EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 25.1.2007 
COM(2007) 26 final 
  
Proposal for a 
COUNCIL REGULATION 
imposing a definitive count ervailing duty on imports of polyethylene terephthalate 
(PET) originating in India following an expiry review pursuant to Article 18 of 
Regulation (EC) No 2026/97 
(presented by the Commission) 
 
EN 2   EN EXPLANATORY MEMORANDUM  
1) CONTEXT OF THE PROPOSAL  
 • Grounds for and objectives of the proposal  
This proposal concerns the application of Council Regul ation (EC) No 2026/97 of 6 
October 1997 on protection agai nst subsidized imports from  countries not members of 
the European Community, as last ame nded by Council Regulation (EC) No 461/2004 
of 8 March 2004 ("the basic Regulation") in  the proceeding concerning imports of 
certain polyethylene terephthala te originating in India. 
 • General context  
This proposal is made in the context of th e implementation of the basic Regulation and 
is the result of an investigation which was carried out in line with the substantive and 
procedural requirements laid out in the basic Regulation. 
 • Existing provisions in the area of the proposal  
There are no existing provisions  in the area of the proposal. 
 • Consistency with other policies and objectives of the Union  
Not applicable. 
2) CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT  
 • Consultation of interested parties  
 Interested parties concerned by the proceeding have alre ady had the possibility to 
defend their interests during the investigation,  in line with the provisions of the basic 
Regulation. 
 • Collection and use of expertise  
 There was no need for external expertise. 
 • Impact assessment  
This proposal is the result of the im plementation of the basic Regulation. 
The basic Regulation does not foresee a ge neral impact assessment but contains an 
exhaustive list of conditions that have to be assessed. 
3) LEGAL ELEMENTS OF THE PROPOSAL  
 • Summary of the proposed action  
 
 
EN 3   EN On 1 December 2005, the Commission announced  by a notice (‘notice of initiation’), 
published in the Official Jour nal of the European Union,1 the initiation of an expiry 
review of the countervailing measures appl icable to imports into the Community of 
certain polyethylene terephthala te originating in India.  
This expiry review was init iated following a request for review lodged on 30 August 
2005 by the Polyethylene Terephthalate (PET ) Committee of Plastics Europe (‘the 
applicant’) on behalf of producers represen ting a major proportion, in this case more 
than 90 %, of the total Community producti on of certain polyethylene terephthalate. 
The enclosed Commission proposal for a Coun cil Regulation contains the definitive 
conclusions regarding subsidization, inju ry, causality and Community interest.  
Member States were consulted during the Anti-Subsidy Committees of 16/01 . 26 
Member States were in favour of the proposed course of action and 1 opposed. 
It is proposed that the C ouncil adopt the attached proposal for a Regulation which 
should be published in the Official Journal of the European Union on 28 February 2007 
at the latest. 
 • Legal basis  
Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against 
subsidized imports from countries not memb ers of the European Community, as last 
amended by Council Regulation (EC) No 461/2004 of 8 March 2004. 
 • Subsidiarity principle  
The proposal falls under the ex clusive competence of the Co mmunity. The subsidiarity 
principle therefore does not apply. 
 • Proportionality principle  
The proposal complies with the proportionali ty principle for th e following reason(s): 
 The form of action is descri bed in the above-mentioned ba sic Regulation and leaves no 
scope for national decision. 
 Indication of how financial and admini strative burden falling upon the Community, 
national governments, regional a nd local authorities, economic  operators and citizens is 
minimized and proportionate to the object ive of the proposal is not applicable. 
 • Choice of instruments  
 Proposed instruments: Regulation. 
 Other means would not be adequate for the following reason(s). 
                                                 
1 OJ C 304, 1.12.2005, Notice of initiation (2005/C 304/03 ), p. 4 
 
EN 4   EN The above-mentioned basic Regulation doe s not foresee alternative options. 
4) BUDGETARY IMPLICATION  
 The proposal has no implication for the Community budget. 
 
 
EN 5   EN Proposal for a 
COUNCIL REGULATION 
imposing a definitive count ervailing duty on imports of polyethylene terephthalate 
(PET) originating in India following an expiry review pursuant to Article 18 of 
Regulation (EC) No 2026/97 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty esta blishing the European Community, 
Having regard to Council Regulation (EC)  No 2026/97 of 6 October 1997 on protection 
against subsidised imports from countries  not member of the European Community2 (‘the 
basic Regulation’), and in pa rticular Article 18 thereof, 
Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on protection 
against dumped imports from countries not members of the European Community3, and in 
particular, Article 14(1) thereof, 
Having regard to the proposal submitted by th e Commission after cons ulting the Advisory 
Committee, 
Whereas: 
A. PROCEDURE 
1. Measures in force 
(1) On 30 November 2000, by Re gulation (EC) No 2603/20004, the Council imposed 
definitive countervailing duties on imports of certain polyethylene terephthalate 
('PET') originating in India, Malaysia, a nd Thailand ('the countries concerned') ('the 
original investigation'). The measures imposed had been based on a countervailing 
measures investigation initiat ed pursuant to Article 10 of  the basic Regulation. At the 
same time, by Regulation (EC) No 2604/20005, the Council imposed definitive anti-
dumping duties on imports of the same produc t originating in the same countries. The 
measures imposed had been based on an an ti-dumping investigation initiated pursuant 
to Article 5 of Council Regulation (EC) No 384/96, referred to in the preamble. 
                                                 
2 OJ L 288, 21.10.1997, p.1, as last amended by Council Regulation (EC) No 461/2004 (OJ L 77, 
13.3.2004, p.12) 
3 OJ L 56, 6.3.1996, p.1, as last amended by Council Regulation (EC) No 2117/2005 (OJ L 340, 
23.12.2005, p.17) 
4 OJ L 301, 30.11.2000. p1. 
5 OJ L301, 30.11.2000. p 21 
 
EN 6   EN (2) Council Regulation 2604/2000, as referred to in  recital (1) has been amended by 
Council Regulations (EC) No 496/2002, 823/2004, 83/2005 and 1646/20056. The 
amendments were the results of either re view investigations initiated pursuant to 
Article 11(3) and (4) or of price undertakings being acc epted under Article 8(1) of 
Council Regulation (EC) No 384/96 as referr ed to in the preamble and recital 1. 
(3) Moreover, on 19 August 20047 the Council imposed definitive anti-dumping duties on 
imports of certain PET originating in Australia and the People's Republic of China ('PRC') and terminated the proceeding on im ports of PET originating in Pakistan. 
(4) On 11 October 2005, the Council amended the level of countervail ing measures in 
force against imports of PET from India
8. The amendments were a result of an 
accelerated review initiated pursuant to  Article 20 of the basic Regulation. 
2. Request for a review (5) Following the publication of a notice of impending expiry, the Commission, on 30 
August 2005, received a request to review the m easures in force pursuant to Article 18 
of the basic Regulation ('expiry review'). 
(6) The request for was lodged on 30 August 2005 by the Polyethyle ne Terephthalate 
Committee of Plastics Europe ('the applican t') on behalf of producers representing a 
major proportion, in this case more than 90 %,  of total Community production of PET.  
(7) The request for the expiry review was base d on the grounds that the expiry of the 
measures would be likely to result in a c ontinuation or recurrence of subsidisation and 
injury to the Community industry.  
(8) Having determined, after consulting the Advi sory Committee, that sufficient evidence 
existed for the initiation of the review, pursuant to Article 18 of the basic Regulation respectively, the Commission initiated these reviews on 1 December 2005
9. 
(9) It should be noted that prior to the initia tion of the expiry review, and in accordance 
with Articles 22(1) and 10(9) of the ba sic Regulation, the Co mmission notified the 
Government of India (‘GOI’) that it had received a properly documented review 
request and invited the GOI for consultations with the aim of clarif ying the situation as 
regards the contents of the complaint and arriving at a mutually agreed solution. However, the Commission did not receive any answer from the GOI regarding its offer 
for consultation.  
3. Parallel investigations (10) On 1 December 2005, the Commission also opene d a review pursuant to Article 11(2) 
of Council Regulation (EC) No 384/96
10 on the anti-dumping measures in force on 
imports of PET originating in India, I ndonesia, Malaysia, the Republic of Korea, 
                                                 
6 OJ L 78, 21.3.2002 p.4, OJ L 127, 29.4.2004, p.7, OJ L 19, 21.1.2005, p.1, OJ L 266, 11.10.2005, p. 10. 
7 Council Regulation (EC) No 1467/2004, (OJ L 271,19.8.2004, p.1) 
8 OJ L 266, 11.10.2005, p. 1. 
9 OJ C 304, 1.12.2005, p.4 
10 OJ L 56, 6.3.1996, p.1. Council Regulation as last amended by Council Regulation (EC) No 2117/2005 
(OJ L 340, 23.12.2005, p.17) 
 
EN 7   EN Thailand and Taiwan11. A partial interim review pursu ant to Article 11(3) of Council 
Regulation 384/96 limited to dumping was initi ated at the same time concerning 
imports of the same product originati ng in the Republic of Korea and Taiwan12.  
4. Review Investigation Period (11) The review investigation period covere d the period from 1 October 2004 to 30 
September 2005 (hereinafter referred to as the review investigation period or RIP). 
The examination of trends in the context of injury covered the period from 1 January 
2002 up to the end of the review investigatio n period (hereinafter referred to as the 
period considered). 
5. Parties concerned by the investigation (12) The Commission officially advised the exporti ng producers, the representatives of the 
exporting country, importers, Community pr oducers, users and the applicant of the 
initiation of the expiry revi ew. Interested part ies were given the opportunity to make 
their views known in writing a nd to request a hearing within  the time limit set out in 
the notice of initiation. All inte rested parties who so requested and showed that there 
were particular reasons why they shoul d be heard were granted a hearing. 
(13) In view of the apparent large number of Indian exporting producers as well as 
Community producers and importers listed in th e request for the expiry reviews, it was 
considered appropriate, in conformity with  Article 27 of the basic Regulation, to 
examine whether sampling should be used. In order to enable the Commission to 
decide whether sampling would be necessary and, if so, to select  a sample, the above 
parties were requested, pursuant to Article  27 of the basic Regulation, to make 
themselves known within 15 days of the init iation of the reviews and to provide the 
Commission with the information reque sted in the notic e of initiation. 
(14) After examination of the information s ubmitted, given the low number of exporting 
producers in India indicating their willingnes s to co-operate, it was decided that 
sampling was not necessary as rega rds exporting producers in India. 
(15) Having examined the information submitte d by Community producers and importers, 
and given the relative small number of replies, it was considered that sampling for none of these categories would be warranted. 
(16) Questionnaires were therefore sent to a ll known exporting producers in the country 
concerned, importers, suppliers, Community producers and users. 
(17) Replies to the questionnaires were received from three Indian producers, from twelve 
Community producers, from one importer, on e supplier and from ten converters/users. 
(18) The Commission sought and verified all the in formation it deemed necessary for its 
analysis and carried out verifi cation visits at the premises of the following companies: 
1. Community producers 
                                                
 
11 OJ C 304, 1.12.2005, p.9 
12 OJ C 304, 1.12.2005, p.9 
 
EN 8   EN Voridian BV (The Netherlands) 
M & G Polimeri Italia Spa (Italy) Equipolymers Srl (Italia) La Seda de Barcelona SA (Spain) Novapet SA(Spain) Selenis Industria de Po límeros SA (Portugal) 
Selenis Itália Spa (Italy) Community Suppliers Interquisa SA (Spain) Unrelated importers in the Community Global Service International SRL (Italy) Community users Coca Cola Enterprises Europe Ltd (Belgium)  2. Government of India  Ministry of Commerce, New Delhi Government of Maharashtra  -Directorate of Industries, Mumbai 
3. Exporting producers in India 
 SENPET Ltd, Calcutta (formerly  Elque Polyesters Limited) 
 Futura Polyesters Limited, Chennai (formerly Futura Polymer Limited)  Pearl Engineering Polymers Limited, New Delhi 
B. PRODUCT CONCERNED AND LIKE PRODUCT 
1. Product concerned 
(19) The product concerned is the same as in th e original investigation, i.e. PET with a 
viscosity number of 78 ml/g or higher, ac cording to ISO Standa rd 1628-5, originating 
in the country concerned. It is currently classifiab le within CN Code 3907 60 20. 
2. Like product 
(20) As in the original investigation, it was found that the product concerned, PET 
produced and sold on the domestic mark ets in the country concerned and PET 
produced and sold by the Community produ cers have the same basic physical and 
 
EN 9   EN chemical characteristics and uses. It is ther efore concluded that a ll types of PET with a 
viscosity of 78 ml/g or higher are alike within  the meaning of Article 1(5) of the basic 
Regulation. 
C. LIKELIHOOD OF CONTINUATION OR RECURRENCE OF SUBSIDISATION 
I. Continuation of Subsidisation- Introduction 
(21) On the basis of the information contained in  the review request and the replies to the 
Commission’s questionnaire, the following schemes, which allegedly involve the 
granting of subsidies, were investigated. 
1. Subsidy schemes originally investigated Nationwide Schemes 
(a) Duty Entitlement Passbook Scheme (DEPBS) (b) Income Tax Exemption Scheme (ITES) (c) Export Promotion Capital Goods Scheme (EPCGS) (d) Export Processing Zones (EPZ)/Special Economic  
Zones (SEZ)/Export Oriented Units (EOU)   
2. Subsidy schemes not originally investigated 
Nationwide Schemes  
(e) Advance Licence Scheme (ALS) 
(f) Export Credit Scheme (pre-shi pment and post-shipment) (ECS) 
Regional Schemes 
(g) Gujarat Sales Tax Incentive Scheme (GSTIS) 
(h) Gujarat Electricity Duty Exemption Scheme (GEDES) (i) West Bengal Incentive Schemes (WBIS) (j) Package Scheme of Incentives (PSI) of the 
Government of Maharashtra 
(22) The schemes (a) and (c)-(e) specified above are based on the Foreign Trade 
(Development and Regulation) Act 1992 (No 22  of 1992) which entered into force on 
7 August 1992 (‘Foreign Trade Act’). The Fo reign Trade Act authorises the GOI to 
issue notifications regarding the export and import policy. These are summarised in ‘Export and Import Policy’ documents, since 1 September 2004 named 'Foreign Trade Policy', and are issued by the Ministry of Commerce every fi ve years and updated 
regularly. One Export and Import Policy do cument is relevant to the review 
investigation period of this case; i.e. th e five-year plan relating to the period 1 
September 2004 to 31 March 2009 (‘EXIM-po licy 2004-2009’). In addition, the GOI 
 
EN 10   EN also sets out the procedures governing the EXIM-policy 2004-2009 in a ‘Handbook of 
Procedures - 1 September 2004 to 31 Ma rch 2009, Volume I’ (‘HOP I 2004-2009’). 
The Handbook of Procedure (HOP) is also updated on a regular basis. 
(23) The Income Tax Scheme specified above under (b) is based on the Income Tax Act of 
1961, which is amended yearly by the Finance Act. 
(24) The Export Credit Scheme specified above under (f) is based on sections 21 and 35A 
of the Banking Regulation Act 1949, which allo ws the Reserve Bank of India (‘RBI’) 
to direct commercial banks in the field of export credits.  
(25) The Gujarat Sales Tax Incentive Scheme speci fied above under (g) is administered by 
the Government of Gujarat and based on its industrial incentive policy; the Gujarat Electricity Duty Exemption scheme stipulat ed above under (h) is based on the Bombay 
Electricity Duty Act of 1958. 
(26) The scheme (j) is managed by the state of Ma harashtra and is based on resolutions of 
the Government of Mahara shtra Industries, Energy and Labour Department.  
(27) The scheme (i) is set up by the Governme nt of West Bengal through the Commerce & 
Industries Department notification No 588-CI/H of 22 June 1999 (WBIS 1999) which 
was last replaced by notification No 134- CI/O/Incentive/17/03/I of 24 March 2004 
(WBIS 2004). 
(28) Following the disclosure of the findings c oncerning the alleged subsidisation, the GOI 
reiterates a number of concerns regarding the countervailability of the schemes and the 
calculation of the subsidy amount s.It also reiterates arguments  that there was no likely 
continuation of subsidisation in  the present case. To this end, it should be noted that 
this submission does not contain any new arguments which would alter the 
conclusions as set out in this regulation..  
II. Nationwide Schemes 
1. Duty Entitlement Passbook Scheme (‘DEPBS’) 
(a) Legal Basis 
(29) The detailed description of the DEPBS is contained in section 4.3 of the EXIM-policy 
2004-2009 and in section 4.3-.4.4 of the HOP I 2004-2009.  
(30) It was found that none of the coope rating exporting producers obtained any 
countervailable benefits under the (DEPBS). It was therefore not found necessary to 
further analyse this scheme in th e scope of this investigation. 
2. Income Tax Schemes 
(31) It was found that that none of the c ooperating exporting pr oducers obtained any 
countervailable benefits under the ITES . It was therefore not found necessary to 
further analyse this scheme in th e scope of this investigation. 
3. Export Promotion Capital Goods Scheme (‘EPCGS’)  
 
EN 11   EN (a) Legal basis 
(32) The detailed description of the EPCGS is contained in chapter 5 of the EXIM-policy 
2004-2009 and in chapter 5 of the HOP I 2004-2009.  
(b) Eligibility 
(33) Manufacturer-exporters, merchant-exporters  “tied to” supporti ng manufacturers and 
service providers are eligible for this scheme.  
(c) Practical implementation 
(34) Under the condition of an e xport obligation, a company is allowed to import capital 
goods (new and – since April 2003  – second-hand capital goods  up to 10 years old) at 
a reduced or zero rate of duty. To this  end the GOI issues  upon application and 
payment of a fee an EPCG li cense. In order to meet the export obligation, the imported 
capital goods must be used to produce a certain amount of export goods during a 
certain period.  
(35) The EPCGS licence holder can also source  the capital goods in digenously. In such 
case, the indigenous manufactur er of capital goods may ava il of the benefit for duty 
free import of components required to manuf acture such capital goods. Alternatively, 
the indigenous manufacturer can  claim the benefit of deemed  export in re spect to the 
supply of capital goods to an EPCGS licence holder. 
(d) Conclusion on EPCG Scheme  
(36) The EPCGS provides subsidies within the m eaning of Article 2(1)(a)(ii) and Article 
2(2) of the basic Regulation. The duty reduc tion constitutes a fina ncial contribution by 
the GOI, since this concession decreases the GOI’s duty revenue which would be 
otherwise due. In addition, the duty reducti on confers a benef it upon the exporter, 
because the duties saved upon importation improve its liquidity. 
(37) Furthermore, the EPCGS is contingent in  law upon export performance, since such 
licences cannot be obtained wit hout a commitment to export. Therefore it is deemed to 
be specific and countervailable under Artic le 3(4)(a) of the basic Regulation.  
(38) Consequently, this scheme cannot be consid ered a permissible duty drawback system 
or substitution drawback system  within the meaning of Arti cle 2(1)(a)(ii) of the basic 
Regulation. Capital goods are not covered by the scope of such permissible systems, 
as set out in Annex I,  item (i), of the basic Regulation,  because they are not consumed 
in the production of the exported products.  
(e) Calculation of the subsidy amount  
(39) None of the cooperating expor ters had purchased any cap ital goods in the IP. One 
company continued however to benefit fr om duty exemptions for capital goods 
purchased before the IP at the amount esta blished in the origin al investigation.. The 
subsidy amount obtained during the RIP was calculated, in accordance with Article 
7(3) of the basic Regulation, on the basi s of the unpaid customs duty on imported 
capital goods spread across a pe riod which reflects the actu al depreciation period of 
such capital goods of the exporting producer. In accordance with the established 
 
EN 12   EN practice, the amount so calculated which is attributable to the review investigation 
period has been adjusted by adding interest during this period in order to reflect the 
full value of the benefit over time. Fees nece ssarily incurred to obtain the subsidy were 
deducted in accordance with Artic le 7(1)(a) of the basic Re gulation from this sum to 
arrive at the subsidy amount as  numerator. In accordance with  Article 7(2) and 7(3) of 
the basic Regulation this subsidy amount ha s been allocated over the export turnover 
during the review investiga tion period as appropriate denominator, because the 
subsidy is contingent upon export performan ce and it was not grante d by reference to 
the quantities manufactured, produced, exporte d or transported. The subsidy obtained 
for the company that continued to benefit from the scheme was 0.38% 
4. Export Credit Scheme (‘ECS’)  
(a) Legal basis 
(40) The details of the scheme are set out in  the Master Circular  IECD No 5/04.02.01/2002-
03 (Export Credit in Foreign Currency) and the Master Circular IECD No 
10/04.02.01/2003-04 (Rupee Export Credit) of th e Reserve Bank of India (‘RBI’), 
which is addressed to all commercial banks in India.  
(b) Eligibility 
(41) Manufacturing exporters and merchant exporter s are eligible for this scheme. It was 
found that one of the companies cooperating in the proceeding availed of benefits 
under the ECS. 
(c) Practical implementation 
(42) Under this scheme, the RBI sets compulsory  maximum ceiling interest rates applicable 
to export credits, both in Indian rupees  or in foreign currency, which commercial 
banks can charge an exporter 'with a view to making credit available to exporters at 
internationally competitive rates' . The EC S consists of two sub-schemes, the Pre-
Shipment Export Credit Scheme (“packing cr edit”), which covers credits provided to 
an exporter for financing the purchase, processing, manufacturing, packing and/or 
shipping of goods prior to export, and the Post-Shipment Export Credit Scheme, which 
provides for working capital loans with th e purpose of financing export receivables. 
The RBI also directs the banks  to provide a certain amount  of their net bank credit 
towards export finance. 
(43) As a result of these RBI Ma ster Circulars, exporters can obtain export credits at 
preferential interest rates co mpared with the interest rates for ordinary commercial 
credits (“cash credits”), which are purely set under market conditions.  
(d) Conclusion on the ECS 
(44) Firstly, the preferential intere st rates of an ECS credit set by the RBI Master Circulars 
can decrease interest costs of an exporter as  compared with credit costs purely set by 
market conditions and confer in this case a benefit within the meaning of Article 2(2) 
of the basic Regulation on such an exporter.  Only in the case of those co-operating 
exporters, where such interest  rate differences were found to exist, it was concluded 
that a benefit was conferred. The differences in rates between the credits given further 
 
EN 13   EN to the RBI Master Circulars and commercial 'cash credit' rates cannot be explained by 
pure market behaviour of the commercial bank.  
(45) Secondly, and despite the fact that the preferentia l credits under th e ECS are granted 
by commercial banks, this be nefit is a financial contri bution by a government within 
the meaning of Article 2(1)(iv) of the basic Regulation. The RBI is a public body and 
falls therefore under the defini tion of a “government” as set out in Article 1(3) of the 
basic Regulation. It is 100% government-own ed, pursues public policy objectives, e.g. 
monetary policy, and its management is a ppointed by the GOI. The RBI directs private 
bodies, since the commercial ba nks are bound by the conditions, inter alia  the 
maximum ceilings for interest rates on e xport credits mandated in the RBI Master 
Circulars and the RBI provisi ons that commercial banks have to provide a certain 
amount of their net bank credit towards export finance. This  direction obliges 
commercial banks to carry out functions men tioned in Article 2(1)(a)(i) of the basic 
Regulation, in this case loans in the form of preferential export financing. Such direct 
transfer of funds in the form of loans under certain conditions  would normally be 
vested in the government, and the practice, in no real sens e, differs from practices 
normally followed by governments, Article 2( 1)(a)(iv) of the ba sic Regulation. This 
subsidy is deemed to be specific and count ervailable since the pr eferential interest 
rates are only available in relation to the financing of  export transactions and are 
therefore contingent upon export performance, pursuant to Article 3(4)(a) of the basic 
Regulation.  
(e) Calculation of the subsidy amount 
(46) The subsidy amount has been calculated on the basis of the difference between the 
interest paid for export cred its used during the review investigation period and the 
amount that would have been payable if the sa me interest rates were applicable as for 
ordinary commercial credits used by the particular company. This subsidy amount 
(numerator) has been allocated over th e total export turnove r during the review 
investigation period as appropriate denominat or in accordance with  Article 7(2) basic 
Regulation, because the subsidy is conti ngent upon export performance and it was not 
granted by reference to the quanti ties manufactured, produced, exported or 
transported. The company that availed of be nefits under the ECS obtained a subsidy of 
0.1%. 
5. Export Oriented Units Scheme (‘EOUS’)/ Special Economic Zones Scheme (‘SEZS’) 
(47) It was found that none of the cooperating exporting producers obtained countervailable 
benefits under the SEZS . However, two Indian companie s had the status of an EOU 
and received countervailable subsidies in the RIP. The description and assessment 
below is therefore limited to the EOUS.  
(a) Legal basis 
(48) The details of the EOU scheme are contai ned in chapter 6 of the EXIM-policy 2004-
2009 and the HOP I 2004-2009.  
(b) Eligibility 
 
EN 14   EN (49) With the exception of pure trading companie s, all enterprises which, in principle, 
undertake to export their entire production of  goods or services may be set up under 
the EOUS. Undertakings in the industrial se ctors have to fulfil a minimum investment 
threshold in fixed assets (10 million Indian rupees) to be eligible for the EOUS  
(c) Practical implementation 
(50) As found in the original i nvestigation, EOUs can be locat ed and established anywhere 
in India.  
(51) An application for EOU status must include details for a period of the next five years 
on, inter alia , planned production quantities, pr ojected value of exports, import 
requirements and indigenous requirements. Upon acceptance by the authorities of the 
company’s application, the terms and conditi ons attached to this  acceptance will be 
communicated to the company. The agreemen t to be recognised  as a company under 
EOU is valid for a five-year period. Th e agreement may be renewed for further 
periods. 
(52) A crucial obligation of an EOU as set out  in the EXIM-policy 2004-2009 is to achieve 
net foreign exchange (‘NFE’) earnings, i.e. in a reference period (5 years) the total 
value of exports has to be higher th an the total value of imported goods. 
(53) EOU units are entitled to the following concessions: 
(i) exemption from import duties on all types of goods (i ncluding capital goods, 
raw materials and consumables) requi red for the manufacture, production, 
processing, or in connection therewith; 
(ii) exemption from excise duty on goods  procured from indigenous sources; 
(iii) reimbursement of central sale s tax paid on goods procured locally; 
(iv) the facility to sell part of produc tion on the domestic market of up to 50% of 
FOB value of exports, s ubject to fulfilment of positive NFE earnings upon 
payment of concessional duties, i.e.  excise duties on finished products; 
v) partial reimbursement of duty paid  on fuel procured from domestic oil 
companies; 
(vi) exemption from income tax normally due on profits realised on export sales in 
accordance with Section 10B of  the Income Tax Act, for a 10 year period after 
starting its operations, but no longer than up to 2010; 
(vii) possibility of 100% foreign equity ownership. 
(54) Units operating under these schemes are bond ed under the surveillance of customs 
officials in accordance with Section 65 of the Customs Act.   
(55) They are legally obliged to maintain a proper account of all imports, of the 
consumption and utilisation of all imported materials and of the exports made in 
accordance with 6.11.1 HOP 2004-2009. These documents should be submitted 
 
EN 15   EN periodically, to the competent authorit ies through quarterly and annual progress 
reports. 
(56) However, “at no point in time [an EOU] sh all be required to co-relate every import 
consignment with its exports, transfers to other units, sales in DTA or stocks”, as 
section 6.11.2 of the HOP I 2004-2009 states.  
(57) Domestic sales are dispatched and recorded on a self-certification basis. The dispatch 
process of export consignments of an EOU is  supervised by a cust oms/excise official, 
who is permanently posted in the EOU.  
(58) In the present case, the EOUS was used by two of the co-operating exporters. These 
co-operating exporters utilized the scheme  to import raw materials and capital goods  
free of import duties, to procure goods dome stically free of excise duty and to obtain 
sales tax reimbursement and to  sell part of its productio n on the domestic market. One 
of the exporting companies also utilized the scheme to obtain partial reimbursement of 
duty paid on fuel procured from domestic oi l companies. They thereby availed of all 
benefits as described in recital (53) above  under (i) to (v). The investigation showed 
that the exporters concerned did not avail of benefits under the income tax exemption 
provisions of the EOUS.  
(d) Conclusions on the EOUS  
(59) The exemptions of an EOU from two types of import duties (“basic customs duty” and 
“special additional customs duty”) and the reimbursement of sales tax are financial contributions of the GOI within the mean ing of Article 2(1)(a)(ii) of the basic 
Regulation. Government revenu e which would be due in the absence of this scheme is 
forgone, thus, in addition, conferring a bene fit upon the EOU in the meaning of Article 
2(2) of the basic Regulation, because it sa ved liquidity by not having to pay duties 
normally due and by obtaining a sales tax reimbursement.  
(60) The exemption from excise duty and its im port duty equivalent (“additional customs 
duty”), however, do not lead to revenue for gone which is otherwise due. Excise and 
additional customs duty, if paid, could be used as a credit for its own future duty liabilities (the so-c alled “CENVAT mechanism”). Ther efore, these duties are not 
definitive. By the means of “CENVAT”-credi t only an added value bears a definitive 
duty, not the input materials.  
(61) Thus, only the exemption from basic cust oms duty, special additional customs duty, 
the partial reimbursement of duty paid on fu el procured from domestic oil companies 
and the sales tax reimbursement, constitute s ubsidies within the meaning of Article 2 
of the basic Regulation. They are conti ngent in law upon export performance, and 
therefore deemed to be speci fic and countervailabl e under Article 3(4) (a) of the basic 
Regulation. The export objectiv e of an EOU as set out in  paragraph 6.1 of the EXIM-
policy 02-07 is a conditio sine qua non to obtain the incentives. 
(62) One of the cooperating exporters asserted th at the Commission has departed from the 
reasoning used in the original investigation in terms of the assessment of the duty exemption of raw materials and that only excess remission if any should be 
countervailed. . However, in reply to this it should be noted that at the time of the 
original investigation, in th e assessment of the counterva ilable amount, the question on 
 
EN 16   EN whether the EOU was a permissible duty draw back system or not was made 'without 
prejudice to the question of whether the sche me constitutes a draw back system in 
conformity the provisions  of the basic Regulation13'. (Within the framework of this 
review, the scheme as a whole, along w ith the monitoring system was carefully 
investigated.  
(63) The investigation revealed th at these subsidies cannot be considered as permissible 
duty drawback systems or substitution dr awback systems within the meaning of 
Article 2(1)(a)(ii) of the basi c Regulation. They do not confor m to the strict rules laid 
down in Annex I (items (h) and (i)), Anne x II (definition and rules for drawback) and 
Annex III (definition and rules for substituti on drawback) of the basic Regulation. In 
the circumstance that the sales tax reimbursement and import duty exemption provisions are used for purchasing capital good s, they are already not in conformity 
with the rules for permitted drawback system s since capital goods are not consumed in 
the production process, as required by Annex I item (h) (sales tax reimbursement) and (i) (import duties remission). 
(64) In addition, it has not been es tablished that that the GOI has a effective verification 
system or procedure in place to confirm whether and in what amounts duty and or 
sales tax free procured inputs were cons umed in the production of the exported 
product (Annex II(II)(4) of the basic Regulation and, in the case of substitution 
drawback schemes, Annex III(I I)(2) of the basic Regulatio n). The verification system 
in place aims at monitoring the Net foreign exchange earning obligation and not the consumption of imports in relation to the production of exported goods. 
(65) An EOU is allowed to sell a significant am ount of its production, up to 50% of its 
annual turnover, on the domestic market. Th erefore, no legal obligation exists to 
export the total amount of ma nufactured resultant products. In addition, these domestic 
transactions take place wit hout the supervision and contro l of a government official 
and are only subject to a se lf-certification procedure.  Consequently, the bonded 
premises of an EOU are at least in part no t subject to a physical control by the Indian 
authorities. These circumstances increase the importance of fu rther verification 
elements, notably control of the nexus be tween duty free inputs and resultant export 
products in order to qualify as a duty drawback verification system. 
(66) Concerning further verification steps installed it should be recalled, that an EOU is 
already de jure  and at no point in time is required to co-relate every import 
consignment with the correspond ing resultant product. Only if  such controls were in 
place would the Indian author ities be able to obtain su fficient information about the 
final destination of inputs so as to allow for an efficient check that the duty/sales tax 
exemptions do not exceed inputs for e xport production. Monthly tax returns for 
domestic sales on a self assessment basis, which are periodically assessed by the Indian authorities, do not suffice. In additi on, the purpose of the monthly tax returns is 
to monitor excise duties and not to control the destination of input s. Company internal 
systems, which are kept without legal ob ligation, would not as such suffice since a 
duty drawback verification system would need to be designed and enforced by a 
government and should not left to the discreti on of the management of each individual 
company concerned. Consequently, the inves tigation has established that the EOU is 
                                                
 
13 Recital 26, Council Regulation (EC) No 2603/2000OJ L 301, 30.11.2000. p1. 
 
EN 17   EN explicitly not required by th e Indian EXIM policy to reco rd the nexus between input 
materials and the finished product and no ef fective control mechanism was set up by 
the GOI to determine which inputs were c onsumed in export production and in what 
amounts.  
(67) Also, the GOI neither carried out a furt her examination based on actual inputs 
involved, although this would normally be requ ired in the absence of an effective 
verification system (Annex II(II)(5) and Annex III(II)(3) to the basic Regulation). 
Furthermore no evidence was provided by the GOI demonstrating that no excess 
remission took place. 
(68) In light of the above, the company's claim that the Commission has departed from the 
reasoning used in the original investigation in terms of the assessment of the duty exemption of raw materials and that only excess remission if any should be 
countervailed has to be rejected. 
(e) Calculation of the subsidy amount  
(69) Accordingly, in the absence of a permitte d duty drawback system or substitution 
drawback system, the countervailable benefi t is the remission of total import duties 
(basic customs duty and special addi tional customs duty) normally due upon 
importation as well as the reimbursement of duty paid on fuel procured from domestic 
oil companies and the sales tax reimbursement , during the review i nvestigation period. 
(i) Exemption from import duties (basic cu stoms duty and special additional customs duty), 
sales tax reimbursement on raw materials and re imbursement of duty paid on fuel procured 
from domestic oil companies 
(70) The subsidy amount for the exporters that are EOUS was calculated on the basis of 
import duties forgone (basic customs duty a nd special additional customs duty) on the 
materials imported for the EOU as a w hole, the sales tax reimbursed, and the 
reimbursement of duties paid on domestica lly purchased fuel all during the review 
investigation period. Fees nece ssarily incurred to obtain the subsidy were deducted in 
accordance with Article 7( 1)(a) of the basic Regulation from this sum to arrive at the 
subsidy amount as numerator. In accordance with Article 7(2) of the basic Regulation 
this subsidy amount has been allocated over the appropriate export turnover generated 
during the review investiga tion period as appropriate denominator, because the 
subsidy is contingent upon export performan ce and it was not grante d by reference to 
the quantities manufactured, produced, expor ted or transported. The subsidy margins 
thus obtained were 0.9 % and 5.8% resp ectively for the two companies.  
(ii) Exemption from import duties (basic cust oms duty and special additio nal customs duty) on 
capital goods 
(71) Capital goods are not physically incorporat ed into the finished goods. In accordance 
with Article 7(3) of the basi c Regulation, the benefit to th e investigated companies has 
been calculated on the ba sis of the amount of unpaid customs duty on imported capital 
goods spread across a period which reflects the normal depreciation period of such 
capital goods in the investigated compan ies. In order to determine such normal 
depreciation period the act ual depreciation periods us ed by the two co-operating 
exporters concerned have been used as a reference, i.e. 18 years. The amount so 
 
EN 18   EN calculated is then attributable to the review  investigation period and has been adjusted 
by adding interest during this period in orde r to reflect the value of the benefit over 
time and thereby establish the full benefit of this scheme to the recipient. In 
accordance with Article 7(2) and 7(3) of th e basic Regulation, this subsidy amount has 
been allocated over the appropriate export turnover generated during the review investigation period as appropriate denomina tor, because the subsidy is contingent 
upon export performance and it was not gr anted by reference to the quantities 
manufactured, produced, exported or transpor ted. The subsidy ma rgins thus obtained 
for the two companies were  1.8% and 0.4% respectively. 
(72) Thus, the total subsidy margin under the E OUS for the companies concerned amounts 
to 2.7% and 6.2% respectively. 
6. Advance Licence Scheme (‘ALS’)  
(a) Legal basis 
(73) The detailed description of the scheme is contained in sections 4.1 to 4.1.14 of the 
EXIM-policy 2004-2009 and chapters 4.1 to 4.30 of the HOP I 2004-2009.  
(b) Eligibility 
(74) The ALS consists of six sub-schemes, as de scribed in more detail below. Those sub-
schemes inter alia  differ in the scope of eligib ility. Manufacturer -exporters and 
merchant-exporters “tied to” supporting manufacturers are eligible for the ALS 
physical exports and for the ALS annua l requirement. Manufacturer–exporters 
supplying the ultimate exporter are eligible for ALS for in termediate supplies. Main 
contractors which supply to the “deemed e xport” categories mentioned in paragraph 
8.2 of the EXIM-policy 2004-2009, such as s uppliers of an export oriented unit 
(‘EOU’), are eligible for ALS deemed export.  Eventually, intermediate suppliers to 
manufacturer-exporters are el igible for “deemed export”  benefits under the sub-
schemes Advance Release Order (‘ARO’) and back to back inland letter of credit. 
(c) Practical implementation 
(75) Advance licences can be issued for: 
(i) Physical exports:  This is the main sub-scheme. It  allows for duty free import of 
input materials for the production of a specific resultant export product. The 
export must be “physical” in the sens e that the export product has to leave 
Indian Territory. The terms of the import allowance and export obligation 
including the type of export produc t are specified in the licence. 
(ii) Annual requirement:  Such a licence is not linked to a specif ic export product, 
but to a wider product group (e.g. chemical and allied products). The licence holder can, up to a certain value threshold set by its past export performance, 
import duty free any input to be used in manufacturing any of the items falling under such a product group. It can choose to export any resultant product falling under the product group using such duty-exempt material.  
(iii) Intermediate supplies:  This sub-scheme covers cases where two manufacturers 
intend to produce a single export pr oduct and divide the production process. 
 
EN 19   EN The manufacturer-exporter produces the intermediate product. It can import 
duty free input materials and can obtain for this purpose an ALS for intermediate supplies. The ultimate e xporter finalizes the production and is 
obliged to export the finished product.  
(iv) Deemed exports:  This sub-scheme allows a main contractor to import inputs 
free of duty which are required in manufacturing goods to be sold as “deemed exports” to the categories of customers mentioned in paragraph 8.2. (b - g) and 
(i - j) of the EXIM policy 2004-2009. The finished goods will, in other words, 
not have to leave the country but are by vi rtue of the status of the customer to 
be considered deemed exports. This w ould include supply to an EOU or to a 
licence holder under the Export Prom otion Capital Goods scheme. 
(v) ARO:  The ALS holder intending to source the inputs from indigenous sources, 
instead of direct import, has the option to source them against AROs. In such 
cases the Advance Licences are validate d as AROs and are endorsed to the 
indigenous supplier upon delivery of the items specified therein. The 
endorsement of the ARO entitles the indigenous supplier to the benefits of deemed exports as set out in paragra ph 8.3 of the EXIM-policy 02-07 (i.e. ALS 
for intermediate supplies/deemed expor t, deemed export drawback and refund 
of terminal excise duty). The ARO m echanism refunds taxes and duties to the 
supplier instead of refunding the same to the ultimate exporter in the form of drawback/refund of duties. The refund of taxes/duties is available both for indigenous inputs as well  as imported inputs.  
(vi) Back to back inland letter of credit:  This sub-scheme again covers indigenous 
supplies to an ALS holder. The holder of an ALS can approach a bank for opening an inland le tter of credit in favour of an indigenous supplier. The 
licence will be invalidated by the bank for direct import, only in respect of the 
value and volume of items being sourced indigenously instead of importation. The indigenous supplier will be entitled to  deemed export benefits as set out in 
paragraph 8.3 of the EXIM-policy 02 -07 (i.e. ALS for intermediate 
supplies/deemed export, deemed export drawback and refund of terminal excise duty).  
(76) It was established that during the review  investigation peri od, one co-operating 
exporter only obtained con cessions under three sub-sche mes linked to the product 
concerned, i.e. (i) ALS physical exports, (v) ARO and (iv) ALS deemed export. . It is 
therefore not necessary to es tablish the countervailability of (ii) annual requirement, 
(iii) Intermediate supplies , and (vi) the back to back inland letter of credit scheme.  
(77) For verification purposes by the Indian author ities, a licence holder is legally obliged 
to maintain “a true and proper account of li cence-wise consumption and utilisation of 
imported goods” in a specified format (c hapter 4.30 and appendix 23 HOP I 2004-
2009), i.e. an actual consumption register  (“appendix 23 regist er”). As of May 2005 
appendix 23 must not only be  preserved with the company but it must also be 
countersigned by a chartered accountant and se nt to the Indian authorities. The 
obligation to submit the appendix 23 applies to licences issued after the entry into 
force of the new rules in May 2005. The pract ical implementation of this new system 
could therefore not be verified as no repor t relating to these licences was due at the 
time of the investigation.  
 
EN 20   EN (78) In regard to the sub-schemes (i), (iv) a nd (v) listed above, both the import allowance 
and the export (including deemed export) obligation are fixed in  volume and value by 
the GOI and are documented on the licence. In  addition, at the time of import and of 
export, the corresponding tran sactions are to be documented by Government officials 
on the licence. The volume of imports allowed under this scheme is determined by the GOI on the basis of standard input-outpu t norms (‘SIONs’). SIONs exist for most 
products including the product concerned and are published in the HOP II 2004-2009. 
(79) Imported input materials are not transferab le and have to be used to produce the 
resultant export product. The export obligation must be fulfilled w ithin a prescribed 
time frame after issuance of the licence (18 months with two possible extensions of 6 
months each).  
(80) The advance licence holder in tending to source the input s from domestic sources, 
instead of direct imports has the option to source them against Advance Release 
Orders (ARO). In such cases the advance licences are validated as ARO's and are 
endorsed to the supplier upon delivery of the items specified therein.  
(81) In the course of the review  investigation, it wa s established that the input materials 
imported according to the SIONs import allowance duty-free under the various sub-schemes by the co-operating exporter exceeded the material needed to produce the reference quantity of the resultant export product. Thus, the SIONs for the product 
concerned were not accurate.  
(d) Conclusion 
(82) The exemption from import duties is a s ubsidy within the meaning of Article 
2(1)(a)(ii) and Article 2(2) of the basic Re gulation, i.e. a financial contribution of the 
GOI which conferred a benefit upon the investigated exporters.  
(83) In addition, ALS 'physical exports' is  clearly contingent in law upon export 
performance, and therefore deemed to be specific and countervailable under Article 
3(4)(a) of the basic Regulation. Without  an export commitment a company cannot 
obtain benefits under these schemes. 
(84) ALS 'deemed export' is de facto  contingent upon export performance. It was only used 
by one company to a minor extent and only when supplying EOUs or units in a SEZ, 
both categories mentioned in paragraph 8.2(b) of the EXIM-policy 02-07. This 
company stated that its customers even tually exported the product concerned. The 
objective of an EOU/SEZ is exportation as  set out in paragraph 6.1 of the EXIM-
policy 02-07. Thus, a domes tic supplier obtains benefits under the ALS deemed 
export, because the GOI anticipates expor t earnings subsequently received by an 
exporter located in an EOU/SEZ. According to Article 3(4)(a) of the basic Regulation, 
a subsidy shall be considered as export con tingent when the facts demonstrate that the 
granting of a subsidy, though not legally co ntingent upon export performance, is in 
fact tied to actual or antic ipated export earnings.  
(85) In this case the cooperating company made no use of advance licence for the purpose 
of importing duty free imports. Instead the company obtained a benefit by sourcing 
raw materials from domestic suppliers th rough the conversion of  the licences into 
ARO. Under this scheme th e right of exemption of taxes and duties falls on the 
 
EN 21   EN supplier instead of to the ultimate exporter in the form  of drawback/refund of duties. 
The exemption of taxes/duties is availabl e both for indigenous inputs as well as 
imported inputs. The investigation revealed there was a significant difference in price between raw material sourced  through the indigenous unrelat ed supplier by use of the 
ARO scheme as opposed to raw materials sourced through an indigenous supplier 
when no licence was used. The benefit of the exemption from duties and taxes was 
passed on through lower prices from the supplier to the comp any using the raw 
material and concerned by this proceeding. The company could make a clear distinction between the purchase prices of raw material under the use of the licence 
and the price paid for the same raw materi al when no licence was used. The company 
defined the benefit thus obtai ned as the difference in pr ice between supplies sourced 
under the ARO and the price of supp lies sourced without such licence. 
(86) None of the three sub-schemes used in the present case can be considered as 
permissible duty drawback systems or substitution drawback systems within the meaning of Article 2(1)(a)( ii) of the basic Regulation. They do not conform to the 
strict rules laid down in Anne x I item (i), Annex II (definition and rules for drawback) 
and Annex III (defini tion and rules for substitution draw back) of the basic Regulation. 
Although the GOI mentioned that the system  had undergone a change as from May 
2005, it should be clear that these change s had no impact on the schemes during the 
RIP, since the new verification syst em was not yet fully implemented. 
Notwithstanding the possible change of the verification system by the GOI, the 
investigation revealed that  during the RIP the GOI di d not effectively apply its 
verification system. Nor did it apply proce dures to confirm whether and in what 
amounts inputs were consumed in the production of the exported product (Annex 
II(II)(4) of the basic Regulation and, in th e case of substitution drawback schemes, 
Annex III(II)(2) of the basic Regulation). The SIONs for the product concerned were 
not sufficiently precise and overestimat ed the raw material consumption. The 
investigation revealed that the SIONs are being amended in view of better reflecting 
the consumption of inputs but these new SION's were not in place during the RIP. 
Thus, it is confirmed that the SIONs themse lves cannot be consid ered a verification 
system of actual consumption, since these generous standard norms do not enable the 
GOI to verify with sufficient precision what  amount of inputs we re actually consumed 
in the export production. Furthermore, an ef fective control done by the GOI based on a 
correctly kept actual consum ption register (“appendix 23 register”, formerly appendix 
18 ), did not take place for the licences used  in the RIP. In addition, the GOI did not 
carry out a further examination based on actual inputs involved, although this would 
normally need to be carried out in the abse nce of an effectively applied verification 
system (Annex II(II)(5) and A nnex III(II)(3) to the basic Re gulation), nor did it prove 
that no excess remissi on took place.  
(87) These three sub-schemes are therefore countervailable.  
(e) Calculation of the subsidy amount 
(88) In the absence of permitted duty drawback systems or substitution drawback systems, 
the subsidy amount has been established,  as demonstrated by the company, on the 
basis of the difference in price between th e same raw material purchased with and 
without the licence.  
 
EN 22   EN (89) In accordance with Article 7(2) of the basic Regulation, the subsidy amount has been 
allocated over the to tal export turnover ge nerated as appropriate  denominator, because 
the subsidy is contingent upon export performa nce and was not granted by reference to 
the quantities manufactured, produ ced, exported or transported.  
(90) One company benefited from this scheme during the review inve stigation period and 
obtained subsidies of 20.9%. 
III. Regional Schemes  
1 Gujarat Sales Tax Incentive Scheme (G STIS) and Gujarat Electricity Duty 
Exemption Scheme (GEDES)  
(91) It was found that none of the coope rating exporting producers obtained any 
countervailable benefits under the  Gujarat Sales Tax Incentive Scheme (GSTIS) or the
 Gujarat Electricity Duty Exemption Scheme (GEDES). It was therefore not found 
necessary to further analyse this scheme within the sc ope of this investigation. 
2 West Bengal Incentive Schemes (WBIS) 
(92) The detailed description of the WBIS is set out in Government of West Bengal 
(GOWB) Commerce & Industries Department  notification No 588-CI/H of 22 June 
1999 (WBIS 1999) which was last re placed by notification No 134-
CI/O/Incentive/17/03/I of 24 March 2004 (WBIS 2004). The scheme conferred a 
number of benefits on the re cipient such as deferred paym ent of sales tax, subsidy for 
installation of capital goods, a nd development subsidies. Th e investigation established 
that one company had benefited from these sc hemes in the past. However, the impact 
of these benefits during th e RIP was negligible. For th is reason it was not found 
necessary to further analyse these schemes within the sc ope of this investigation. 
3 Package Scheme of Incentives (‘PSI’) of the Government of Maharashtra (‘GOM’) 
(a) Legal basis 
(93) In order to encourage the dispersal of i ndustries in the Maharashtra to the less 
developed areas of the State, the GOM has been granting incentives to new-expansion 
units set up in developing regions of th e State since 1964. The scheme has been 
amended many times since its introduction and the '2001 Scheme' was operative from 
1 April 2001 until 31 March 2006 after which it was extended for one year until 31 March 2007. The PSI of the GOM is compos ed of several sub-schemes amongst which 
the main ones are: (i ) the refund of octroi tax /entry  tax, (ii) the exemption from 
electricity duty and (iii) the exemption from local sales ta x which expired on 
24.10.2004. The investigation revealed that th e only sub scheme used by one of the 
cooperating exporting producers was th e local sales tax exemption.  
(b) Eligibility 
(94) In order to be eligible, companies must as a rule invest in less developed areas either 
by setting up a new industrial establishm ent or by making a large scale capital 
investment in expansion or diversification of an existing indus trial establishment. 
These areas are classified according to their economic development into different categories (e.g. less developed areas, le sser developed areas and least developed 
 
EN 23   EN areas). The main criterion to establish the am ount of incentives is the area in which the 
enterprise is or will be located and the size of the investment. 
(c) Practical implementation 
(95) Under the local sales tax exemption sc heme which expired in October 2004, 
designated units were not required to collect  any sales tax on their sales transactions. 
Similarly, designated units were exempted fr om the payment of the local sales tax on 
their purchases of goods from a supplier its elf eligible for the scheme. Whereas the 
exemption in relation to sales transacti ons does not confer any benefit on the 
designated sales unit, the exemption in re lation to purchase transactions, however, 
does confer a benefit on the designated pur chasing unit. The investigation established 
that the company concerned enjoyed sales tax exemption until 24 October 2006. 
(d) Conclusion 
(96) The PSI of the GOM provides subsidies within  the meaning of Article 2(1)(a)(ii) and 
Article 2(2) of the basic Re gulation. The sub scheme examin ed constitutes a financial 
contribution by the GOM, since this conce ssion decreases the GOM's revenue which 
would be otherwise due. In addition, this exemption/re fund confers a benefit upon the 
company as it improves the company's liquidity. 
(97) The sub-scheme is only available to comp anies having invested within certain 
designated geographical areas with in the jurisdiction of the State of Maharashtra. It is 
not available for companies located outside these areas. The level of benefit is different according to the ar ea concerned. The scheme is specific in accordance with 
Article 3(2)(a) and Article 3(3) of the basi c Regulation and theref ore countervailable. 
(e) Calculation of the subsidy amount 
(98) Concerning the sales tax exemption, the subs idy amount was calculated on the basis of 
the amount of the sales tax normally due dur ing the review investigation period but 
which remained unpaid under the scheme. Since the sales tax exemption scheme 
expired on 24.10.2004m only the sales unpaid during the period 1.10.2004 – 
24.10.2004 were taken into consideration because  only this period fe ll in the review 
investigation period. Pursuant to Article 7(2) of th e basic Regulation, the amount of 
subsidy (numerator) has then been alloca ted over the total co mpany turnover during 
the review investigation peri od as the appropriate denominat or, because the subsidy is 
not export contingent and it was not gr anted by reference to the quantities 
manufactured, produced, exported or tr ansported. During the RIP one company 
benefited from the sub scheme; however th e subsidy amount obtained was less than 
0.1% i.e. negligible. 
IV. Amount of countervailable subsidies 
(99) The amount of countervailable subsidies in accordance with the provisions of the basic 
Regulation, expressed ad valorem , for the investigated ex porting producers ranges 
between 2.7% and 20.9 %. 
(100)  Although there was a high level of cooperation in terms of proportion of exports to the 
Community it should be noted that severa l exporting producers di d not cooperate in 
 
EN 24   EN the proceeding, including the exporting producer  with the highest subsidy margin in 
the original investigation. The capacity  and production of the non cooperating 
producers in India is significant and it is al so likely that these exporting producers will 
continue to avail of benefits  under the investigated subsid isation schemes at at least 
the same rate as that establishe d in the original  investigation. 
SCHEME → DEPBS ITES EPGS EOU ALS ECS GSTIS GEDES WBIS PSI Total
COMPANY ↓  % %  %  %  %  %  %  %  %  %  %  
Senpet 
(Former Elque) nil nil nil 2.7 nil nil nil nil nil nil 2.7 
Futura nil nil nil  6.2 nil 0.1 nil nil nil nil 6.3 
Pearl nil nil 0.3 Nil 20.6 nil nil nil nil neg 20.9 
V. CONCLUSIONS 
(101)  In accordance with Article 18 (2) of the basic Regulation, it  was examined whether the 
expiry of the measures in force would be lik ely to lead to a continuation or recurrence 
of subsidisation. 
(102)  As set out under recita ls (21) to (100) above, it was es tablished that during the review 
investigation period Indian exporters of the product concerned continued to benefit 
from countervailable subsidisation by the I ndian authorities. In fact, the subsidy 
margins found during the review are higher th an those established during the original 
investigation, except for one exporting produ cer. The subsidy schemes concerned give 
recurring benefits and there is no indicat ion that these programmes will be phased out 
in the foreseeable future. In the absence of information on how the amendment to the 
ALS verification system will be implemented in practice, no conclusions can be drawn 
as to the possible effect of these changes. Under these conditions, the exporters of the 
product in question will continue to receive countervailable subsidies. Each exporter is 
eligible for several of the subsidy progr ammes. Under these circumstances, it was 
considered reasonable to concl ude that subsidisation would be  likely to continue in the 
future. 
(103)  Since it has been demonstrated that subsidis ation continued at the time of the review 
and is likely to con tinue in the future, the issue of likelihood of recurrence of 
subsidisation is irrelevant. 
D. DEFINITION OF THE COMMUNITY INDUSTRY 
1. Community production 
(104)  PET is manufactured in the Community by the following companies: 
Twelve producers which requested the expiry review, supported them and co-
operated in the investig ation (see recital (107)) 
 
EN 25   EN Two producers which have requested the expi ry review but have not co-operated in 
the current investigation; 
One subsidiary of a Korean producer loca ted in the Community who has cooperated 
in the investigation and has supported the request; 
(105)  PET produced by all these companies cons titutes the total Community production 
within the meaning of Article 9(1) of the basic Regulation. 
2. Community industry 
(106)  The Commission examined whether th e co-operating Community producers 
requesting or supporting the request for the expiry re views represented a major 
proportion of the total Community producti on of PET. Those Community producers 
accounted for 88% of the total Community  production of PET. Those Community 
producers who did not fully cooperate were  excluded from the definition of the 
Community industry. The Comm ission therefore considered  that the twelve fully 
cooperating Community producers represen t the Community industry within the 
meaning of Articles 9(1) and 10(8) of the basic Regulation. In the original 
investigations the Community industry repr esented more than 85% of the total PET 
production in the Community at that time. 
(107)  The following twelve Community producer s constitute the Community industry. 
Voridian BV (The Netherlands) M & G Polimeri Italia Spa (Italy) Equipolymers Srl (Italia) La Seda de Barcelona SA (Spain) Novapet SA (Spain) Selenis Industria de Po limeros SA (Portugal) 
Aussapol Spa (Italy) 
Advansa Ltd (UK) 
Wellman BV (The Netherlands) Boryszew subsidiary Elana Wse (Poland) V.P.I. SA (Greece) SK Eurochem Sp.Z. o.o. (Poland) 
 
EN 26   EN E. SITUATION ON TH E COMMUNITY MARKET 
1. Consumption in the Community market 
(108)  Community consumption was established on the basis of the sales volumes of the 
Community industry, of estimates of the sa les of the other Community producers on 
the Community market based on data provided  at the complaint stage, and Eurostat 
data for all Community impor ts from third countries. 
(109)  Between 2002 and the RIP, Community consum ption of the product concerned in the 
Community continuously increased to re ach a total of 2.400.000 t onnes in the RIP. 
The overall increase over the period was 18%. The increase was partly due to new 
applications (beer and wine bottles, inter alia) and partly due to the increase of consumption in the accession countries.  
Table 1 2002 2003 2004 RIP 
Community 
consumption (tonnes) 
 
Index 2.041.836
100 2.213.157
108 2.226.751
109 2.407.387 
 
118 
2. Imports from India 
2.1 Volume, market share and prices of imports 
(110)  Between 2002 and the RIP, total imports fr om India increased by 13%. Whereas 
imports decreased by 17% from 2002 to 2003, they increased by 100 percentage points in 2004 and decreased again during the RI P to around 6800 tonnes, i.e. by around 70 
percentage points. Import pr ices rose by 5 percentage points in 2003 and by further 3 
and 7 percentage points respectively in 2004 and during the RIP. Th is price trend only 
partially reflects the strong in crease of the raw material co sts.Market share of Indian 
imports remained relatively small throughout  the period considered, i.e. 0.3% in 2002, 
0.2% in 2003, 0.5% in 2004 and 0.3% in the RIP. 
Table 2 2002 2003 2004 RIP 
India  
Volume (tonnes) 
Index 
Price (EUR per tonne) 
Index 
Market share 6 046
100
883
100
0,3% 4 999
83 
930
105
0,2% 11 079
183
955
108
0,5%  
6 831 
113 
1018 
115 
0,3% 
3. Imports from other countries  
 
EN 27   EN (111)  The volume of imports from other third c ountries increased by 25 percentage points 
during the period consider ed. The biggest increase was observed in 2003, when 
imports rose by 41 percentage points. Af ter the imposition of anti-dumping measures 
on Chinese exports in 2004, imports declin ed by 14 percentage points in 2004 and by 
2 further percentage points in the RIP. Ma rket shares followed a similar trend passing 
from 15.9% in 2002 to 20.6% in 2003, to 18.5% in 2004 and to 16.9% during the RIP. 
The increase of the market share of imports was lower than the increase of the imports 
in absolute terms, due to the stronger consumption. Import prices were on average 
constantly lower than the EU prices between 2002 and 2004. Only during the RIP, 
were they slightly above Community industry prices. 
Table 3 2002 2003 2004 RIP 
 
Volume (tonnes) 
Index 
Average price (EURpert) 
Index 
Market share 
Main exporters 
Korea 
Pakistan 
China 
USA 
Taiwan 324 749
100
869
100 
15,9%
113 685
28 558
47 875
20 570
42 136 456 499
141
821
94
20,6%
129 188
83 208
131 343
16 105
36 986 411 020
127
907
104
18,5%
139 296
55 125
49 678
49 763
16 796  
406 562 
125 
1061 
122 
16,9% 
 
127 734 
73 426 
72 814 
50 393 
29 382 
F. ECONOMIC SITUATION OF THE COMMUNITY INDUSTRY 
1. Preliminary remarks 
(112)  At the beginning of the review, sampling of the Community producers was foreseen 
but considering that their number was not exce ssive, it was decided to include all of 
them and the injury factors have been assessed on the basis of information collected at the level of the entire Community industry. 
(113)  Pursuant to Article 8(5) of the basi c Regulation, the Commission examined all 
relevant economic factors and indices havi ng a bearing on the st ate of the Community 
industry.  
2.1. Production 
(114)  The Community industry’s production increa sed by 20% between 2002 and the RIP, 
i.e. from a level of 1.465.000 tonnes in 2002 to 1.760.000 tonnes in the RIP. The 
 
EN 28   EN yearly increase was 4.8% in 2003 and 4.6% in  2004. A further increase occurred in the 
RIP, when production soared by 150.000 tonnes, i.e. by 10.8%. This was due to the restructuring process undertak en by the industry with the aim to better control the 
production costs and thereby take advantag e of the growing consumption in the 
Community market which, as stated a bove, increased by 19% between 2002 and the 
RIP (from 2 million tonnes in 2002 to  2.4 million tonnes in the RIP).  
Table 4 2002 2003 2004 RIP 
Production (tonnes) 
Index 1 464 522
100 1 534 480
105 1 602 086
109 1 760 828 
120 
2.2. Capacity and capacity utilisation 
(115)  Production capacity increased by 22% between 2002 and the RIP, i.e. from a level of 
1.760.000 tonnes in 2002 to 2.156.000 tonnes in th e IP. The increase occurred mainly 
in the RIP, when production capacity, co mpared to the year  2004, increased by 
300.000 tonnes, i.e. 16.7%. This significan t increase of production capacity was 
parallel to the increase of  production over the same peri od (see recital (114)). The 
increase in production capacity resulted fr om additional investments in production 
lines designed to take advantage of the growing market . The capacity utilisation 
increased by 4 percentage points in 2003, remained on this level in 2004 and then 
decreased in the RIP by 5 per centage points to the level of 82%. The decrease between 
2004 and the RIP results from the significant increase of production capacity in that 
period. Consequently, a higher production volume in the RI P, when compared with 
2004, coincided with a lower capacity utilisation rate. 
Table 5 2002 2003 2004 RIP 
Production capacity (tonnes) 
Index  1 760 332
100 1 762 378
100 1 848 315 
105 2 156 294 
122 
Capacity utilisation 
Index 83%
100 87%
105 87% 
104 82% 
98 
2.3. Sales and market share 
(116)  The volume sold by the Community industry on the Community market increased by 
21% between 2002 and the RIP. A growth of 2% in 2003 was followed by an increase in both 2004 and RIP, by 8 and 11 percenta ge points respectivel y. Notwithstanding the 
increase of sales, due to the higher cons umption the Community industry's market 
share fell by 4 percentage points in 2003 and then gradua lly rose by 5 percentage 
points in 2004 and 1 percen tage point in the RIP. 
Table 6 2002 2003 2004 RIP 
Sales in the EC (tonnes) 
Index  1 306 768
100 1 333 976
102 1 438 883 
110 1 586 902 
121 
 
EN 29   EN Market share 64% 60% 65% 66% 
2.4. Growth 
(117)  Overall, it has to be noted that the Comm unity industry’s market  share increased by 
2% in the period considered, which shows th at its growth lagged behind the growth of 
consumption of the overall market. 
2.5. Employment 
(118)  The level of employment of the Community  industry increased by 18% in the period 
considered. The main increase occurred in  2003 (11 percentage  points) and 2004 
(further 6 percentage points). Although this  rising tendency continued in the RIP, the 
increase amounted to only 2 percentage poi nts. This increase of 18% during the whole 
period is linked to the production level which increased by 20%.  
Table 7 2002 2003 2004 RIP 
Employees 
Index  1 010
100 1 124
111 1 170
116 1 190 
118 
2.6. Productivity 
(119)  The Community industry’s productivity, measured  as the output in tonnes per person 
employed per year, increased overall over the period considered. After initially falling 
by 6% in 2003 compared to the year 2002 a nd remaining at this level in 2004, when 
productivity in the RIP increased signifi cantly by more than 8% compared to 2004, a 
period when production increased significantly. 
Table 8 2002 2003 2004 RIP 
Productivity(t/employee) 
Index 1450
100 1365
94 1369
94 1480 
102 
2.7. Wages 
(120)  It has to be noted that PET chips production is a capital intensive industry and that 
therefore labour costs have a limited impact on the overall cost of the product. During 
the period, wages increased by 12%, compar ed to a 20% increase of the overall 
production cost. Another significant indicato r is the cost of wa ges spent per tonne 
produced. During the period, this cost decreased by 6%. 
Table 9 2002 2003 2004 RIP 
Wages (million Euro) 
Index 
Wages per tonne 
produced(€) 62,3
100
44,463,0
101
42,966,3
106
43,669,5 
112 
41,9 
 
EN 30   EN Index  
100 96 98  
94 
2.8. Sales prices and factors affecting Community prices 
(121)  The unit sales prices increased from 924 EUR/tonne in 2002 to 1058 EUR/tonne in the 
RIP. Overall, the tendency was rising (by 15% in the whole period). This increase is to 
a large extent a consequence of  the increase in the price of raw materials, which is due 
to the increase in the oil pr ice. Although the Community in dustry had increased prices 
it was not in the position to pass the increase on to the downstream sector and fully reflect the increase of raw materials prices in  its sales prices. This was principally due 
to the fact that the increase in the price of raw materials was higher than the increase 
of PET prices. With the aim to maintain its market share, the Community industry 
could only moderately increase its prices  and thus experienced price suppression. 
Table 10 2002 2003 2004 RIP 
Weighted average price 
(EUR/tonne) 
Index 924
100 902
98 1006
109 1058 
 
115 
2.9. Cost of production of the main raw materials 
(122)  Bearing in mind that around 850 kg of purifie d terephthalic acid (PTA) and 350 kg of 
mono ethylene glycol (MEG) (the main raw materials) are needed to produce 1 tonne 
of PET, the costs of raw materials (PTA and MEG) increased significantly 
respectively by 67% and by 31% between 2002 and the RIP to reach the level of 770 EUR/tonne (PTA) and 721 EUR/tonne (MEG) (average of the RIP). Although a small 
decline in prices of PTA has been noted in  the third quarter of 2005 when the prices 
dropped to the level of 700 EUR/tonne, and a substantially stable price was observed 
for MEG, it has to be pointed out that th e raw materials are purchased in advance 
based on long term contracts. As a result, fo r the period considered, despite the small 
decline in prices of PTA at the end of th e RIP, the Community industry still bears the 
consequences of the heavily increased costs.  In addition, due to the situation on the 
world oil market the prices of raw materi als for the production of  PET are susceptible 
to unpredictable changes but they are most lik ely to remain at a high level. All these 
factors contribute to an increased level of vulnerability of the Community PET 
producers. It should be noted, however, th at the main raw materials are products 
traded on a global level, and should ther efore also affect the Indian exporting 
producers to the same extent.  
Table 11 
average cost (EUR/tonne)
 2002 2003 2004 RIP 
-PTA 
Index 460
100566
123718
156770 
167 
 
EN 31   EN -MEG 
Index 551
100 550
100 650
118 721 
131 
(123)  By comparison the average unit cost pe r tonne of PET chips produced by the 
Community industry was the following: 
Table 12 2002 2003 2004 RIP 
Weighted average cost 
(EUR/tonne) 
Index 899
100 918
102 1013
113 1092 
 
121 
(124)  During the period considered, as indicated in  tables 11 and 12, the main raw materials 
have continuously increased (PTA by 67%, MEG by 31%), while the overall cost of 
production raised only by 21%. However, as shown in ta ble 10, prices have only 
increased by 15% due to the f act that the Community indust ry was not in a position to 
pass the increase onto the downstream sector a nd fully reflect the rise of raw materials 
prices in its sales prices. 
2.10. Stocks 
(125)  The evolution of stocks over the whole pe riod considered, i.e. between 2002 and the 
RIP, is down by 10%. However, as in the orig inal investigations, stocks should not be 
considered as a meaningful indicator as  regards PET produced by the Community 
industry, given the seasonal nature of th e PET market throughout the year. When 
compared to the production, stocks re present around 5/6% of the output.  
Table 13 2002 2003 2004 RIP 
Stocks (tonnes) 
Index 101 554
100 110 695
109 90 422
89 91 123 
90 
2.11. Profitability, return on investments and cash flow 
(126)  Profitability on sales represents the profit generated by sales of the product concerned 
in the Community. Return on total assets and cash flow could only be measured at the 
level of the narrowest group of products wh ich included the like product, pursuant to 
Article 8(8) of the basic Regulation. More over, return on investments has been 
calculated on the basis of return on total assets, as return on total assets is considered more relevant for the an alysis of the trend.  
Table 14 2002 2003 2004 RIP 
Pre-tax profit margin on sales 
in the Community 2,7% -1,8% -0,7%  
-3,2% 
Return on total assets 2,0% -1,4% -0,6% -2,4% 
 
EN 32   EN Cash flow(% of total sales) 18,1% 5,5% 10,1% -2,6% 
(127)  Further to the price suppressi on starting in 2002 a nd coinciding with a strong increase 
of dumped imports from the PRC, Taiw an, Malaysia, Korea and Australia (until 
2004), and of subsidised imports from India the financial situati on of the Community 
industry deteriorated and turned into lo sses in 2003. After a small recovery in 2004 
due to the anti-dumping measures imposed on PRC and Australia, losses increased to -
3,2% in the RIP. It is therefore noted  that there is a clear downward trend. 
(128)  The trends for return on total assets and for cash flow developed si milarly i.e. showed 
a relatively good situa tion in 2002, a sharp deterioratio n in 2003, a small recovery in 
2004 and a further deterioration in the RIP. 
2.12. Investments and ability to raise capital 
Table 15 2002 2003 2004 RIP 
Investments ('000 EUR) 
Index 31.779
100 42.302
133 63.986
201 50.397 
159 
(129)  The investments were partly dedicated to an  increase of capacity and partly to the 
improvement of the production process. The bulk of the expenditure was made in 2004 and during the RIP, coinciding with the increa se of the capacity and with the aim to 
keep the market share in vi ew of the increased consumption. Nevertheless, the current 
situation of the Community industry and th e evolution of the Community and world 
markets for PET marked out by lack of prof itability were not an incentive to make 
excessive investments. Although in some circumstances Community producers have 
been able to raise capital (in particular from related companies), the lack of profitability of PET did not encourage inve stment and in some cases the decision was 
postponed.  
2.13. Magnitude of the actual  margin of subsidy  
(130)  As concerns the impact on the Community industry of the magnit ude of the actual 
margin of subsidy of Indian imports, given th e price sensitivity of the market for this 
product, this impact cannot be considered to be negligible. It should be noted that this 
indicator is more relevant in the context of the likelihood of r ecurrence of injury 
analysis. Should measures lapse, it is likely that subsidized imports would come back 
at such volumes and prices that the impact  of the magnitude of the subsidy margin 
would be significant. 
2.14 Recovery from the effect s of past subsidisation  
(131)  While the indicators examined above show  some improvement in some economic 
indicators of the Community industry, further to the imposition of definitive 
countervailing measures in 2001, they al so provide evidence that the Community 
industry is still fragile and vulnerable.  
3. Conclusion on the situatio n of the Community industry 
 
EN 33   EN (132)  The constant increase of consumption partly due to new applications  (inter alia beer 
and wine bottles) and partly due to the increase of consumption in the accession 
countries, obliged the Community industry to increase capacity and production in 
order not to lose market share. To do so, an important restructuring process 
accompanied by a frequent change of the ow nership of the different producers, took 
place in 2004 and during the RIP. In parallel, the number of production lines was generally increased in order to follow the increase of the consumption and to 
concurrently achieve economies of scale. Thus, some economic indicators, i.e. consumption, capacity production, productio n, EU sales and employment indeed 
followed a positive trend. In addition, the sales price also increased during the period considered. However, all those restruct uring efforts described above could not 
counterbalance the impact of the constant and massive incr ease of raw material prices 
in the period considered. The higher raw ma terial costs could not be passed on to the 
downstream sector to the exte nt it would have been neces sary to maintain a certain 
level of profitability. This caused a serious  deterioration of the profitability which 
decreased from +2.7% in 2002 to -3.2% duri ng the RIP. Similar negative trends were 
observed for the return on investments and for the cash flow. 
(133)  This coincided with the low price level of the imports from the country concerned 
which clearly contributed to the downward pressure on the price of the Community 
industry. However, given the small volumes of  subsidised imports in the framework of 
this expiry review, the focus is  on the likelihood of  recurrence of injury analysis. Thus, 
despite the apparent positive developmen ts concerning production, sales and sales 
price, the overall financial si tuation of the Community deteri orated and is reflected in 
the negative developments of profitability (from 2,7% profit in 2002 to 3,2% losses in 
the RIP), of export sales, production cost , return on investments and cash flow.  
(134)  If one compares the above trends with th e ones described in the Regulations imposing 
provisional and definitive c ountervailing measures, again the assessment is mixed. As 
concerns market share, the Community i ndustry lost one percen tage point between 
2002 and the RIP, whilst it had earned five percentage points in the four years 
preceding the adoption of the definitive countervailing measures. On the other hand, the profitability of the Community industry dur ing the RIP is less negative than before 
the imposition of definitive countervailing measures. Consequently, despite some apparent positive trends showed by the injury indicators, the situation of the Community industry is still far from the levels that could be expected had it fully recovered from the injury found in  the original investigations. 
(135)  It is therefore concluded that the situa tion of the Community industry has slightly 
improved, as compared to the period preceding the imposition of measures, but is still very fragile and vulnerable. Furthermore, the price pre ssure from imports of the 
country concerned did not allow the Commun ity industry to fully reflect the increase 
in the price of raw materials in its sales prices. 
G. LIKELIHOOD OF RECURRENCE OF INJURY 
Relationship between export volumes and pri ces to third countries and export volumes 
and prices to the Community  
(136)  It was found that the average export price of Indian sales to non-EU countries was 
significantly below the average export price to the Community and also below the 
 
EN 34   EN prices on the domestic market. The Indian exporter’s sale s to non-EU countries were 
made in significant quantities, accountin g for over 95% of total export sales. 
Therefore, it was considered that, should m easures lapse, Indian exporters would have 
an incentive to shift significant quantities of  exports from other th ird countries to the 
more attractive Community market, at price levels, which, even if they increased, were 
likely to still be below the current pri ce levels of export to the Community.  
Production capacity, unused capacity and stocks 
(137)  As indicated further under recital (140), the exporting producers in India have the 
potential to increase their export volumes to the Community market. India had a 
significant growth in its production capaci ty from the level of 330.000 tonnes in 2003 
to 600.000 tonnes in 2005. According to market fo recasts, it is expected to increase by 
a further 220.000 tonnes in 2008. In 2005, the domestic sales amounted to 220.000 tonnes and exports to 290.000 tonnes (including 6.831 tonnes to the EU). On the basis of the data available, on average, the current spare cap acity should am ount to around 
90.000 tonnes and has to be considered as signi ficant as it represents around 4% of the 
current Community consumption. This estimat e is confirmed by the results of the co-
operating Indian producers, who ha d significant spare capacities.  
(138)  Concerning the stock level, the investigation ha s shown that the level of stocks held by 
the co-operating Indian producers was not significant. However, it should be noted 
that the level of stocks is not  a meaningful factor as the market for PET is cyclical.  
(139)  To conclude, although the imports to the EU  were low, there exists a risk that 
significant exports could be  diverted to the EU. 
Conclusions 
(140)  The producers in the country concerned theref ore have the potential to raise and/or 
redirect their export volumes to the Community market. The investigation showed that 
the cooperating exporting producers sold the product concerned at a lower price than 
the Community industry. These low prices w ould most likely continue to be charged 
or even decrease in line with the lower prices charged to the rest of the world, as mentioned in recital (137), also in order to re gain the level of market shares held in the 
period before the imposition of measures. Such price behaviour, coupled with the 
ability of the exporters in the country con cerned to deliver significant quantities of the 
product concerned to the Commun ity market, would in all li kelihood have the effect of 
reinforcing the price-depressive trend on the market, with an expected negative impact on the economic situation of the Community industry. 
(141)  As shown above, the situation of the Co mmunity industry rema ins vulnerable and 
fragile. It is likely that if the Community  industry was exposed to increased volumes 
of imports from the country concerned at su bsidized prices, this would result in a 
deterioration of its sales, market shares , sales prices as well as the consequent 
deterioration of the financial situation, to the levels found in  the original investigation. 
On this basis, it is therefore concluded that  the repeal of the measures would in all 
likelihood result in a worsening of the alread y fragile situation and a recurrence of an 
even more injurious state of the Community industry. 
 
EN 35   EN (142)  On the basis of the foregoing it is concl uded that the import pri ces would most likely 
be lower on the Community market in the absence of anti-subsidy measures, as the producers in India would possibly try to in crease their market shares. Such price 
behaviour, coupled with th e ability of the exporting producers in India to sell 
significant quantities of PET on the Commun ity market, would in all likelihood have 
the effect of reinforcing the price pressure , with an expected negative impact on the 
situation of the Community industry. 
H. COMMUNITY INTEREST 
1. Introduction 
(143)  According to Article 31 of the basic Regulation, it was examined whether the 
maintenance of the existing an ti-subsidy measures would be against the interest of the 
Community as a whole. The determination of  the Community interest was based on an 
appreciation of all the various  interests involved.  The present inves tigation analyses a 
situation in which anti-subsidy measures ha ve already been in place and allows for 
assessment of any undue negative impact on th e parties concerned due to the current 
anti-subsidy measures. 
(144)  On this basis, it was examined whether, despite the conclusions on the likelihood of a 
continuation or recurrence of injurious subsidisation, compelling reasons existed which would lead to the conclusion that it is  not in the Community interest to maintain 
measures in this particular case. 
2. Interest of the Community industry 
(145)  As outlined above, there is a clear likelihood of  recurrence of injurious subsidisation if 
measures were to be repeal ed. All the Community producer s but two fully co-operated 
and indicated their support for the ongoing measures.  
(146)  The continuation of anti-subsidy measures on imports from India would enhance the 
possibility for the Community industry to reach a reasonable leve l of profitability 
because it is likely that in the short medium  term, it would be ab le to increase sales 
quantities and thereby benefit from economies of scale and at the same time is likely 
to be able to moderately increase their sales price and thereby reach a satisfactory profit level. Even if subsidised imports in  the RIP originating in the India were low 
and, therefore, could not have caused severe injury, they would be likely to negatively 
affect the situation of the Community i ndustry if the anti-subsidy measures were 
repealed. These measures are thus essential to guarantee the viability of the Community industry’s PET chips business, which has been facing competition from 
subsidised imports from I ndia for several years.  
3. Interest of importers  
(147)  Low cooperation was obtained from the importers/traders, and amongst those 
cooperating importers none were purchasing from India. However, the cooperating 
importers/traders could be regarded as repr esentative as their sales volume represented 
around 5% of the EU consumption. They would prefer a market with zero duties also 
if they are constantly en joying good financial results.  
 
EN 36   EN (148)  The investigation showed that there are still alternative so urces of supply with no anti-
subsidy or anti-dumping measures, i.e. from  Mexico, Brazil, USA, Turkey, Pakistan, 
Iran, Saudi Arabia, available. The importers/tr aders would thus be able to rely on (or 
to switch to) considerable al ternative sources of supply. 
(149)  Bearing in mind that the measures in force did not considerably a ffect the importers, it 
is concluded that maintaining the existi ng countervailing measures against imports 
originating in India would continue not have a signif icant negative effect on the 
situation of the importers in the Community. 
4. Interest of converters/users 
(150)  The Commission sent questi onnaires to 47 known conve rters/users. Only ten 
converters/users with an overall low repr esentativity replied to  the questionnaire. 
According to the information on purchases  supplied in their responses to the 
questionnaire, co-operating converters/users dur ing the IP represent about 20% of total 
Community consumption of PET. They pur chased during the IP 95% of their PET 
from Community producers and the remainder from imports originating in countries 
other than the country subject to this re view. A number of arguments against the 
imposition of duties were presented. 
(151)  Five converters (transforming PET chips in preforms and bottle grade and representing 
10% of the consumption) replied to the que stionnaire. The cost of PET chips accounts 
for 55% of their final product (mostly prefor ms). It has been established that they 
import negligible quantities from India and other third countries. Nevertheless they 
oppose the continuation of duties claiming that the measures could have the effect of 
artificially raising the prices in Europe.  
(152)  Five users accounting for about 10% of th e consumption supplied rather incomplete 
data. The low level of co-opera tion from the big users is likely to be due to the fact 
that the last investigation concerning im ports of PET from the PRC, Australia and 
Pakistan took place only two years ago. PET costs account for around 6/7% of the 
overall cost and are therefore rather lim ited. Although they have declared no imports 
from India, similarly as the converters, th ey oppose the imposition of duties claiming 
that the measures could have the effect of artificially raising th e prices in Europe. 
(153)  Considering the rather good financial situa tion of the downstream industry, in contrast 
to the one of the Community industry, no c onverter/user put forward the argument that 
maintaining the current duties could lead to a loss of jobs or to moving manufacturing 
facilities overseas. 
(154)  Furthermore, in terms of output, the Commun ity industry adapted its size to match the 
increased consumption and therefore it is ve ry likely that the unused capacity of the 
Community industry could fully c over the amount of the imports. 
(155)  Bearing in mind that there are still alternat ive sources of supply w ith no anti- subsidy 
or anti-dumping measures, i.e. from Mexi co, Brazil, USA, Turkey, Pakistan, Iran, 
Saudi Arabia, the Community users would more over be able to rely on (or to switch 
to) diversified suppliers of the product concerned. 
 
EN 37   EN (156)  As concerns the performance of the user industry, the investig ation has shown that 
during the period consider ed the co-operating users increased their turnover, 
maintained employment stable and rath er improved overall their profitability. 
Therefore it was found that they were not negatively affected by the anti-subsidy 
measures. 
(157)  On the basis of the above, it is concluded that maintaining the existing anti-subsidy 
measures against imports originating in I ndia would not have a significant negative 
effect on the situation of the users in the Community. 
5. Interest of suppliers 
(158)  The suppliers of raw material (mono ethylen e glycol (MEG) and purified terephthalic 
acid (PTA), DMT and IPA, all petrochemical  products derivatives of naphtha, clearly 
indicated their support for th e measures and provided good co-operation. They would 
benefit if measures ar e maintained as the Community i ndustry would be likely to be 
able to recover allowing them to improve their performance.  
6. Conclusion on Community interest 
(159)  Taking into account all of th e above factors, it is concluded that there are no 
compelling reasons against the maintenan ce of the current anti-subsidy measures 
against India. 
I. COUNTERVAILING MEASURES 
(160)  All interested parties were informed of the essential facts and considerations on the 
basis of which it is intended to recommend that the existing measures be maintained. They were also granted a peri od to make representations subs equent to this disclosure. 
The Government of India made comments on injury aspects alleging that it was not 
demonstrated that the Community industry suffered continued injury and that import pressure from India was not the reason th at the European producers did not fully 
reflect the increase of the raw materials cost in th eir sale price. It is to be recalled that , 
as indicated in the analysis of the situa tion of the Community industry, its financial 
situation deteriorated and, as  explained in recital (127), the low price level of the 
imports from the country concerned clearly contributed to the dow nward pressure on 
the price of the Community i ndustry. However, given the small volumes of subsidised 
imports in the framework of this expiry re view, the likelihood of recurrence of injury 
had to be examined. In this regard it was concluded, as stated in  recital (127) above, 
that in absence of measures, increased vol ume of imports from India at low prices 
would have a negative impact on the situation of the Community industry. 
Furthermore , one Indian exporter alleged that in the absence of measures it is not 
likely that India will re-direct sales to the Community. This exporter claimed that 
emerging markets are more at tractive than the Communit y, that Indian demand is 
growing fast and that, therefore, no spare cap acity is available. It is however to be 
considered that, notwithstanding an increase  of the demand in the Indian market, the 
investigation at company level indicated spare capacities, as also confirmed by the 
market intelligence. It is therefore concl uded that none of the disclosure comments 
received were such as to alter the conclusions as c ontained in this regulation. 
 
EN 38   EN (161)  It follows from the above that, as pr ovided for by Article 21(2) of the basic 
Regulation, the countervailing measures applicable to impor ts of PET chips, 
originating in India should be maintained. It  is recalled that these measures consist of 
specific duties. 
(162)  The individual company counter vailing duty rates specified in this Regulation reflect 
the situation found during the review with re spect to the co-opera ting exporters. Thus, 
they are solely applicable to imports of  the product concerned manufactured by these 
companies and thus by the specific legal entities mentioned. Imports of the product 
concerned produced by any other company not specifically mentione d in the operative 
part of this Regulation with its name and address, including entities related to those 
specifically mentioned, cannot be nefit from these rates and sh all be subject to the duty 
rate applicable to all "other companies ". 
(163)  Any claim requesting the appli cation of these individual coun tervailing duty rates (e.g. 
following a change in the name of the entity or following the setting up of new production or sales entities) shoul d be addressed to the Commission 
14 forthwith with 
all relevant information, in particular any modification in the company's activity linked 
to production, domestic and export sales asso ciated with, for instance, that name 
change or that change in the production a nd sales entities. If a ppropriate, and after 
consultation of the Advisory Committee, th e Regulation will be amended accordingly 
by updating the list of companies benef iting from individual duty rates. 
(164)  In order to ensure proper enforcement of the countervailing duty, the residual duty 
level should not only apply to non-cooperating exporters but also apply to those 
companies which did not have any exports  during the RIP. Ho wever, the latter 
companies are invited, when they fulfil the requirements of Article 20 of the basic Regulation, to present a request for a review pursuant to that Article in order to have 
their situation examined individually. 
HAS ADOPTED THIS REGULATION: 
Article 1 
1 A definitive countervailing duty is hereby im posed on imports of polye thylene terephthalate 
having a viscosity of 78 ml/g or higher, acco rding to ISO Standard 1628-5, falling within CN 
code 3907 60 20 and originating in India. 
2. Except as provided for in Article 2, the rate of  the countervailing duty a pplicable to the net, 
free-at-Community frontier price, before dut y for products manufactured by the companies 
listed below shall be as follows: 
Country Company Countervaili
ng duty (EUR/tonne)TARIC additional 
code 
India Reliance Industries Limited  41,3 A181 
                                                 
14 European Commission, Directorate-General for Tr ade, Directorate H, J-79 5/17, B-1049 Brussels 
 
EN 39   EN India Pearl Engineering Polymers 
Ltd  31,3 A182  
India Senpet Ltd   22,2 A183 
India Futura Polyesters Ltd  0 A184 
India South Asian Petrochem Ltd  106,5 A585 
India All other companies  41,3 A999 
 
3. In cases where goods have been damaged before  entry into free circulation and, therefore, 
the price actually paid or pa yable is apportioned for the dete rmination of the customs value 
pursuant to Article 145 of Com mission Regulation (EEC) No 2454/9315, the amount of 
countervailing duty, calculated on the basis of  the amounts set above, shall be reduced by a 
percentage which corresponds to the apportioni ng of the price actually paid or payable. 
4. Notwithstanding paragraphs 1 and 2, the definitive countervai ling duty shall not apply to 
imports released for free circulation in accordance with Article 2. 
5. Unless otherwise specified, the provisions in  force concerning customs duties shall apply. 
Article 2 
1. Imports shall be exempt from the counter vailing duties imposed by Article 1 provided 
that they are produced and directly exported (i .e. invoiced and shipped) to a company acting 
as an importer in the Community by the compan ies mentioned in paragraph 3, declared under 
the appropriate TARIC additional code and that the conditions set out in paragraph 2 are met. 
2. When the request for release for free circ ulation is presented, exemption from the 
duties shall be conditional upon pr esentation to the customs se rvice of the Member State 
concerned of a valid ‘Undertaking Invoice’ is sued by the exporting companies mentioned in 
paragraph 3, containing the esse ntial elements listed in the A nnex. Exemption from the duty 
shall further be conditional on the goods declared and presented to customs corresponding 
precisely to the descripti on on the ‘Undertaking Invoice’. 
3. Imports accompanied by an ‘Undertaki ng Invoice’ shall be declared under the 
following TARIC additional codes: 
Country Company TARIC additional 
code 
India Pearl Engineering Polymers 
Ltd A182 
                                                 
15 OJ L 253, 11.10.1993, p.1 Regulation as last amended by Commission Regulation (EC) No 2286/2003 
(OJ L 343, 31.12.2003, p.1) 
 
EN 40   EN India Reliance Industries Ltd A181 
India South Asian Petrochem Ltd A585 
Article 3 
This Regulation shall enter into force on the day following that of its publication in the 
Official Journal of the European Union. 
This Regulation shall be binding in  its entirety and directly applicable in all Member States. 
Done at Brussels, 
 For the Council 
 The President 
 
EN 41   EN ANNEX  
Elements to be indicated in the Undertak ing Invoice referred to in Article 2(2): 
1. The Undertaking Invoice number. 2. The TARIC additional code under which the g oods on the invoice may be customs-cleared 
at Community borders (as sp ecified in the Regulation). 
3. The exact description of the goods, including: 
— the product reporting code number (PRC) (as established in the undertaking offered by the 
producing exporter in question), 
— CN code, — quantity (to be given in units). 4. The description of the term s of the sale, including: 
— price per unit, — the applicable payment terms, — the applicable delivery terms, — total discounts and rebates. 5. Name of the company acting as an importer to  which the invoice is issued directly by the 
company. 
6. The name of the official of the company th at has issued the undert aking invoice and the 
following signed declaration: 
‘I, the undersigned, certify that the sale for di rect export to the European Community of the 
goods covered by this invoice is being made w ithin the scope and un der the terms of the 
undertaking offered by …… [company], and accep ted by the European Commission through 
Decision 2000/745/EC . I declare that the informa tion provided in this invoice is complete and 
correct.’