EUROPEAN UNION – COUNTERVAILING MEASURES ON CERTAIN POLYETHYLENE TEREPHTHALATE FROM PAKISTAN REQUEST FOR CONSULTATIONS BY PAKISTAN
Document: REQUEST FOR CONSULTATIONS BY
Date: 7 November 2014
Document codes: WT/DS486/1; G/SCM/D103/1; G/L/1089
Complainant: Pakistan
Respondent: EU
Third parties: China, U.S.
Dispute stage: Appellate Body
Agreements cited: Art. 1.1(a)(1)(i), 1.1(a)(1)(ii), 3.1(a), Annex I, Annex II, Annex III  Subsidies and Countervailing Measures (SCM)Art. VI  GATT 1994Art. 1, 3, 14, 19, 1.1(a)(1), 1.1(b), 14, 14(b), 19.3, 15.5, 12.6, 12.8, Annex VI, 22.3, 22.4, 10, 19.1, 32  Subsidies and Countervailing Measures (SCM)

EUROPEAN UNION – COUNTERVAILING MEASURES ON CERTAIN
POLYETHYLENE TEREPHTHALATE FROM PAKISTAN
REQUEST FOR CONSULTATIONS BY PAKISTAN
The following communication, dated 28 October 2014, and received at the WTO on
5 November 2014, from the delegation of Pakistan to the delegation of the European Union and to
the Chairperson of the Dispute Settlement Body, is ci rculated in accordance with Article 4.4 of the
DSU.

Pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes, Article 30 of the Agreement on Subsidies and Countervailing Measures
(SCM Agreement), and Article XXIII:1 of the General Agreement on Tariffs and Trade 1994
(GATT 1994), the Government of Pakistan requests consultations with the European Union (EU)
with respect to the imposition of provisional and definitive countervailing measures by the EU on
imports of certain polyethylene terephthalate from Pakistan, and with respect to certain aspects of
the investigation underlying those measures.
1
Pakistan is particularly concerned about the following aspects of the measures at issue:
1. The EU determined that Pakistan's Final Tax Regime (FTR), which is part of Pakistan's
tax law, constitutes a countervailable subsidy that is contingent upon export
performance. In Pakistan's view, this dete rmination appears to be inconsistent with
Articles 1, 3, and 19 of the SCM Agreement, as well as Article VI of the GATT 1994.
In particular:
(i) the EU appears to have acted inconsistently with Articles 1.1(a)(1)(ii) and
3.1(a) of the SCM Agreement and Article VI of the GATT 1994 in determining
that the FTR resulted in the foregoing of government revenue. The EU appears
to have compared the tax treatment under the FTR to a hypothetical treatment
under the "normal tax regime" (NTR), and improperly concluded that any
difference in tax liability between these two regimes constituted government
revenue foregone; and,
(ii) the EU appears to have acted inconsis tently with Articles 1.1(a)(1)(ii), 3.1(a)
and 19.3 of the SCM Agreement and Article VI of the GATT 1994 by refusing to
offset any alleged export subsidy with the Export Development Surcharge (EDS)
paid by the Pakistani exporter.
2. The EU also determined that the Manufacturing Bond Scheme (MBS) is a
countervailable subsidy that is contingent upon export performance. This

1 The Provisional Determination was published as Commission Regulation (EU) No 473/2010 of
31 May 2010, Imposing a provisional countervailing duty on imports of certain polyethylene terephthalate
originating in Iran, Pakistan and the United Arab Emirates, OJ L134/25. The Definitive Determination was
published as Council Implementing Regulation (EU) 857/2010 of 27 September 2010, Imposing a definitive
countervailing duty and collecting definitively the provisional duty imposed on imports of certain polyethylene
terephthalate originating in Iran, Pakistan and the United Arab Emirates, OJ L254/10.
WT/DS486/1 • G/SCM/D103/1 • G/L/1089

determination appears to be inconsistent with Articles 1 and 3, and Annexes I, II, and
III of the SCM Agreement, as well as Article VI of the GATT 1994. In particular:
(i) the EU appears to have acted inconsistently with Articles 1.1(a)(1)(i),
1.1(a)(1)(ii), and 3.1(a), on their own and read together with Annexes I(h),
I(i), II(I)(2), II(II)(1), II(II)(2), III(II)(2), and III(II)(3) of the SCM Agreement,
as well as Article VI of the GATT 1994, by determining that the MBS constituted
a remission or drawback of import charges in excess of those levied on imported
inputs that are consumed in the production of the exported product; and,
(ii) the EU appears to have acted inconsistently with Articles 1.1(a)(1)(i),
1.1(a)(1)(ii), and 3.1(a), on their own and read together with Annexes I(h),
I(i), II(I)(2), II(II)(2), III(I), and III(II)(3) of the SCM Agreement, as well as
Article VI of the GATT 1994, by determ ining that the entirety of the duty
refunds under the MBS scheme – rather than just the excess portion of these
refunds – constituted an export subsidy.
3. The EU determined that the "Long-Term Financing of Export-Orientated Projects"
(LTF-EOP) programme constituted a countervailable subsidy that is contingent upon
export performance and included this subsidy in its calculation of the subsidization
margin. This determination appears to be inconsistent with Articles 1, 3, 14, and 19
of the SCM Agreement as well as Article VI of the GATT 1994. In particular:
(i) the EU appears to have acted inconsistently with Articles 1.1(a)(1)(i),
1.1(a)(1)(iv), 3.1(a), 14(b), and 19.3 of the SCM Agreement, as well as Article
VI of the GATT 1994, by failing to explain adequately the application of its
method to the case at hand and by choosing an inappropriate interest
benchmark for calculating the amount of subsidy during the investigation
period; and,
(ii) the EU appears to have acted inconsistently with Articles 1.1(b), 3.1(a), 14(b),
and 19.3 of the SCM Agreement, as well as Article VI of the GATT 1994, in its
allocation of the amount of the subsidy.
4. The EU determined that the "Imports of Plant, Machinery and Equipment in
Manufacturing Bond" (IPME-MB) programme constituted a countervailable subsidy
that is contingent upon export performance and included this subsidy in its calculation
of the subsidization margin. This determination appears to be inconsistent with
Articles 1, 3, 14, and 19 of the SCM Agreement, as well as Article VI of the GATT
1994. In particular:
(i) the EU appears to have acted inconsistently with Articles 1.1(a)(1)(i),
1.1(a)(1)(iv), 3.1(a), 14(b), and 19.3 of the SCM Agreement, as well as Article
VI of the GATT 1994, by failing to explain adequately the application of its
method to the case at hand and by choosing an inappropriate interest
benchmark for calculating the amount of subsidy during the investigation
period; and,
(ii) the EU appears to have acted inconsistently with Articles 1.1(b), 3.1(a), 14(b),
and 19.3 of the SCM Agreement, as well as Article VI of the GATT 1994, in its
allocation of the amount of the subsidy.
5. The EU determined that a causal link existed between the allegedly subsidized imports
and the material injury suffered by the do mestic industry. In so doing, the EU
appears to have acted inconsistently with Article 15.5 of the SCM Agreement by failing
to ensure that injurious effects of known factors, such as imports from other sources,
competition from domestic producers not included in the domestic industry, economic
downturn, and low oil prices, were not improperly attributed to the allegedly
subsidized imports.
WT/DS486/1 • G/SCM/D103/1 • G/L/1089

6. The EU appears to have acted inconsiste ntly with Articles 12.6 and 12.8 of the SCM
Agreement by failing to provide the Pakistan i exporter with the results of the EU's
verification visits to that exporter and by failing to inform all interested parties of the
essential facts under consideration. Moreover, during the verification visits, the EU
appears to have acted inconsistently with Article 12.6 and Annex VI(1)-(8) of the SCM
Agreement by failing to make a thorough and objective assessment of the matter,
including a proper establishment of the facts.
7. The EU appears to have acted inconsiste ntly with Articles 22.3 and 22.4 of the SCM
Agreement by failing to provide in sufficient detail the findings, explanations, and
conclusions reached with respect to the existence of the subsidies allegedly arising
under the FTR, MBS, LTF-EOP, and IPME-MB programmes.
It appears to Pakistan that the foregoing aspects of the EU's determinations may not be reconciled
with Articles 10, 19.1, and 32 of the SCM Agreement, and the specific provisions cited above.
In addition to the legal instruments listed above, these consultations are also requested with
respect to any amendments, extensions, related instruments or practices, the results of any
review proceedings, and any modifications of the original measures as a result of any proceedings
under EU law, including proceedings before the Euro pean Court of Justice. Pakistan reserves the
right to raise additional legal claims or matters during the course of consultations.
Pakistan looks forward to receiving your response to this request. I propose that the date and
venue of the consultations be agreed between our two missions.