)

Between 2006 and 2008, the annual flow of investments in the product concerned made by the Union industry increased by 18 %. Investments between 2007 and 2008 increased by 103 %. However, during the RIP investments decreased by 65 % compared to 2008.

(73)

Investments were mainly made in the construction of new facilities to produce tungsten material from used materials and scrap. Investments had to be reduced due to: (i) the decrease on the general level of production in the Union market, (ii) the distortions in the raw materials (see recital 39), (iii) the economic crisis.

(74)

During the RIP, no significant investments were made. This can be explained in large part by the economic crisis which began in 2008 and reached its deepest point during the RIP when access to new capital was ever more difficult.

Table 13

Investments

(75)

Thanks in part to the anti-dumping measures in force and in part to the efforts made by the Union industry to diversify the raw material sources, between 2006 and 2008 the Union industry was able to maintain a positive level of profitability, even if it overall decreased by 26 % during this period. During the RIP, however, the Union industry had a much less favourable result, showing a certain fragility in this respect.

(76)

The return on investments (‘ROI’) broadly followed the profitability trend over the whole period considered.

Table 14

Profitability and ROI

(77)

The trend of cash-flow, which is the ability of the industry to self-finance its activities, remained positive during the period under investigation. However, between 2006 and the RIP, it decreased by around 35 %.

Table 15

Cash flow

(78)

Dumping from PRC continued during the RIP at a level which is significantly above the current level of measures. Furthermore, given the distortions on raw materials, the spare capacity and prices of the imports from the PRC, the impact on the Union industry of the actual margins of dumping cannot be considered to be negligible.

(79)

It was analysed whether the Union industry recovered from the effects of past dumping. It was concluded that it managed to recover to a large extent from such effects given that the anti-dumping measures in force proved to be effective. However, the economic crisis stopped that process and has accentuated the difficulties of the Union industry.

(80)

In parallel to the shrinking consumption in the Union, the market share of Chinese imports decreased from 7,1 % to 2,1 % (see recital 52). The available information indicates that these imports were made at prices which were lower than those of the Union industry and also lower than those of the imports originating in other third countries. As mentioned in recital 56 above, based on a calculation excluding anti-dumping duty, the Chinese imports undercut the Union industry prices by 10,7 % during the RIP. It is recalled that the duty rate amounts to 33 %. Consequently, the level of undercutting demonstrates on one hand the effectiveness of the duties in place and on the other hand the necessity to continue the measures. This conclusion is reinforced by the fact that the undercutting found was at the same level as in the last review investigation. Hence, the price impact of dumped imports from the PRC on the Union industry remained unchanged and, in the absence of any evidence pointing to the contrary, it is likely to continue.

(81)

Due to the very negative economic conditions prevailing during the RIP in the tungsten’s downstream sector, in particular in the sector of steel and cemented carbides, which represents the majority of tungsten consumption in the Union, the Union industry drastically reduced production and sales of the product concerned.

(82)

Prior to the crisis, companies operating in the downstream sector had high level of tungsten' stocks that were not built up during the RIP, further affecting the production level of the Union industry.

(83)

As production decreased, and as the Union industry is a capital intensive one, thus needing to produce certain volumes to keep down the unit fixed cost, the profitability was seriously affected.

(84)

However, the analysis of the Union industry, before the crisis, proves the effectiveness of the anti-dumping measures in force. The investigation showed that the largest Union producers were making important investments in order to avoid the raw material distortions while at the same time they were able to compete in the market keeping a healthy position.

(85)

It is estimated that the volume of imports from other third countries decreased by 36 % from 1 500 tonnes in 2006 to 675 tonnes in the RIP. The market share of imports from other countries increased from 10,5 % in 2006 to 17,9 % in the RIP. Their average imports price decreased by 8,9 % between 2006 and the RIP. The main importing countries were South Korea and the USA.

(86)

The market share of imports from South Korea doubled over the period considered (from 2,2 % to 4,4 %). However, the available information indicates that during the RIP these imports were made at prices only slightly lower than those of the Union industry (by 6,6 %), but higher (by 9,8 %) than those of the imports originating in the PRC.

(87)

The market share of imports from the USA decreased by 15,1 percentage points over the period considered (from 4,2 % to 3,6 %). The available information indicates that during the RIP these imports were made at prices which were above those of the Union industry and thus also substantially higher (by 31 %) than those of the imports originating in the PRC.

(88)

In conclusion, among the biggest importers of tungsten carbide into the EU, the South Korean and US imports could not have a negative impact on the situation of the Union industry mainly because of their price levels (similar or even higher than the Union industry prices) and in the case of the US also because of the decreasing market share.

(89)

Due to the effective anti-dumping duties in place, the Union industry was able to recover to some extent from the effects of past injurious dumping.

(90)

Nevertheless, it cannot be concluded that the situation of the Union industry is secure. Although almost all injury indicators relating to the financial performance of the Union producers — such as profitability, return on investments and cash-flow — improved during the first years of the period considered, the investigation also showed that during the RIP all injury indicators deteriorated.

(91)

Notwithstanding the fact that the decrease in demand during the RIP could be partially attributed to the economic crisis, the investigation carefully analysed the impact of low dumped priced exports from the PRC on the situation of the Union industry.

(92)

As shown under recital 52, volumes of imports from the PRC indeed decreased between 2006 and the RIP. The prices of those imports decreased by 14 % over the same period, which when analysed from the perspective of the four-year period considered mirrors the development of the Union industry prices. It is notable, however, that the substantial price decrease of the Chinese dumped imports occurred between 2006 and 2007 (by 15 %), i.e. long before the economic crisis in the period when the Union industry was in the process of recovery. The prices of dumped imports from PRC stabilised thereafter and the financial-crisis related decrease appears to be limited. The timing of the substantial price decrease on the part of the Chinese exporters (before crisis) could indicate that they were setting off more concentrated and forceful price strategy in order to undercut the Union industry prices. Indeed the price differential between Chinese export prices and those of the Union industry amounted to 27 % and 22,8 % in 2007 and 2008 respectively.

(93)

In 2008, export prices from China were 22,8 % lower than those to the Union industry. During the RIP, the gap decreased to 15,7 %. With the sharp decline in consumption, Union producers had to reduce their prices in order to keep market share.

(94)

As shown under recital 57, the volume of imports from other third countries decreased by 36 %, in line with the decrease in consumption. Despite an increase in market share the impact of those imports on the situation of the Union industry cannot be considered negative, as demonstrated in recital 88 above.

(95)

With regard to the viability of the Union industry it must be noted that the evidence collected during the investigation showed that the Union industry has been able to compete under normal market conditions against the imports from third countries and even when prices were lower than those of the Union producers the gap was not as significant as with the prices from China, as demonstrated in recitals 85 to 88 above.

(96)

As a result of the amelioration of the Union industry situation in the years previous to the RIP, the industry invested in new cutting edge technology to produce the product concerned from scrap and partially circumvent the distortions in place on the raw materials.

(97)

Taking into account the overall situation of the Union industry as well as the imports from PRC in the period from 2006 to RIP, in conclusion, in view of the positive developments of some indicators pertaining to the Union Industry, it is considered that the Union industry did not suffer material injury during the period considered. It was therefore examined whether there was a likelihood of recurrence of injury should the measures be allowed to lapse.

(98)

As described in recitals 89 to 97, the imposition of anti-dumping measures allowed the Union industry to recover from the injury suffered, but only to some extent. Indeed when the exceptional levels of Union consumption experienced during most of the period considered significantly decreased during the RIP, the Union industry appeared in a fragile and vulnerable situation, still exposed to the injurious effect of the dumped imports from the PRC.

(99)

In accordance with Article 11(2) of the basic Regulation, imports from the country concerned were assessed in order to establish if there was a likelihood of recurrence of injury.

(100)

It was found that export price of Chinese sales on other third-country markets were also lower to those charged to the EU (roughly between 10 and 20 % lower in different years throughout the period considered, except in 2007). The Chinese exporter’s sales to non-EU countries were made in significant quantities, accounting for over 80 % of its total export sales. Therefore, it was considered that, should measures lapse, Chinese exporting producers would have an incentive to shift significant quantities of exports from other third countries to the more attractive Union market.

(101)

As described in recitals 34 to 42, data collected during the investigation showed that there is a significant spare capacity available in the PRC. Clear indications were found pointing to the conclusion that a large part of this spare capacity could be used to increase exports to the Union in the absence of anti-dumping measures. This is confirmed in particular because there are no indications that third-country markets or the domestic market could absorb any additional production in the PRC.

(102)

The Union industry had been suffering from the effects of the Chinese dumped imports for several years and is still currently in a fragile economic situation.

(103)

As shown above, the Union industry managed to recover from the Chinese dumping practice thanks to the anti-dumping measures in force. During the RIP, however, it found itself in a difficult economic situation mainly due to the economic crisis. In this context, should the Union industry be exposed to increased volumes of dumped low priced imports from the country concerned, this would be likely to result in a further deterioration of its sales, market share, sales prices, as well as a consequent deterioration of its financial situation.

(104)

In addition, as stated in recital 56 above, it was also found that the fact that the sales price of Chinese producers undercut those of the Union industry on average almost 11 % appears to indicate that in the absence of measures Chinese exporting producers are likely to export the product concerned to the Union market at prices considerably lower than those of the Union industry.

(105)

In view of the findings made during the investigation, namely the spare capacity in the PRC, the distortions found in the market for raw materials, the potential of the exporting producers in the country concerned to raise and/or redirect their export volumes to the Union market, the pricing behaviour of the Chinese in other third countries and the attractiveness of the more lucrative Union market, any repeal of the measures would point to a likelihood of recurrence of injury. The latter would be even more serious taking into account the present economic crisis.

(106)

In accordance with Article 21 of the basic Regulation, it was examined whether the maintenance of the existing anti-dumping measures would be against the interest of the Union as a whole. The determination of the Union interest was based on an appreciation of the various interests involved, i.e. those of the Union industry, importers and users.

(107)

It should be recalled that, in the previous investigations, the adoption of measures was considered not to be against the interest of the Union. Furthermore, the fact that the present investigation is a review, thus analysing a situation in which anti-dumping measures have already been in place, allows the assessment of any undue negative impact on the parties concerned by the current anti-dumping measures.

(108)

On this basis it was examined whether, despite the conclusions on the likelihood of a continuation of dumping and recurrence of injury, compelling reasons existed which would lead to the conclusion that it is not in the Union interest to maintain measures in this particular case.

(109)

In view of the conclusions on the situation of the Union industry set out in recitals 89 to 97 above, and pursuant to the arguments relating to the analysis on the likelihood of recurrence of injury as explained in recitals 102 to 105, it can also be considered that the Union industry would be likely to experience a serious deterioration of its financial situation in case the anti-dumping duties were allowed to expire.

(110)

It is considered that the continuation of measures would benefit the Union industry which should then be able to increase sales volumes and, in all likelihood, sales prices thereby generating the necessary return level which would enable it to continue to invest in new technology for its production facilities. By contrast, the discontinuation of the measures would halt the recovery of the Union industry, seriously threatening its viability, and, as a consequence, putting its existence at risk, thus reducing supply and competition on the market.

(111)

One user came forward and submitted a questionnaire reply. The cooperating user claimed that the continuation of measures would not have a negative impact on competition in the Union market, but that, on the contrary, it would allow the downstream industry to have a wider range of suppliers competing at market prices.

(112)

It is recalled that, in the previous investigations, it was found that the impact of the imposition of measures would not be significant for the users (14). Despite the existence of measures, importers/users in the Union were able to continue to source their supply, inter alia, from the PRC. No indications were brought forward whether there have been difficulties in finding other sources. It is therefore concluded that the maintenance of the anti-dumping measures is not likely to have a serious effect on importers/users in the Union.

(113)

The effects of the continuation of measures can be expected to assist the Union industry, with consequent beneficial effects on the competitive conditions on the Union market and the reduction of the threat of closures and reductions in employment.

(114)

Furthermore, the continuation of the measures can be expected to benefit the users/importers by maintaining a wide range of suppliers in the Union market.

(115)

Given the above analysis, it is concluded that the continuation of measures is not against the Union interest.

(116)

All parties were informed of the essential facts and considerations on the basis of which it was intended to recommend that the existing measures be maintained. They were also granted a period to submit comments subsequent to that disclosure. The submissions and comments were duly taken into consideration where warranted.

(117)

It follows from the above that, as provided for by Article 11(2) of the basic Regulation, the anti-dumping measures applicable to imports of tungsten carbide, tungsten carbide simply mixed with metallic powder and fused tungsten, originating in PRC should be maintained. It is recalled that these measures consist of ad valorem duties,

24.3.2011   

EN

Official Journal of the European Union

L 78/13

(1)

On 2 March 2011, the Council adopted Regulation (EU) No 204/2011 concerning restrictive measures in view of the situation in Libya.

(2)

On 17 March 2011, the United Nations Security Council adopted Resolution UNSCR 1973 (2011) which widened the scope of the restrictive measures imposed by Resolution UNSCR 1970 (2011) and introduced additional restrictive measures against Libya.

(3)

The lists of persons and entities subject to restrictive measures as set out in Annexes II and III to Regulation (EU) No 204/2011 should be amended accordingly,

24.3.2011   

EN

Official Journal of the European Union

L 78/21

(1)

The Hungarian text of Commission Regulation (EU) No 1272/2009 (2) contains two errors which must be corrected with effect from the date of application of Regulation (EU) No 1272/2009.

(2)

The measures provided for in this Regulation are in accordance with the opinion of the Management Committee for the Common Organisation of the Agricultural Markets,

24.3.2011   

EN

Official Journal of the European Union

L 78/22

24.3.2011   

EN

Official Journal of the European Union

L 78/24

(1)

On 28 February 2011, the Council adopted Decision 2011/137/CFSP concerning restrictive measures in view of the situation in Libya (1), implementing United Nations Security Council Resolution (UNSCR) 1970 (2011).

(2)

On 17 March 2011, the United Nations Security Council adopted UNSCR 1973 (2011), which widened the scope of the restrictive measures imposed by UNSCR 1970 (2011) and introduced additional restrictive measures against Libya.

(3)

Decision 2011/137/CFSP should be amended accordingly.

(4)

Further action by the Union is needed in order to implement certain measures,

(1)

the following Article is added:

‘Article 3a

1.   Member States shall take the necessary measures to prevent flights by aircraft under their jurisdiction in the airspace of Libya, in view of the need to help protect civilians.

2.   Paragraph 1 shall not apply to flights the sole purpose of which is humanitarian, such as delivering or facilitating the delivery of assistance, including medical supplies, food, humanitarian workers and related assistance, or evacuating foreign nationals from Libya, nor shall it apply to flights authorised by paragraph 4 or 8 of UNSCR 1973 (2011), nor to other flights which are deemed by Member States, acting under the authorisation conferred in paragraph 8 of UNSCR 1973 (2011), to be necessary for the benefit of the Libyan people.’;

(2)

Article 4(1) is replaced by the following:

‘1.   Member States shall inspect, in accordance with their national authorities and legislation and consistent with international law, in particular the law of the sea and relevant international civil aviation agreements, vessels and aircraft bound to or from Libya, in their territory, including their seaports and airports, and on the high seas, if they have information that provides reasonable grounds to believe that the cargo of such vessels and aircraft contains items the supply, sale, transfer or export of which is prohibited under this Decision.’;

(3)

the following Article is added:

‘Article 4a

1.   Member States shall deny permission to any aircraft registered in Libya or owned or operated by Libyan nationals or companies to take off from, land in or overfly their territory unless the particular flight has been approved in advance by the Sanctions Committee, or in the case of an emergency landing.

2.   Member States shall deny permission to any aircraft to take off from, land in or overfly their territory, if they have information that provides reasonable grounds to believe that the aircraft contains items the supply, sale, transfer, or export of which is prohibited under this Decision, including the provision of armed mercenary personnel, except in the case of an emergency landing.’;

(4)

Article 5(1) is replaced by the following:

‘1.   Member States shall take the necessary measures to prevent the entry into, or transit through, their territories of:

(5)

Article 6(1) is replaced by the following:

‘1.   All funds, other financial assets and economic resources, owned or controlled, directly or indirectly, by:

shall be frozen.’;

(6)

in Article 6, the following paragraph is added:

‘4a.   With regard to persons and entities listed in Annex IV to this Decision, exemptions may also be made for funds and economic resources which are necessary for humanitarian purposes, such as delivering or facilitating the delivery of assistance, including medical supplies, food, the provision of electricity, humanitarian workers and related assistance, or evacuating foreign nationals from Libya.’;

(7)

the following Article is added:

‘Article 6a

Member States shall require their nationals, persons subject to their jurisdiction and firms incorporated in their territories or subject to their jurisdiction to exercise vigilance when doing business with entities incorporated in Libya or subject to Libya's jurisdiction, and any individuals and entities acting on their behalf or at their direction, and entities owned or controlled by them, with a view to preventing business that could contribute to violence and the use of force against civilians.’.

24.3.2011   

EN

Official Journal of the European Union

L 78/37

(1)

By judgment of 15 April 2008 (3) (hereinafter ‘the judgment of the Court of First Instance’), the Court of First Instance of the European Union annulled Commission Decision 2005/262/EC of 20 April 2004 on the aid implemented by France in favour of the Coopérative d’exportation du livre français (CELF) (4)  (5).

(2)

Following the judgment of the Court of First Instance, the Commission must adopt a new decision.

(3)

This judgment is the culmination of a procedure the principal stages of which are set out below.

(4)

By letter dated 20 March 1992, Société internationale de diffusion et d’édition (SIDE) drew the Commission’s attention to aid measures for promotion, transport and marketing granted by the French authorities to CELF, aid which had not been notified to the Commission’s services in advance.

(5)

By letter dated 2 April 1992, the Commission, having pointed out to the French authorities that any plans to grant or alter aid had to be notified to its services in advance, asked the said authorities to inform it as to the nature and purpose of the aid measures referred to by SIDE.

(6)

By letter dated 29 June 1992, the French authorities confirmed to the Commission the existence of grants to CELF. They explained that these measures were designed to make French language and literature known in non-French-speaking countries and that CELF had also been asked to manage three schemes of ad hoc aid which were also designed to facilitate access to French books by readers in far-distant places.

(7)

By letter dated 7 August 1992, the Commission confirmed to SIDE the existence of aid to CELF, explained its purpose and informed the company that the measures at issue had not been notified. It stated, however, that the disputed aid did not seem likely to adversely affect trade between Member States. SIDE was accordingly asked to submit its comments.

(8)

By letter dated 7 September 1992, SIDE informed the Commission that it intended to submit a complaint with regard to the discriminatory nature of the measures and the consequences for intra-Community trade, without however disputing the cultural purpose of the Ministry of Culture, which was to see the spread of the French language and French literature.

(9)

By Decision dated 18 May 1993 (6), the Commission concluded that, given the special nature of competition in the book trade and the cultural purpose of the aid schemes at issue, the exemption provided for in former Article 92(3)(c) of the Treaty was applicable to them.

(10)

By application dated 2 August 1993, SIDE filed an action for annulment of the Decision. By judgment of 18 September 1995 (7), the Court of First Instance (CFI) partially granted SIDE’s request, annulling the Commission Decision of 18 May 1993 but only in relation to the measures granted to CELF with regard to small orders.

(11)

The Court concluded that the Commission was in a position to adopt a favourable decision concerning the following three aid schemes administered by CELF on behalf of the State:

(12)

The Court held that the Commission had obtained sufficient information on these three schemes to justify the finding that their impact on competition was negligible. The Court stated that ‘as regards the cultural purpose of the aids at issue, it is common ground that the aim of the French Government is the spread of the French language and French literature’. The Court felt bound to conclude that determining the cultural purpose of the aid at issue did not pose any particular difficulties for the Commission and that it was not necessary for it to obtain further information in order to accept that its purpose was cultural.

(13)

On the other hand, the Court found that, as regards the compensation granted exclusively to CELF for small orders, the Commission should have thoroughly examined the conditions of competition in the sector concerned before expressing an opinion on the compatibility of the measures with the internal market.

(14)

The Court therefore concluded (paragraph 76 of the judgment) that the Commission should have initiated the procedure provided by former Article 93(2) EC (now Article 108(2) TFEU), and it was therefore necessary to annul the Commission Decision of 18 May 1993 in so far as it concerned the aid granted exclusively to CELF for the purpose of offsetting the extra costs involved in handling small orders for French-language books placed by booksellers established abroad.

(15)

In accordance with the Court’s judgment of 18 September 1995, the Commission decided, by Decision of 30 July 1996, to open a formal investigation procedure. Interested parties were invited to submit their comments to the Commission, and these were largely received during December 1996 and January 1997.

(16)

Once its investigation was complete, on 10 June 1998 the Commission adopted Decision 1999/133/EC (9). It confirmed the cultural purpose of aid for small orders and considered that, on the basis of former Article 87(3)(d) of the Treaty, the said aid was not likely to affect trading conditions and competition in the Union to an extent that was contrary to the common interest with regard to the export market for French-language books.

(17)

By a judgment dated 28 February 2002 (10), the Court of First Instance annulled the last sentence of Article 1 of the said Decision. The Court concluded that the Commission should have carried out the necessary verifications in order to obtain relevant data enabling it to distinguish the agency market from that of the export of French-language books in general.

(18)

The Court found that, by failing to carry out such verification, the Commission had committed a manifest error of assessment in taking the export market for French-language books in general as the reference market when it was established that the contested aid was intended only for export agencies.

(19)

However, in its judgment of 22 June 2000 (11), the Court of Justice rejected the appeal brought by the French authorities against the Commission Decision of 10 June 1998, without going into the substance of the case, and confirmed that, even if the aid could be considered compatible with the common market, this was irrelevant to the obligation to notify and that the obligation to give prior notification meant that the aid had to be suspended.

(20)

Following the partial annulment of the Decision of 10 June 1998, the Commission asked the French authorities and SIDE, by letters dated 14 June 2002, to give their views on the grounds for the annulment of the Decision and, in particular, on the aspects relating to the relevant market.

(21)

The French authorities were asked to comment in particular on the special features of the CELF offer compared with those of other market operators, including SIDE. SIDE was asked to comment in particular on the notion of small orders and to indicate any special feature its offer might have compared with CELF’s and those of the other market operators.

(22)

SIDE sent its reply to the Commission by letter dated 12 August 2002. The French authorities sent their reply by letter dated 17 September 2002.

(23)

Having asked SIDE, by letter dated 19 September 2002, to say whether its reply contained confidential information, and having obtained a negative reply on 30 September 2002, the Commission, by letter dated 17 October 2002, sent SIDE’s reply together with its annexes to the French authorities for comment. It also asked them a series of further questions on this occasion.

(24)

By letter dated 30 October 2002, the Commission also asked SIDE some further questions, to which the company replied by letters dated 31 October 2002 and 9 December 2002. Following the Commission’s request of 16 December 2002, SIDE informed it, by letter dated 23 December 2002, that its replies contained no confidential information and could be sent to the French authorities for comment.

(25)

Since the French authorities did not reply within the time limit, the Commission was obliged to send them a reminder by letter dated 27 November 2002. By letter dated 19 December 2002, the French authorities sent a further request for an extension to the Commission.

(26)

On 9 January 2003, the Commission sent SIDE’s reply of 23 December 2002 to the French authorities for comment. By letter dated 17 January 2003, the French authorities replied to the Commission’s questions sent on 17 October 2002.

(27)

By letter dated 4 February 2003, the French authorities asked the Commission for a further extension in relation to the request for comments on SIDE’s second reply, dated 23 December 2002. By letter dated 11 February 2003, the Commission granted the requested extensions in part. By letter dated 11 March 2003, the French authorities sent their reply to the Commission.

(28)

In the meantime, SIDE was received by the Commission’s services at its request and was able to explain its view of the case from the beginning, at a meeting held on 4 March 2003.

(29)

At the end of this procedure, the Commission adopted Decision 2005/262/EC, concluding that the disputed aid was compatible on the basis of former Article 87(3)(d) of the Treaty, having established that the aid did not overcompensate for the costs of processing small orders.

(30)

By its judgment of 15 April 2008, the Court of First Instance annulled the Commission Decision of 20 April 2004.

(31)

It concluded that, with regard to the part of the aid paid to CELF prior to 1 November 1993, the date of entry into force of the Treaty on European Union, the Commission had committed an error of law by considering that the aid at issue was compatible with the common market by virtue of former Article 87(3)(d) when the substantive law in force prior to 1 November 1993 should have been applied. In particular, the Court took into account the fact that the EU Treaty did not include any transitional provisions for the application of former Article 87(3)(d) and that the principle of legal certainty, barring exceptions, precluded a Community measure from taking effect from a point in time before its publication.

(32)

Moreover, the Court concluded that the Commission had committed a manifest error of assessment when examining the compatibility of the disputed aid by overestimating the small order processing costs that were actually borne by CELF. In its Decision of 20 April 2004, the Commission did not take account of the actual costs of processing small orders but estimated these costs on the basis of the total costs borne by CELF (allocating a share of the total costs to the processing of small orders, using a different method of apportioning costs for each cost category). Multiplying factors were applied for certain categories of cost, bearing in mind the additional difficulties small order processing would entail in relation to CELF’s other activities. The Court, however, considered that these difficulties would have been resolved through the use of tele-transmission, which related to two thirds of small orders. The Court therefore concluded that the Commission had made an error of judgment by applying multiplying factors to some costs (and, in any case, to the tele-transmitted orders) and concluded that, in the absence of the said multiplying factors, the costs related to small order processing would have been reduced and the trading results for the activity relating to small orders would have been positive (FRF 600 000, or EUR 91 469). According to the Court, the Commission had therefore not demonstrated the absence of overcompensation.

(33)

Following the Court’s judgment of 15 April 2008, the investigation procedure initiated by the Commission Decision of 30 July 1996 therefore remains open and the Commission has to adopt a new decision.

(34)

Having regard to the grounds for the Court’s judgment of 15 April 2008, and in view of the fact that the decision initiating the procedure dates back to 30 July 1996, the Commission wished to invite the French authorities and the parties concerned to submit their comments again.

(35)

The Commission therefore adopted a decision extending the procedure dated 8 April 2009 (12) (Decision C(2009) 2481, the ‘decision extending the procedure’). By setting a new time limit for the submission of comments, this decision extending the procedure supplemented the decision initiating the procedure on 30 July 1996. It states that the two decisions should be regarded as forming an inseparable whole, that they will give rise to one and the same formal investigation procedure and that, should the description of facts and law or the Commission’s preliminary assessment in the decision extending the procedure diverge from the decision initiating the procedure on 30 July 1996, it would be appropriate to take into consideration only the decision extending the procedure.

(36)

The Commission invited interested parties to submit their comments on the measure at issue.

(37)

The Commission received comments from the French authorities on 9 June 2009 and from SIDE on 23 July 2009. It sent SIDE’s comments to the French authorities on 24 August 2009, giving them the opportunity to comment on them, and received their comments on 24 September 2009.

(38)

The French authorities did not, however, provide the detailed elements that were requested by the Commission in its decision extending the procedure and, in relation to the proportionality of the aid, merely referred back to information already provided on 17 September 2002, 17 January 2003 and 11 March 2003, which the Commission could not use as such due to the judgment of the Court of First Instance of 15 April 2008.

(39)

By letter of 8 October 2009, the Commission’s services therefore reminded the French authorities of their request for information on the specific points mentioned, indicating that if this information were not provided within ten working days, the Commission would have to take a final decision on the basis of the information at its disposal, in accordance with Article 13(1) of the procedural Regulation, after delivering, if appropriate, an information injunction in accordance with Article 10(3) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (13).

(40)

By letter dated 21 October 2009, the French authorities informed the Commission that CELF had been put into receivership by judgment of the Paris Commercial Court dated 9 September 2009 and had ceased trading. Moreover, with regard to the elements requested in the Commission’s letter of 8 October 2009, the French authorities indicated that they had no further information to provide and referred back to their comments sent on 9 June 2009.

(41)

By decision dated 20 November 2009 (Decision C(2009) 9256, the ‘injunction decision’), the Commission therefore decided to order France to present the information requested since, despite repeated requests, this information had not been provided.

(42)

By letter dated 2 December 2009, the French authorities indicated that they had no further information to give the Commission and referred back to their comments sent on 9 June 2009.

(43)

It should be noted that, on 2 December 2009, the French authorities also sent a letter relating to the aid scheme known as the ‘University and Scientific Books Programme’ also called ‘Programme Plus’. This aid scheme does not form the object of this Decision.

(44)

By letter dated 22 December 2009, the Commission asked the French authorities for information on CELF’s situation and applicable liquidation procedure. The French authorities replied on 27 January 2010. Clarifications were also provided on 9 March 2010 and 26 November 2010.

(45)

It should, moreover, be noted that proceedings are under way in France before the national courts, and that they have given rise to referrals to the Court of Justice on the basis of Article 267 TFEU (former Article 234 EC). The main stages in these proceedings are briefly outlined below.

(46)

SIDE referred the matter of the direct effect of former Article 88(3) EC to the French courts. By judgment of 5 October 2004, confirming a judgment of the Paris Administrative Court of 26 April 2001, the Paris Administrative Court of Appeal ordered the French State to recover the aid paid to CELF.

(47)

After appealing to the Council of State, by judgment of 29 March 2006 this body confirmed certain aspects of the decision of the Administrative Court of Appeal, particularly the fact that the disputed aid was not of a purely compensatory nature for public service obligations (14), that it could not be described as existing aid by the national judge and that CELF could not claim a legitimate expectation.

(48)

Nevertheless, in its judgment of 29 March 2006, the Council of State also decided to stay proceedings on the appeal until the Court of Justice had issued its judgment on the preliminary questions it had raised with it regarding the national judicature’s obligations in relation to State aid that had not been notified but was subsequently declared compatible with the common market by a decision of the Commission.

(49)

In its judgment of 12 February 2008 (15), the Court of Justice ruled:

‘The last sentence of Article 88(3) EC is to be interpreted as meaning that the national court is not bound to order the recovery of aid implemented contrary to that provision, where the Commission has adopted a final decision declaring that aid to be compatible with the common market, within the meaning of Article 87 EC. Applying Community law, the national court must order the aid recipient to pay interest in respect of the period of unlawfulness. Within the framework of its domestic law, it may, if appropriate, also order the recovery of the unlawful aid, without prejudice to the Member State’s right to re-implement it, subsequently. It may also be required to uphold claims for compensation for damage caused by reason of the unlawful nature of the aid.

In a procedural situation such as that in the main proceedings, the obligation, arising from the last sentence of Article 88(3) EC, to remedy the consequences of the aid’s unlawfulness extends also, for the purposes of calculating the sums to be paid by the recipient, and save for exceptional circumstances, to the period between a decision of the Commission of the European Communities declaring the aid to be compatible with the common market and the annulment of that decision by the Community court.’

(50)

After considering the judgment of the Court of Justice of 12 February 2008, along with the previously mentioned judgment of the Court of First Instance of 15 April 2008, in its judgment of 19 December 2008, the Council of State annulled Articles 2, 3 and 4 of the above-stated judgment of 5 October 2004 of the Paris Administrative Court of Appeal and ruled as follows.

(51)

Firstly, the Minister for Culture and Communication was ordered to recover the interest relating to the State aid paid to CELF since 1980 and up to the date of the Council of State judgment, calculated in accordance with Commission Regulation (EC) No 794/2004 (16). The Minister was then ordered to take the necessary steps to collect the interest due between the date of the Council of State’s judgment and either the date when the compatibility of the aid with the common market was definitively noted or the date when the aid was finally returned.

(52)

In addition, the Council of State decided to stay proceedings until the Court of Justice had issued an opinion on the following preliminary questions:

(53)

On 11 March 2010 (17), the Court of Justice deferred judgment on the said preliminary questions and ruled:

(54)

The French authorities informed the Commission that, in 1980, the Ministry of Culture had decided, in line with the French Government’s general policy guidelines on promoting French-language books and French literature, to grant aid to export agents accepting any kind of order, irrespective of its amount and profitability. These measures were presumably introduced to alleviate the effects of market failure and to foster the continuation of activity relating to ‘small non-profitable orders’ in the export agency market.

(55)

According to the French authorities, small bookshops, established in essentially non-French-speaking areas, sometimes with difficult access and/or remote, were experiencing serious supply difficulties, since their orders could not be met by the traditional distribution channels when the quantities of books ordered were insufficient or when the unit price of the books ordered was not high enough to make the service profitable.

(56)

According to the French authorities, the aid at issue was therefore designed to allow export agencies to meet all orders from booksellers established abroad in essentially non-French-speaking areas, irrespective of amount, profitability or destination. The aim was to ensure, as part of France’s policy of supporting cultural diversity, the optimum distribution of books in the French language, thus promoting the dissemination of French literature throughout the world.

(57)

The aid mechanism chosen by the French authorities, the Small Orders Programme, consisted of a grant intended to offset the extra costs of handling small orders, defined by the French authorities as being orders of FRF 500 (approximately EUR 76) or less.

(58)

According to the French authorities, the company receiving the grants had to promise to provide the Ministry of Culture’s Book Directorate with all information concerning the general activity of the firm (overall turnover, financial accounts, provisional budgets, copies of the proceedings validating these figures, the auditor’s report where appropriate, and a summary salary scale), along with any documents relating to the activity to be subsidised, including in particular the grant utilisation account, substantiating that the services giving rise to the grant awarded the previous year had been carried out.

(59)

In practice, only one firm, CELF, had qualified under the Small Orders Programme. According to the French authorities, the company had to justify the extra costs incurred each year by the small orders service in relation to its application for a grant for the following year. Specifically, one quarter of the grant awarded the previous year was paid at the start of the year, the balance being awarded in the autumn, after the authorities had examined the provisional budget of the recipient firm and the flows recorded in the first part of the financial year. It was agreed that if the amount of aid was not fully utilised, the balance would be deducted from the planned grants for the following year. In addition, the Ministry of Culture attended CELF’s board meetings and general meetings as an invited observer.

(60)

After steadily declining from 1997 onwards, the aid at issue was abolished in 2002. Every year from 1980 to the end of 2001, CELF therefore received aid to reduce, according to the French authorities, the costs of processing small orders from abroad for books in French. In all, from 1980 until the end of 2001, CELF received approximately EUR 4,8 million by way of the aid at issue.

Table

Amounts of aid allocated to CELF since 1980 for processing ‘small orders’

Information supplied by the French authorities

(amounts given in euro)

(61)

In their reply of 9 June 2009 to the decision extending the procedure, the French authorities made the following comments in particular.

(62)

They first stated that they shared the Commission’s analysis that the aid to CELF represented State aid and that the exemptions laid down in Article 107(2) and Article 107(3)(a) and (b) TFEU were not applicable.

(63)

In terms of assessing the aid under Article 107(3)(c) and (d) TFEU, the French authorities did not provide any new information with regard to the proportionality of the aid.

(64)

The French authorities also stated that they considered that the tasks allocated to CELF formed a public service within the meaning of Article 106(2) TFEU.

(65)

The French authorities finally, and above all, pleaded the existence of exceptional circumstances that should lead the Commission not to recover the aid.

(66)

As previously indicated, the French authorities did not therefore provide the detailed elements that were requested by the Commission in its decision extending the procedure, and merely referred back, with regard to the proportionality of the aid, to information already provided in 2002 and 2003, which the Commission could not use as such due to the Court judgment of 15 April 2008. After a reminder letter dated 8 October 2009, the Commission therefore decided, on 20 November 2009, to order the French authorities to submit the requested information, in application of Article 10(3) of Regulation (EC) No 659/1999. By letter dated 2 December 2009, the French authorities replied that they had no further information to give to the Commission.

(67)

In its comments of 23 July 2009, SIDE made the following observations in particular.

(68)

SIDE recalled that only CELF had benefited from the aid when, in its opinion, this activity was not specific to CELF since the act of honouring orders of all sizes, however small, coming from geographically dispersed bookshops, in order to group them together and issue larger orders to publishers, was specifically, in SIDE’s opinion, the definition of the activity of an export agent. SIDE also stated that it was not due to an alleged lack of transparency that it had been refused the aid but because it was a private company and not a publishing cooperative.

(69)

Moreover, SIDE contested in detail the fact that the aid was necessary. In this context, it considered, in particular, that the notion of ‘small orders’ was arbitrary and rejected the figures presented by the French authorities.

(70)

In addition, SIDE considered that the aid could not be justified on the basis of Article 106(2) TFEU and based its opinion particularly on national rulings with regard to CELF’s activity.

(71)

Finally, SIDE indicated that it considered that, in this particular case, there were no exceptional circumstances that would enable the obligation to recover the aid to be limited.

(72)

It must be established whether the measure at issue constitutes State aid and whether it can, if appropriate, be considered compatible with the internal market. In the context of its assessment, the Commission must, in particular, take note of the judgment of the Court of First Instance of 15 April 2008.

(73)

Article 107(1) TFEU provides that ‘Save as otherwise provided by the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.

(74)

By way of introduction, as already stated in the decision extending the procedure, the Commission recalls that the Commission’s conclusion that the measure at issue constitutes State aid within the meaning of the Treaty has never been challenged, either at the different stages of the procedure before the Commission or before the courts of the European Union (18), nor even, moreover, before the national courts (19). Thus in their reply of 9 June 2009 to the decision extending the procedure, the French authorities indicated that they shared the Commission’s analysis that the aid to CELF was State aid.

(75)

The Commission considers that the measure in question constitutes State aid within the meaning of Article 107(1) TFEU (former Article 87(1) EC), for the following reasons.

(76)

Firstly, the measure gives CELF an advantage, since it enables it to reduce the cost of its small orders. It is selective, given that in practice it has only benefited CELF.

(77)

Moreover, the measure is financed from the budgetary resources of the French State, i.e. from state resources. Its implementation was decided by the Ministry of Culture and the measure is therefore attributable to the French authorities.

(78)

Furthermore, the measure is likely to affect trade between Member States and distort competition. The aid is granted to French agents (in practice to CELF) who export books in the French language principally to non-French-speaking countries. French agents are therefore competing, at least potentially, with other agents for the export of French-language books that may be established in other French-speaking countries of the EU (Belgium and Luxembourg). The fact that the impact on trade and the distortion of competition as a result of the measure seem to be small does not alter this conclusion. In line with the Court of Justice’s established case law, the Commission is not required to determine the actual impact of aid on trade between Member States and the actual distortion of competition; it is sufficient that the aid is likely to have an impact on trade and distort competition.

(79)

Finally, the Commission considers that the conditions for application of the Altmark case law are not met. In its judgment of 24 July 2003 (20), the Court of Justice specified the conditions under which a grant to a company responsible for managing services of general economic interest does not constitute State aid: ‘First, the recipient undertaking is actually required to discharge public service obligations and those obligations have been clearly defined; second, the parameters on the basis of which the compensation is calculated have been established beforehand in an objective and transparent manner; third, the compensation does not exceed what is necessary to cover all or part of the costs incurred in discharging the public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations; fourth, where the undertaking which is to discharge public service obligations is not chosen in a public procurement procedure, the level of compensation needed has been determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means of transport so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.’

(80)

In this particular case, and without it being necessary to consider each of the conditions individually since they are cumulative, the Commission notes that the choice of CELF was not made in the context of a public procurement procedure and that the level of compensation was not determined on the basis of an analysis of the costs incurred by a typical undertaking, well run and adequately provided with production resources.

(81)

In these circumstances, the aid granted to CELF constitutes State aid within the meaning of Article 107(1) TFEU, since all the constituent elements of the concept of State aid are present.

(82)

And yet the French authorities did not notify the Commission of the measure in question. The aid was therefore granted in violation of Article 108(3) TFEU, which stipulates that the Commission must be informed of projects aimed at instituting or amending aid in sufficient time to be able to submit its comments. The aid was therefore granted unlawfully.

(83)

As the measure in question thus constitutes State aid, it is necessary to assess its compatibility with the internal market.

(84)

The Commission considers that the exemptions listed in Article 107(2) TFEU are not applicable in this case, since the measures in question were clearly not intended to achieve the objectives defined therein.

(85)

Nor does the aid satisfy the conditions for the exemption established in Article 107(3)(a) TFEU, since it was not intended to promote the development of the areas that were eligible for this provision. The exemption provided for in Article 107(3)(b) concerning the promotion of the execution of an important project of common European interest cannot be applied in this case either, since the aid in question was not intended to promote this kind of project. Since the aid was also not intended to remedy a serious disturbance in the French economy, the exemption in the second part of Article 107(3)(b) is not applicable in the case in point.

(86)

The Commission must therefore look into the applicability of Article 107(3)(c) and (d) TFEU (former Article 87(3)(c) and (d) EC).

(87)

Given the judgment of the Court of First Instance of 15 April 2008, a distinction must be made between the aid granted after the entry into force of the Treaty on European Union (1 November 1993) and that granted before its entry into force, to which the substantive rules in effect during the period in question must be applied.

(88)

To this end, the Commission takes note of the fact that the grant awarded the previous year was paid to CELF at the start of the year, the balance being awarded in the following autumn, after the authorities had examined the provisional budget of the recipient firm and the flows recorded in the first part of the financial year. If the amount of aid was not fully utilised, the balance would be deducted from the planned grants for the following year. The grant paid for 1993 was therefore paid partly at the start of 1993 and the balance allocated in autumn 1993. The decision to grant aid for 1993 was taken by the French authorities at the end of 1992 or at the start of 1993, and in any case before the entry into force of the Treaty on European Union. The Commission therefore considers that the aid paid in 1993 should be assessed according to the legal rules applicable prior to the entry into force of the Treaty on European Union.

(89)

Article 107(3)(d) TFEU (former Article 87(3)(d) EC) states that ‘Aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest may be considered to be compatible with the internal market’.

(90)

It is therefore necessary to verify whether the aid paid to CELF between 1994 and the end of 2001 did indeed have a cultural purpose and whether it affected trading conditions and competition in the European Union to an extent that was contrary to the common interest or not.

(91)

Firstly, the Commission recalls that the cultural purpose of the aid paid to CELF was admitted by the Court of First Instance in the above-cited judgment of 18 September 1995. Thus in paragraph 62 of its judgment, the Court stated that ‘as regards the cultural purpose of the aids at issue, it is common ground that the aim of the French Government is the spread of the French language and French literature. In that connection, the Court finds also that the information available to the Commission when it adopted its decision, including the facts contained in the letter from the applicant’s legal adviser of 7 September 1992, was capable of supporting its assessment that that aim was a real and proper one. Accordingly, the Court must conclude that determining the aim of the aids at issue did not pose any particular difficulties for the Commission and that it was not necessary for it to obtain further information in order to accept that their purpose was cultural.’

(92)

The French authorities stated that the aid at issue had a cultural purpose consisting of encouraging the distribution of French-language books in non-French-speaking countries. It was thus a proactive policy aimed at safeguarding and encouraging cultural diversity at the international level.

(93)

The preservation and promotion of cultural diversity are among the founding principles of the European model. They are set out in Article 167(1) TFEU (former Article 151(1) EC). ‘The Union shall contribute to the flowering of the cultures of the Member States, while respecting their national and regional diversity and at the same time bringing the common cultural heritage to the fore’, and again in Article 167(4), which states that ‘The Union shall take cultural aspects into account in its action under other provisions of this Treaty, in particular in order to respect and to promote the diversity of its cultures’.

(94)

The Commission considers, therefore, that the aid granted to CELF by the French authorities for marketing French-language works did indeed pursue a cultural purpose.

(95)

The Commission must verify whether the measures in question were really necessary and proportional in relation to the cultural policy objective pursued by the French authorities.

(96)

By way of introduction, it should be recalled that, in line with the above-cited judgment of the Court of First Instance of 28 February 2002, the measures at issue must be considered within the context of the export agency market for French-language books.

(97)

Firstly, the need for the aid must be questioned.

(98)

According to the French authorities, the measures were designed in 1980, by the Ministry of Culture, at a time when certain actors in the industry (Groupe Hachette and Messageries du livre) wanted to quit the export agency market. According to the French authorities, the disputed mechanism was introduced to encourage operators to become involved in the market, so that all orders for French-language books from bookshops in non French-speaking areas could be met. This ensured that French-language books could reach all bookshops, including the very smallest in far distant countries, even if they only needed a few books, and often, moreover, published by different publishers.

(99)

For its part, SIDE indicated that, particularly in the context of the comments it sent following the decision extending the procedure, the aid in question was not necessary. Whilst it is true that some actors had withdrawn from the export agency business in 1980, SIDE recalls that it was precisely at this time that it was itself created to intervene on the market. Moreover, SIDE contests the fact that CELF had the specific activity of processing small orders. In particular, SIDE questions the figures provided by the French authorities and considers that data for CELF and SIDE with regard to proportion, each company’s respective turnover, number of invoices and number of order lines were, in fact, quite similar. More broadly, SIDE questions the notion of ‘small orders’ as defined by the French authorities. According to SIDE, this notion is arbitrary as the cost of processing an order does not depend on its amount but on the number of lines.

(100)

The Commission considers that there is no need to draw a definitive conclusion with regard to the need for the aid since the conditions of need and proportionality are cumulative and it will be concluded in recital (123) that the condition of proportionality is not shown to be fulfilled.

(101)

Secondly, the Commission considers that the impact on trade within the European Union and distortion of competition caused by the measure are very low, given in particular the amounts in question, the very low substitutability of books in the French language and those of another language, and the considerable gap existing between the volume of French-language books exported to non-French-speaking countries from France, on the one hand, and Belgium and Luxembourg, on the other.

(102)

More specifically, with regard to the export agency market for books in French, the Commission notes that, as part of their export agency activity, CELF and SIDE distribute books in non-French-speaking countries and territories. In French-speaking countries, the local market is covered by large publishers through their subsidiaries or representatives. The export agency has only a very marginal role, therefore, in the French-speaking markets, which are, however, the main outlets for books in French.

(103)

In the national export agency market for French-language books, there are general agents such as SIDE and CELF and, to a lesser extent, specialist agents who also sell, on a very small scale, directly to end users and who would therefore in some way be in competition with the two general agents, along with a certain number of bookshops servicing orders for foreign bookshops and online booksellers even on an occasional basis, whose activity was, however, relatively low at the time of the measures in question.

(104)

In the relevant market, the complainant was therefore the main operator affected by the disputed measures. On the one hand, the French authorities state that the Small Orders Programme was in principle accessible to any firm applying, provided it accepted the conditions on which the aid was granted. They state that the Ministry of Culture’s rejection of SIDE in 1991 was justified by SIDE’s refusal to submit to the required obligation of transparency in order to benefit from the said aid. On the other hand, SIDE indicated that the French authorities’ rejection was linked to the fact that it was a private company and not a publishing cooperative. Moreover, in 1996, following the annulment of the Commission Decision of 18 May 1993, the Ministry of Culture, wishing to put an end to the proceedings, pointed out to SIDE that the aid scheme for small orders was not by nature reserved for CELF. By letter dated 3 September 1996, the Ministry offered the company a meeting to examine whether it was able to provide, under the same conditions of transparency, the same services as CELF. During a meeting on 26 September 1996, SIDE executives told the Ministry of Culture that they refused to benefit from a programme whose compatibility with Community law could be called into question by the Commission.

(105)

In any case, the elements mentioned above in recitals (103) et seq. seem to indicate that the impact on trading conditions and competition in the European Union on the part of the measures in question was relatively limited.

(106)

In order to establish if the measure is proportional, however, the Commission must also compare, thirdly, the amount of aid received with the costs borne by CELF in achieving the purpose pursued by the French authorities.

(107)

To this end, the different stages in the orders handling process must be recalled, and on which the different parties agree:

(108)

According to the French authorities, CELF bore certain costs linked to the processing of ‘small orders’. The French authorities consider that, within the export agency market, some orders generate extra costs such that the service cannot be profitable. The French authorities stated that they had taken the threshold of FRF 500 (EUR 76,22) as the definition of a ‘small order’ and that this threshold had been empirically determined. They explained that some orders of less than FRF 500 might be profitable, whereas others, above that amount, might not. The objective was to find an economically acceptable solution, so that CELF wanted to take on small orders even if they were not profitable enough.

(109)

As the Commission indicated in its decision extending the procedure, it is for the French authorities, in the context of analysing compatibility, to establish the amount and veracity of costs borne by CELF.

(110)

In this regard, in its decision extending the procedure, the Commission asked the French authorities to provide a certain number of elements in order to be able to draw conclusions from the judgment of the Court of First Instance and rule on the proportionality of the aid. The Commission asked, in particular, for the following information: