Council Regulation (EC) No 1295/2004 of 12 July 2004 amending Regulation (EC) No 1599/1999 imposing a definitive countervailing duty on imports of stainless steel wire with a diameter of 1 mm or more originating in India
Date: 2004-07-12
Institutions: Council of the European Union
Subjects: India, import, monetary compensatory amount, originating product, steel, wire

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COUNCIL REGULATION (EC) No 1295/2004

of 12 July 2004

amending Regulation (EC) No 1599/1999 imposing a definitive countervailing duty on imports of
stainless steel wire with a diameter of 1 mm or more originating in India

THE COUNCIL OF THE EUROPEAN UNION,

2. Initiation of an accelerated review

Having regard to the Treaty
Community,

establishing the European

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 Community (1)
(the
basic Regulation), and in particular Article 20 thereof,

(3)

The Commission examined the evidence submitted by
the applicant 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
the European Union (3), an accelerated
review of Regulation (EC) No 1599/1999 with regard
to the company concerned and commenced its investi-
gation.

Journal of

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

(4)

Whereas:

(1)

(2)

A. PREVIOUS PROCEDURE

The Council, by Regulation (EC) No 1599/1999 (2),
imposed a definitive countervailing duty on imports of
stainless steel wire having a diameter of 1 mm or more
falling within CN code
(the product
ex 7223 00 19 and originating in India. The measures
took the form of an ad valorem duty ranging between
0 % and 35,4 % for individual exporters, with a rate of
48,8 % for non-cooperating exporters.

concerned),

B. CURRENT PROCEDURE

1. 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) No 1599/1999,
from
pursuant to Article 20 of the basic Regulation,
one Indian producer, VSL Wires Limited (the applicant).
The applicant claimed that it was not related to any other
exporters
India.
it had not exported the
Furthermore,
product concerned during the original period of investi-
gation (i.e. from 1 April 1997 to 31 March 1998), but
had exported the product concerned to the Community
after that period. On the basis of the above, it requested
that an individual duty rate be established for it.

product
it claimed that

concerned

the

of

in

(1) OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regu-

lation (EC) No 461/2004 (OJ L 77, 13.3.2004, p. 12).

(2) OJ L 189, 22.7.1999, p. 1. Regulation as amended by Regulation

(EC) No 164/2002 (OJ L 30, 31.1.2002, p. 9).

3. Product concerned

The product covered by the current review is the same
product as that under consideration in Regulation (EC)
No 1599/1999, namely stainless steel wire having a
diameter of 1 mm or more, containing by weight 2,5 %
or more of nickel, excluding wire containing by weight
28 % or more but no more than 31 % of nickel and 20 %
or more but no more than 22 % of chromium.

4. Investigation period

The investigation of subsidisation covered the period
from 1 April 2002 to 31 March 2003 (the review inves-
tigation period).

5. Parties concerned

India (GOI) of

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

the initiation of

The Commission sent a questionnaire to the applicant
and received a full reply within the required deadline.
The Commission sought and verified all
information it
deemed necessary for the purpose of the investigation
and carried out a verification visit at the premises of
the applicant.

(5)

(6)

(7)

C. SCOPE OF THE REVIEW

(8)

As no request for a review of the findings on injury was
made in by the applicant,
the review was limited to
subsidisation.

(3) OJ C 161, 10.7.2003, p. 2.

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(9)

The Commission examined the same subsidy schemes
which were analysed in the original
It
also examined whether
the applicant had used any
subsidy schemes which were alleged to confer benefits
in the original complaint but not found to have been
used during the original investigation.

investigation.

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

2. Subsidisation

(15) On the basis of the information contained in the appli-
the

reply to the Commission's questionnaire,

cant's
following schemes were investigated:

— Duty Entitlement Passbook Scheme,

— Income Tax Exemption Scheme,

— Export Promotion Capital Goods Scheme,

D. RESULTS OF THE INVESTIGATION

1. New exporter qualification

— Export Processing Zones/Export Oriented Units.

(10)

(11)

(12)

(13)

The applicant was able to satisfactorily demonstrate that
it was not related, directly or indirectly, to any of the
Indian exporting producers subject to the countervailing
measures in force with regard to the product concerned.

The investigation confirmed that the applicant had not
exported the product concerned during the original
investigation period,
from 1 April 1997 to 31
March 1998.

i. e.

(16)

It was established that the applicant had only realised one
sale to the Community which actually took place in
August 2001, i. e. after the original investigation period
but well before the review investigation period.

period,

In reply to the questionnaire, the applicant identified only
one contract that had been signed during the review
investigation
verification
confirmed that
the sale had never been materialised.
Consequently, there was no irrevocable contractual obli-
gation undertaken by the applicant
to the
Community.

to export

on-spot

but

the

(14) However,

it is noted that the company had significant
export sales to other countries during the review inves-
tigation period which allowed for the calculation of the
benefit accruing to export sales from subsidisation, since
such benefits accrue regardless of the destination of these
sales.

3. Duty Entitlement Passbook Scheme (DEPB)

General

scheme during the

this
It made use of

the applicant received benefits
It was established that
review investigation
under
the DEPB on a post-export
period.
basis. The detailed description of
is
the
contained in paragraph 4.3 of the Export and Import
Policy (Notification No 1/2002-07 of 31 March 2002
of
the
the Ministry of Commerce and Industry of
Government of India).

scheme

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 product concerned, on the basis
of the Standard Input/Output Norms (SION). A licence
stating the amount of credit granted is issued automa-
tically.

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 the importation of
which 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 on which
the licence is granted.

In this respect,
the Commission decided to verify all
information it deemed necessary for the purpose of the
investigation of
to
calculate any amount of countervailable subsidy by allo-
cating such amount over the level of the relevant total
turnover of the applicant during the review investigation
period.

the accelerated review in order

(17)

The characteristics of the DEPB have not changed since
the original
investigation. The scheme is a subsidy
contingent in law upon export performance, and it was
therefore determined during the original
investigation
that
is deemed to be specific and countervailable
under Article 3(4)(a) of the basic Regulation.

it

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Calculation of the subsidy amount

(18)

It was established that the applicant transferred all the
DEPB credits to its related company Viraj Alloys Ltd. The
same practice was also followed by three other related
Indian companies of the applicant, i.e. Viraj Forgings Ltd,
Viraj Impoexpo Ltd and Viraj Profiles Ltd. The investi-
gation confirmed that Viraj Alloys Ltd is the provider of
the
the previous mentioned
all
companies and used their transferred DEPB credits to
make duty-free imports.

raw materials of

all

these

Moreover, it was established that exports of the product
concerned were made via several
related companies.
Taking into account that the owners of the applicant
control
an
the related
extensive shareholding system, and that
companies are involved in certain aspects of the manu-
facture and distribution of the product concerned, it was
considered appropriate to treat all these companies as a
single recipient of the benefit.

companies

through

related

the total credit

Therefore, the subsidy amount under the DEPB scheme
in the
was based on the amount of
licences granted to both the applicant and its related
companies. Given that the subsidy was not granted by
reference to the quantities exported, the subsidy amount
has been allocated over the total export turnover of the
applicant and its related companies in accordance with
the provisions of Article 7(2) of the basic Regulation.

In conclusion, VSL Wires Limited benefited from this
scheme during the review investigation period and
obtained subsidies of 12,7 %.

4. Income Tax Exemption Scheme (ITES)

General

(19)

It was established that
under
80HHC of the Indian Income Act.

the applicant received benefits
scheme and in particular under Section

this

companies

The Indian Income Tax Act 1961 sets out the basis for
exemptions
that can be claimed by firms on the
collection of taxes. Among the exemptions which can
be claimed are those covered by Sections 10A (applicable
for
located in Free Trade Zones), 10B
(applicable for companies being Export Oriented Units)
and 80HHC (applicable for companies which export
goods) of the Act. To benefit from the ITES, a firm has
to make the relevant claim when submitting its tax
return to the Tax Authorities. The tax year runs from
to 31 March and the tax return must be
1 April
In
submitted by 30 November of the following year.

(20)

(21)

(22)

this case, the review investigation period coincided with
the tax and the financial year 1 April 2002 to 31 March
2003.

The characteristics of the ITES have not changed since
the original investigation. It was determined during the
investigation that the ITES is a countervailable
original
subsidy, as the GOI confers a financial contribution to
the company by forgoing government revenue in the
form of direct
taxes on profits from exports which
would otherwise be due if the income tax exemptions
it was
were not claimed by the company. However,
found that the ITES under Section 80HHC is gradually
being phased out starting from the financial year 2000-
2001 until the financial year 2004-2005 when no export
profit would be exempted from income tax. During the
review investigation period only 50 % of profits obtained
from exports were exempted from income tax.

is

subsidy

contingent

The
in law upon export
performance within the meaning of Article 3(4)(a) of
the basic Regulation,
from
export sales only, and is therefore deemed to be specific.

since it exempts profits

Calculation of the subsidy amount

tax,

income

the benefit of

including corporate

the difference between the amount of

The benefit to the applicant has been calculated on the
taxes
basis of
normally due with and without
the
exemption during the review investigation period. The
rate of
tax plus
surcharge, applicable during this period was 36,75 %. In
order to establish the full benefit to the applicant and
given that three companies related to the applicant have
also exported the product concerned during the review
the amount of
investigation period (see recital 18),
subsidy has been established taking into account
the
income tax exemptions under Section 80HHC of the
Impoexpo Ltd and
applicant, Viraj Forgings Ltd, Viraj
the subsidy was not
Viraj Profiles Ltd. Given that
the
granted by reference to the quantities exported,
the total
subsidy amount has been allocated over
export
related
companies in accordance with the provisions of Article
7(2) of the basic Regulation. On this basis, it was estab-
lished that VSL Wires Limited obtained under
this
scheme subsidies of 1,4 %.

turnover of

applicant

and its

the

5. Export

Promotion Capital Goods

Scheme

(EPCGS)

(23)

It was established that the applicant had not availed itself
of the EPCGS.

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6. Export Processing Zones (EPZ)/Export Oriented

Units (EOU)

No 1599/1999 be amended. They were also given a
reasonable period of time to comment.

(24)

It was established that the applicant was not located in
an EPZ and was not an EOU and, therefore, had not
availed of the scheme.

(30)

7. Other schemes

(25)

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

In its response to the disclosure, the applicant claimed
that the post-export DEPB is a substitution remission/
drawback scheme which was wrongly assessed by the
Commission in terms of extent of subsidy and amount
of countervailable benefit. It argued that the Commis-
sion's assessment of the benefits under this scheme was
incorrect since only the excess duty drawback could be
considered a subsidy and that the practical operations of
the
the
Commission.

system have not

been investigated

by

8. Amount of countervailable subsidies

(26)

Taking account of the definitive findings relating to the
various schemes as already set out, the amount of coun-
tervailable subsidies for the applicant is as follows:

DEPB

ITES

Total

VSL Wires Limited

12,7 %

1,4 %

14,1 %

E. AMENDMENT OF THE MEASURES BEING REVIEWED

(27)

Based on the findings made during the investigation, it is
considered that imports into the Community of stainless
steel wire having a diameter of 1 mm or more produced
and exported by VSL Wires Limited should be subject to
a level of countervailing duty corresponding to individual
amounts of subsidies established for this company during
the review investigation period.

(28)

Regulation (EC) No 1599/1999 should therefore be
amended accordingly.

F. DISCLOSURE AND DURATION OF THE MEASURES

(29)

The Commission informed the applicant and the GOI of
the essential
facts and considerations on the basis of
which it was intended to propose that Regulation (EC)

repeatedly concluded (see for
The Commission has
example Council Regulation (EC) No 1338/2002 (1) and
in particular recitals 14 to 20) that post-export DEPB is
not a drawback or a substitution drawback scheme as it
does not conform to any of the provisions of Annexes I
to III of the basic Regulation linked to its Article 2(1)(ii).
The scheme lacks a built-in obligation to import only
goods that are consumed in the production of
the
exported goods
the basic Regulation)
(Annex II of
which would ensure that the requirements of Annex I(i)
were met. Furthermore, there is no verification system in
place
actually
consumed in the production process.
It is also not a
substitution drawback scheme because the imported
goods do not need to be of the same quantity and char-
acteristics as the domestically sourced inputs that were
used for export production (Annex III of the basic Regu-
lation). Lastly, exporting producers are eligible for the
DEPB benefits regardless of whether they import any
inputs at all.

to check whether

imports

the

are

In the case of the applicant, the investigation confirmed
that the raw materials were imported duty-free by one of
its related companies with the use of
the transferred
DEPB credits of all related companies obtained from
exports of different products. However, no link could
be established between each company's credits and the
imported goods from the sole related company
actual
assigned with the
imports.
Furthermore, there was no verification system in place
by the GOI
imports were actually
consumed into what product and by which company.
Since the above exception to the subsidy definition
does not therefore apply, the countervailable benefit is
the amount of the total credit granted under the scheme.
For these reasons the claim cannot be accepted.

to control what

raw material

task of

(1) OJ L 196, 25.7.2002, p. 1. Regulation as amended by Regulation

(EC) No 492/2004 (OJ L 80, 18.3.2004, p. 6).

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further claimed that

‘the Commission's
The applicant
services failed to offset import duties from the costs,
thus, rendering the subsidy calculations incorrect and
exaggerated’. In this respect, it should be noted that the
applicant was requested in advance and based on the
situation described in recital 18 above to submit post-
export DEPB credits listings for all
its exports made
during the review investigation period. The applicant
was also requested to submit the same information for
all exports made by its related companies for the same
period, along with details of any application fees or other
costs incurred in order to obtain the credits. However,
the applicant has not reported any such details and was
not in a position to provide such information during the
on-spot verification. Therefore, due to the lack of any
relevant
such costs
could be made on the amount of subsidy as established
in recital 18.

information, no adjustment

for

(31)

This review does not affect the date on which Council
Regulation (EC) No 1599/1999 will expire pursuant to
Article 18(1) of the basic Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

The table in Article 1(2) of Regulation (EC) No 1599/1999 is
hereby amended by adding the following:

‘VSL Wires Limited, G-1/3 MIDC, Tarapur
Industrial Area, Boisar District, Thane, Mahar-
ashtra, India

14,1

A444’

Article 2

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, 12 July 2004.

For the Council
The President

B. BOT