EC, July 28, 1987, No 2247-87

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal und Steel Community,

Having regard to Commission Decision No 2177-84-ECSC of 27 July 1984 on protection against dumped or subsidized imports from countries not members of the European Coal and Steel Community (1), and in particular Article 11 thereof,

After consultations within the Advisory Committee as provided for by the above Decision,

Whereas:

A. Procedure

(1) In August 1986 the Commission received a complaint lodged by the European Confederation of Iron and Steel Industries (EUROFER) on behalf of producers whose collective output constitutes the majority of Community production of the product in question. The complaint contained evidence of dumping and of material injury resulting thereform, which was considered sufficient to justify the initiation of a proceeding. The Commission accordingly announced by a notice published in the Official Journal of the European Communities (2), the initiation of a anti-dumping proceeding conerning imports into the Community of certain sheets and plates of iron or steel falling within Common Customs Tariff subheading 73.13 B I ex a), and corresponding to NIMEXE codes 73.13-17, 19, 21 and 23 originating in Mexico and commenced an investigation.

(2) The Commission officially so advised the exporters and importers known to be concerned, the representatives of the exporting country and the complainants and gave the parties directly concerned the opportunity to make known their view in writing and to request a hearing.

(3) The Mexican producer and one importer known to the Commission made their views known in writing. The Mexican producer/exporter requested a hearing which was granted.

(4) No submissions were made by or on behalf of Community purchasers or processors of sheets and plates or iron or steel.

(5) The Commission sought and verified all information it deemed to be necessary for the pruposes of a preliminary determination and carried out investigations at the premises of the following companies:

EEC producers:

- Usinor, Paris La Défense, France,

- BSC British Steel, London, United Kingdom,

- Dillinger Huettenwerke, Dillingen, Federal Republic of Germany,

- Peine-Salzgitter AG, Salzgitter, Federal Republic of Germany,

- Nuova Italsider SpA, Genoa, Italy,

- Forges de Clabecq SA, Tubize, Belgium;

Non-EEC producers/exporters:

- Sidermex, SA de CV, Mexico D.F., Mexico (holding company),

- Altos Hornos de Mexico SA, Monclova, Mexico (producer/exporter),

- Sidermex International Inc., San Antonio, Texas, USA (exporter);

EEC importer

General Steel, Brussels, Belgium.

(6) The Commission requested and received detailed written submissions from complainant Community producers and one importers and verified the information therein to the extent considered necessary.

(7) The investigation of dumping covered the period from 1 January to 30 September 1986.

B. Normal value

(8) Normal value was provisionally determined on the basis of the domestic prices of the producer exporting to the Community who provided sufficient evidence and whose prices were considered to be representative of the domestic market concerned. This was considered appropriate because using the Community's basic price system would have produced a significantly different result. Normal value was calculated on the basis of monthly weighted averages.

C. Export prices

(9) All exports to the Community taken into consideration were made through Sidermex International Inc., Texas, USA, a fully-owned subsidiary of the Mexican holding company Sidermex SA de CV, Mexico, which also fully owns the producing company Altos Hornos de Mexico SA (AHMSA). Sidermex SA claimed that its subsidiary in the USA performed identical functions to those of a fully-integrated export sales department, being the unit solely responsible for sales to the international market in the group organization. Sidermex International Inc. should therefore be regarded as part of the same corporate entity.

(10) The Commission accepts that where a subsidiary of a producer established in the same country performs functions identical to those of a fully-integrated export sales department, it would be normal to regard it as part of the same economic entity. In the present case, however, the subsidiary in question is located in a third country. The Commission notes that the question of whether in this case the subsidiary is or is not treated as a fully integrated export sales department is at any rate without decisive influence on the rate of the duty to be applied (see paragraphs 26 and 27). For the purpose of a preliminary determination the Commission has acceded to the request made by Sidermex SA, reserving its final views for the definitive determination. Export prices were therefore provisionally determined on the basis of the prices actually paid or payable to Sidermex International Inc. for the product sold for export to the Community.

D. Comparison

(11) In comparing normal value with export prices the Commission took account, where appropriate and to the extent of the evidence available, of differences in conditions and terms of sale such as transport, insurance, forwarding and handling costs.

(12) The Mexican producer claimed in addition adjustments for differences in certain financial costs due to the very high domestic interest rates for borrowing funds, reflecting the highly inflationary situation of the Mexican economy.

(13) With regard to financing costs for stock keeping at the domestic distribution level, the Commission concluded that these pre-sale warehousing costs should be considered to be overheads not directly related to the sales under consideration and therefore not allowable under Article 2 (10) c) of Decision No 2177-84-ECSC.

(14) On the basis of the evidence submitted by the exporter the Commission took account of the fact that in the domestic market payments are made with certain delays. In order to calculate the amount of the adjustment to be made, the Commission considered that the real cost instead of the nominal cost of money should be relied upon; to that effect, it took into consideration the money market interest rate in Mexico during the investigation period adjusted by the rate of inflation for the same time span. This approach was considered appropriate because the financial effects of inflation on monetary assets and liabilities are eliminated in the financial accounts of the Mexican exporter to the extent that the inflationary devaluation of monetary assets is compensated for by an equivalent devaluation of the monetary debt. The Commission used the same factors which were applied by the Mexican exporter for its accounting purposes.

(15) All comparisons were made at the ex-works level.

E. Margins

(16) The above preliminary determination of the facts shows the existence of dumping, the margins of dumping being equal to the amount by which the normal values as established exceed the prices for export to the Community. Export prices were compared on a transaction by transaction basis with normal values for each month of the investigation period. The weighted average margin amounts to 37,7 %.

F. Injury

(17) With regard to injury caused by the dumped imports the evidence available to the Commission shows tht imports into the Community from Mexico of sheets and plates of iron or steel have increased from 13 112 tonnes in 1983 to 92 271 tonnes in 1986. In the first nine months of 1986, covering the investigation period, the imports from Mexico had surged to 78 035 tonnes from 2 537 tonnes in the same period of the preceding year. In terms of market share that of Mexican imports increased from 0,5 % in 1983 to 3,5 % in the first nine months of 1986.

(18) The evidence available to the Commission also indicates that the prices of these products undercut the published list prices of the Community producers during the investigation period, to a varying degree according to the market and the steel quality concerned, by between 16 % and 46 %. The published list prices which are deposited with the Commission are generally binding for Commu nity producers. However, Community producers are entitled under certain conditions to align their prices with low priced offers from third countries, with the exception of those countries with which the Community has concluded a steel arrangement (1), and to notify the Commission of special sectoral rebates in order to maintain their competitiveness with offers not respecting the Community price rules.

As the Commission had relaxed the price regulations as from 1 January 1986 Community producers made increasing use of these possibilities in order to cope with low price competition from non-arrangement countries, in particular from Mexico and Yugoslavia, which were the principal exporters falling into this category in 1986. Thus the notification of special rebates spread through the market and caused progressive price depression.

(19) Community production of sheets and plates started to decrease again in 1986 after a steady rise since the bottoming out of the recession in 1983. On average, production of sheets and plates, measured by deliveries of Community producers, was down in 1986, by 10,3 % against the preceding year.

(20) On 1 January 1986 the Commission made a first move towards liberalization of the steel market by suspending the compulsory minimum price regulations and removing certain products from the quota system. This policy, which will be reinforced in the current year, is designed to remove the crisis measures still in force and to return to a freely competitive steel market in the Community which will also be to the benefit of the trading partners in steel products. This however requires that fair trading conditions be respected by exporters to the Community. The greater flexibility of Community producers to respond to low priced imports makes the price level in the Community also more vulnerable to dumping practices.

(21) Imports of significant quantities of dumped products into the Community also put into question the objectives sought by the external measures adopted within the framework of the Community steel policy. Third countries which have concluded steel trade arrangements with the Community will only respect and renew these arrangements if they see a reasonable chance of selling the quantities provided for at the price levels agreed. In the first nine months of 1986 more than 70 % of all imports of sheets and plates into the Community originated in countries with arrangements on quantitative ceilings and/or prices had been concluded. Under these conditions the sudden arrival of imports from Mexico, which shot up from practically zero to 72 000 tonnes in less than six months, at prices significantly below the prevailing ECSC prices, had a disproportionately detrimental effect on the market for sheets and plates in the Community.

(22) The consequent impact on the Community industry has been a decrease in production, which fell by 8,9 % in the first nine months of 1986 against the same period of the preceding year. Capacity utilization, which had significantly improved up to 1985 as a result of the restructuring efforts of the industry, remained stable or even fell back despite further shedding of mill capacity in 1986 in the Community.

The price slide, which was accentuated in the second half of 1986 when the effects of the dumped imports had spread through the market, interrupted the return to profitability of the Community industry which was under way and had led the Commission to take first steps towards a gradual relaxation of the price regulations.

(23) The Commission has considered whether injury has been caused by other factors, such as imports of sheets and plates from certain other third countries, and provisionally established that these imports also increased by about the same quantity as those from Mexico. The Commission is, however, satisfied that this increase is mainly attributable to the fact that third countries having arrangements have made fuller use of the agreed tonnages, and to reciprocity of trade with EFTA member countries. This increase is not likely to upset the equilibrium of the market because the countries concerned are bound to observe the Community price rules.

(24) The substantial increase in dumped imports and the prices at which they are offered for sale in the Community led the Commission to determine that the effect of the dumped imports of plates and sheets of iron or steel originating in Mexico taken in isolation have to be considered as constituting material injury to the Community industry concerned.

G. Community interest

(25) In view of the particularly serious difficulties facing the Community industry, and in the light of the factors referred to above, the Commission has come to the conclusion that it is in the Community's interest that action be taken. In order to prevent further injury being caused during the remainder of the proceeding, this action should take the form of a provisional anti-dumping duty.

H. Rate of duty

(26) Having regard to the injury caused, the rate of such duty should be less that the dumping margin provisionally established but adequate to remove the injury.

(27) Taking into account the fact that it is necessary for the Community industry to achieve satisfactory prices for sheets and plates in order to generate a sufficient flow of earnings to cope with restructuring and to keep the impact on employment within acceptable limits, the rate of the duty should be less than the dumping margin but sufficient to prevent the undermining of the Community's basic price system, the prices of which have recently been revised and published by the Commission (1) in order to take account of changes in steel production costs and market conditions. On this basis the duty should be expressed as an amount in ECU to be paid on each tonne imported into the Community. This form of duty appears more appropriate in the light of the specific circumstances of the market of the relevant products.

(28) A period should be fixed within which the parties concerned may make their views known and request a hearing.

HAS ADOPTED THIS DECISION:

Article 1

1. A provisonal anti-dumping duty is hereby imposed on imports of certain sheets and plates of iron or steel, not further worked than hot rolled, of a thickness of 3 mm or more, falling within Common Customs Tariff subheading 73.13 B I ex a, corresponding to NIMEXE codes 73.13-17, 19, 21 and 23 and originating in Mexico.

2. The amount of the duty shall be equal to 92 ECU per 1 000 kilograms.

3. The provisions in force concerning customs duties shall apply.

4. The release for free circulation in the Community of the products referred to in paragraph 1 shall be subject to the provision of a security, equivalent to the amount of the provisional duty.

Article 2

Without prejudice to Article 7 (4) (b) and (c) of Decision No 2177-84-ECSC, the parties concerned may make known their views in writing and apply to be heard by the Commission within one month of the entry into force of this Decision.

Article 3

This Decision shall enter into force on the day following that of its publication in the Official Journal of the European Communities.

Subject to Articles 11, 12 and 14 of Decision No 2177-84-ECSC, it shall apply for a period of four months, unless the Commission adopts definitive measures before the expiry of that period.

This Decision shall be binding in its entirety and directly applicable in all Member States.

(1) OJ No L 201, 30. 7. 1984, p. 17.

(2) OJ No C 308, 2. 12. 1986, p. 2.

(1) Commission Decision No 1031-86-ECSC, OJ No L 95, 10. 4. 1986, p. 14.

(1) OJ No C 119, 5. 5. 1987, p. 3.