Proposal for a Council Regulation (EC) amending Regulation (EC) No 2450/98 imposing a definitive countervailing duty on imports of stainless steel bars originating in India and collecting definitively the provisional duty imposed
Date: 1999-09-13
Institutions: European Commission
Subjects: CCT duties, India, bar, import, steel

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.09.1999
COM(1999) 436 final

Proposal for a

COUNCIL REGULATION (EC)

amending Regulation (EC) No 2450/98 imposing a definitive countervailing duty
on imports of stainless steel bars originating in India and collecting definitively
the provisional duty imposed

(presented by the Commission)

EXPLANATORY MEMORANDUM

On 23 January 1999 the Commission initiated an accelerated review with regard to
the anti-subsidy proceeding concerning imports of stainless steel bars originating in
India in respect of two companies, which had not exported the product concerned to
the Community during the investigation period.

Investigations were carried out at the premises of the two companies concerned,
Sindia Steels and Meltroll Engineering, and the amounts of countervailable subsidies
were individually established. These are lower than the countervailing duty rates that
currently apply to these companies.

On this basis, it is proposed to amend the Council Regulation in force accordingly,
and to impose individual duty rates for both companies.

Member States were consulted and supported the imposition of individual rates of
countervailing duty.

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Proposal for a

COUNCIL REGULATION (EC)

amending Regulation (EC) No 2450/98 imposing a definitive countervailing duty
on imports of stainless steel bars originating in India and collecting definitively
the provisional duty imposed

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on
protection against subsidised imports from countries not members of the European
Community1, and in particular Articles 15 and 20 thereof,

Having regard to the proposal submitted by the Commission after consulting the
Advisory Committee,

Whereas:

A.

(1)

B.

1.

(2)

PREVIOUS PROCEDURE

By Regulation (EC) No 2450/982,
imposed a definitive
countervailing duty on imports of stainless steel bars (hereinafter referred to as
‘the product concerned’) falling within CN codes 7222 20 11, 7222 20 21,
7222 20 31 and 7222 20 81 originating in India. The measures took the form
of ad valorem duties of between 0 and 25.5 % with a residual duty of 25.5 %.

the Council

CURRENT PROCEDURE

Request for review

Subsequent to the imposition of definitive measures, the Commission received
a request for the initiation of an accelerated review of Regulation (EC)
to Article 20 of Regulation (EC) No 2026/973
No 2450/98, pursuant
(hereinafter referred to as ‘the basic Regulation’), from two Indian producers,
Sindia Steels Ltd. and Meltroll Engineering Pvt. Ltd., both located in Bombay.
The companies concerned claimed that they were not related to any other
exporters of the product concerned in India. Furthermore, they claimed that
they had not exported the product concerned to the Community during the

1 OJ L 288, 21.10.1997, p. 1.
2 OJ L 304, 14.11.1998, p. 1.
3 OJ L 288, 21.10.1997, p. 1.

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original period of investigation (l July 1996 to 30 June 1997), but had exported
the product concerned to the Community since then.

Both companies requested the establishment of an individual rate of duty. In
the case of Sindia Steels Ltd, this company had made itself known during the
original investigation, but as it had not exported to the Community during the
investigation period, it was allocated a weighted-average countervailing duty
of 22.1%. Meltroll Engineering Pvt.Ltd has been subject to the residual 25.5%
countervailing duty.

Initiation of an accelerated review

The Commission examined the evidence submitted by the two Indian
exporting producers concerned and considered it sufficient
to justify the
initiation of a review in accordance with the provisions of Article 20 of the
basic Regulation. After consultation of the Advisory Committee and after the
Community industry concerned had been given the opportunity to comment,
the Commission initiated, by a notice in the Official Journal4, an accelerated
review of Regulation (EC) No 2450/98 with regard to the companies
concerned and commenced its investigation.

Product concerned

The product covered by the current review is the same product as the one
under consideration in Regulation (EC) No 2450/98.

Parties concerned

The Commission officially advised the two companies concerned and the
Government of India. Furthermore, it gave other parties directly concerned the
opportunity to make their views known in writing and to request a hearing.
However, no such request was received by the Commission.

The Commission sent a questionnaire to the companies concerned and
received full replies within the deadline. The Commission sought and verified
all information it deemed necessary for the purpose of the investigation and
carried out verification visits at the premises of the companies concerned.

Investigation period

The investigation of subsidisation covered the period from 1 January 1998 to
31 December 1998 (hereinafter referred to as ‘the investigation period’).

Methodology

The same methodology as that used in the original investigation was applied in
the current investigation.

2.

(3)

3.

(4)

4.

(5)

5.

(6)

6.

(7)

4 OJ C 19, 23.1.1999, p. 17.

4

C.

(8)

(9)

(10)

D.

1.

(11)

SCOPE OF THE REVIEW

This review was limited to calculating the amount of subsidisation granted to
Sindia Steels Ltd. and Meltroll Engineering Ltd.

The Commission examined the same subsidy schemes which were analysed in
the original investigation. It was also examined whether the new exporters had
used any subsidy schemes which were alleged in the original complaint but
not used during the original investigation.

It was finally examined whether the new exporters had made use of any
the original
subsidy schemes which were established after
investigation period, or had received ad-hoc subsidies after this date.

the end of

RESULTS OF THE INVESTIGATION

New exporter qualification

The investigation confirmed that the companies concerned had not exported
the product concerned during the original period of investigation and that they
had begun exporting to the Community after this period.

Furthermore, the companies concerned were able satisfactorily to demonstrate
that they did not have any links, direct or indirect, with any of the Indian
exporting producers subject
to the countervailing measures in force with
regard to the product concerned.

it

is confirmed that

Accordingly,
the companies concerned should be
considered as new exporters in accordance with Article 20 of the basic
Regulation and thus individual amounts of subsidy should be determined for
them. The fact that Sindia Steels is already subject to a weighted-average,
rather than the residual, countervailing duty on the product concerned does not
in any way prejudice its right to request a new exporter review, given that all
the criteria set out in Article 20 are fulfilled.

2.

Subsidisation

(12) On the basis of the information contained in the replies to the Commission’s

questionnaire, the following five schemes were investigated:

-

-

-

-

-

Passbook Scheme

Duty Entitlement Passbook Scheme

Export Promotion Capital Goods Scheme

Export Processing Zones/Export Oriented Units

Income Tax Scheme

All these schemes had been found to be countervailable during the original
investigation.

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3.

Passbook scheme (PBS)

(13) Neither of the companies concerned had availed themselves of the Passbook
scheme, which on 1 April 1997, i.e. during the original investigation period,
was abolished and replaced by its successor, the Duty Entitlement Passbook
Scheme (DEPB).

4.

Duty Entitlement Passbook Scheme (DEPB)

General

(14)

It was established that the two companies concerned received benefits under
this scheme. Both companies used the DEPB on a post-export basis.

Under this scheme, any eligible exporter can apply for credits which are
calculated as a percentage of the value of exported finished products. Such
DEPB rates have been established by the Indian authorities for most products,
including the products concerned, on the basis of the Standard Input/Output
norms. A licence stating the amount of credit granted is issued automatically.

DEPB on post-export basis allows for the use of such credits for any
subsequent imports (e.g. raw materials or capital goods) except for goods of
which the import is restricted or prohibited. Such imported goods can be sold
on the domestic market (subject to sales tax) or used otherwise.

DEPB credits are freely transferable. The DEPB licence is valid for a period of
12 months from the date of granting of the licence.

the DEPB have not changed since the original
The characteristics of
investigation. The subsidy conferred by the relief
from import duty is
contingent upon export performance, and it was therefore determined during
the original investigation that it is specific and countervailable under Article
3(4)(a) of the basic Regulation

Calculation of the subsidy amount

It was established that neither of the companies used the licences to make
duty-free imports. Instead the companies sold some of their licences, and the
benefit was calculated on the basis of the amount of credit in the license
regardless of the sales price of the license. The companies concerned claimed
that the benefit should be limited to the effective sales price of the licence
which is often less than the face value of the credits in the licence. However,
in accordance with the provisional findings in the cases of stainless steel wire
from India (Commission Regulations (EC) N° 618/99 and 619/995), this claim
cannot be granted since the sale of a licence at a price less than the face value
is a purely commercial decision which does not alter the countervailable
benefit from this scheme.

(15)

(16)

5 OJ L 79, 24.3.1999, p. 25.

6

(17)

In order to establish the full benefit to the recipient under this scheme, this
amount of credit has been adjusted by adding interest during the original
investigation period. Since the benefits from import duty exemptions are
obtained regularly during the investigation period,
it was considered
appropriate to follow the practice established in the original investigation and
add interest covering a period of six months, equivalent to half of the annual
commercial rate in India of 14.58% found during the original investigation
period, i.e. 7.29%. This amount (i.e. unpaid customs duty plus interest) has
been allocated over total exports during the investigation period.

Sindia Steels Ltd. and Meltroll Engineering Pvt. benefited from this scheme
during the investigation period and obtained subsidies of 11.7% and 4.9%
respectively. Where the companies claimed deductions linked to the payment
of fees for obtaining the DEPB License, these were granted.

5.

Export Promotion Capital Goods scheme (EPCGS)

General

(18)

It was established that Sindia Steels Ltd. had availed itself of this scheme.

To benefit
from the scheme, a company must provide to the relevant
authorities details of the type and value of capital goods which are to be
imported. Depending on the level of export commitment which the company is
prepared to undertake, the company will be allowed to import capital goods at
either a zero rate of duty or a reduced rate. A licence authorising the import at
preferential rates is issued automatically.

In order to meet
produced using the imported capital goods.

the export obligation, goods exported must have been

An application fee is payable to obtain a licence.

(19)

The characteristics of the EPCGS have not changed since the original
investigation. It was determined during the original investigation that the
EPCGS is a countervailable subsidy as the payment by an exporter of a
reduced or zero rate of duty constitutes a financial contribution by the GOI,
revenue otherwise due is foregone and a benefit is conferred on the recipient
by lowering the duties payable or fully exempting him from paying the import
duties.

The subsidy is contingent in law upon export performance within the meaning
of Article 3(4)(a) of the Basic Regulation, since it cannot be obtained without
a commitment to export goods, and is therefore deemed to be specific and
countervailable.

Calculation of the subsidy amount

(20)

The benefit to the exporter has been calculated on the basis of the amount of
unpaid customs duty due on imported capital goods by spreading this amount
across a period which reflects the normal depreciation of such capital goods in
the industry of the product concerned. This period has been established by

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using the weighted average (on the basis of production volume of the products
concerned) of depreciation periods for capital goods actually imported under
the EPCGS by Indian producers during the original
investigation period,
resulting into a normal depreciation period of 15.5 years. Since this subsidy is
equivalent to a one-time grant, the amount so calculated which is attributable
to the investigation period has been adjusted by adding the annual interest rate
of 14.58%. This amount has then been allocated over total exports during the
investigation period.

(21)

Sindia Steels Ltd. obtained a benefit under this scheme of 0.3%.

6.

Export Processing Zones (EPZ)/Export Oriented Units (EOU)

(22)

The Commission established that none of the companies was located in an
EPZ or was an EOU. There is therefore no need for the Commission to assess
this scheme in the context of the investigation.

7.

Income tax exemption scheme (ITES)

General

(23)

It was established that Meltroll Engineering Pvt. Ltd. had availed itself of this
scheme.

To benefit from exemptions from paying tax, a company will make the
relevant claim when submitting its tax return to the Tax Authorities at the end
of the tax year. The tax year runs from 1 April to 31 March. The tax return
must be submitted to the authorities by the following 30 November. The final
assessment by the authorities can take up to 3 years after submitting the tax
return.

Under Section 80HHC companies can claim 100% exemption from taxable
income for profits realised on export sales.

(24)

the ITES have not changed since the original
The characteristics of
investigation. It was determined during the original investigation that the
subsidy conferred by the relief from income tax is contingent upon export
performance in the meaning of Article 3(4)(a) of the basic Regulation, since it
exempts profits from export sales only, and is therefore deemed to be specific
and countervailable.

Calculation of the subsidy amount

(25) As stated in recital (23) above, claims for benefit under section 80HHC is
made when submitting a tax return at the end of the tax year. As the tax year in
India runs from 1 April to 31 March, it is considered appropriate to calculate
the benefit under this scheme on the basis of the tax year 1997/98 (i.e. 1 April
1997 to 31 March 1998). The benefit to the exporters has therefore been
calculated on the basis of the difference between the amount of taxes normally
due with and without the benefit of the exemption. The rate of corporate tax
applicable during this tax year was 35%. In order to establish the full benefit to
the recipient, this amount has been adjusted by adding interest during the

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investigation period. Given the nature of this subsidy, which is equivalent to a
one-time grant,
interest rate of 14.58% was considered
appropriate. The amount of benefit has been allocated over total exports
during the tax year 1997/98.

the commercial

Meltroll Engineering Pvt. Ltd. obtained a benefit under this scheme of 0.6%.

8.

Other schemes

(26)

It was established that the new exporters had neither made use of new subsidy
schemes which were established after the end of the original investigation
period, nor had received ad-hoc subsidies after this date.

9.

Amount of countervailable subsidies

(27)

Taking account of the definitive findings relating to the various schemes as set
out above, the amount of countervailable subsidies for each of the investigated
exporting producers is as follows:

DEPB

EPCGS

Income Tax TOTAL

Sindia Steels Ltd.

11.7%

0.3%

12.0%

Meltroll Engineering

4.9%

0.6%

5.5%

Pvt. Ltd

E.

AMENDMENT OF THE MEASURES BEING REVIEWED

(28) Based on the findings made during the investigation, it is considered that
imports into the Community of stainless steel bars produced and exported by
to countervailing duties
the companies concerned should be subject
corresponding to individual amounts of subsidies established for
these
companies.

(29) Regulation (EC) No 2450/98 should therefore be amended accordingly.

F.

DISCLOSURE AND DURATION OF THE MEASURE

(30)

The companies concerned were informed of the facts and considerations on
the basis of which it is intended to propose the amendment of Regulation (EC)
No 2450/98, and were given the opportunity to comment.

(31)

The review carried out does not affect the date on which Regulation (EC)
No 2450/98 will expire pursuant to Article 18(1) of the basic Regulation,

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HAS ADOPTED THIS REGULATION:

Article 1

Article 1(2) of Regulation (EC) No 2450/98 is hereby amended as follows:

The duty rate for Sindia Steels Ltd (Taric Additional Code : 8406) shall be 12%.

To the list of companies subject to measures shall be added the following:

Manufacturer

Rate of duty (%)

Taric additional code

- Meltroll Engineering Ltd., Mumbai

5.5

A021

Article 2

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

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

Done at Brussels,

For the Council
The President

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