Council Regulation (EC) No 1323/2004 of 19 July 2004 amending Regulation (EC) No 1601/1999 imposing a definitive countervailing duty on imports of stainless steel wire with a diameter of less than 1 mm originating in India
Date: 2004-07-19
Institutions: Council of the European Union
Subjects: CCT duties, India, import, import policy, originating product, steel, wire

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Official Journal of the European Union

20.7.2004

COUNCIL REGULATION (EC) No 1323/2004

of 19 July 2004

amending Regulation (EC) No 1601/1999 imposing a definitive countervailing duty on imports of
stainless steel wire with a diameter of less than 1 mm 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
(‘the
countries not members of the European Community (1)
basic Regulation’), and in particular Article 20 thereof,

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

Whereas:

(1)

(2)

A. PREVIOUS PROCEDURE

The Council, by Regulation (EC) No 1601/1999 (2),
imposed a definitive countervailing duty on imports of
stainless steel wire having a diameter of less than 1 mm
(‘the product
falling within CN code
ex 7223 00 19 and originating in India. The measures
took the form of an ad valorem duty ranging between
0 % and 42,9 % for individual exporters, with a rate of
44,4 % for non-cooperating exporters.

concerned’),

B. CURRENT PROCEDURE

1. Request for review

Indian

producer, VSL Wires

Subsequent to the imposition of definitive measures, the
Commission received a request for the initiation of an
accelerated review of Regulation (EC) No 1601/1999,
from
pursuant to Article 20 of the basic Regulation,
(‘the
one
Limited
applicant’). The applicant
it was not
related to any other exporters of the product concerned
in India. Furthermore, it claimed that it had not exported
the product concerned during the original period of
investigation (i.e.
from l 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.

claimed that

(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. 26.

(3)

(4)

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 1601/1999 with regard
to the company concerned and commenced its investi-
gation.

Journal of

3. Product concerned

The product covered by the current review is the same
product as that under consideration in Regulation (EC)
No 1601/1999, namely stainless steel wire having a
than 1 mm, containing by weight
diameter of
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.

less

4. Investigation Period

(5)

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

5. Parties concerned

(6)

(7)

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.
information it
The Commission sought and verified all
deemed necessary for the purpose of the investigation
and carried out a verification visit at the premises of
the applicant.

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

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(8)

(9)

(10)

(11)

(12)

(13)

C. SCOPE OF THE REVIEW

As no request for a review of the findings on injury was
made by the applicant, the review was limited to subsi-
disation.

The Commission examined the same subsidy schemes
which were analysed in the original
It
the applicant had used any
also examined whether
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.

D. RESULTS OF THE INVESTIGATION

1. New exporter qualification

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.

(16)

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.

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
verification
investigation
confirmed that
the sale had never been materialized.
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.

turnover of the applicant during the review investigation
period.

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,

— Export Processing Zones/Export Oriented Units.

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 Ministry of Commerce
the
Government of India).

and Industry of

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 license 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

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
was based on the amount of
in the
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

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

companies

(20)

(21)

(22)

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
submitted by 30 November of the following year.
In
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
original
investigation that the ITES is a countervailable
subsidy, as the GOI confers a financial contribution to
the company by forgoing government revenue in the
taxes on profits from exports which
form of direct
would otherwise be due if the income tax exemptions
were not claimed by the company. However,
it was
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

the benefit of

the income tax,

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
including corporate 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
investigation period (see recital (18) above), the amount
of 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

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5. Export

(‘EPCGS’)

Promotion

Capital Goods

Scheme

lation (EC) No 1601/1999 be amended. They were also
given a reasonable period of time to comment.

(23)

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

6. Export Processing Zones (‘EPZ’)/Export Oriented

Units (‘EOU’)

(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)

a

is

post-export DEPB

In its response to the disclosure, the applicant claimed
substitution
the
that
remission/drawback
scheme which was wrongly
assessed by the Commission in terms of extent of
It
subsidy and amount of
argued that
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 system have not been
investigated by the Commission.

countervailable benefit.

the Commission's

assessment of

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.

8. Amount of countervailable subsidies

(26)

Taking account of the definitive findings relating to the
various schemes as set out above, the amount of counter-
vailable subsidies for the applicant is as follows:

DEPB

VSL Wires Limited

12,7 %

ITES

1,4 %

Total

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 less than 1 mm 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 1601/1999 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 Council Regu-

scheme

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
the basic Regulation linked to its Article
I
to III of
2(1)(ii). The
lacks a built-in obligation to
import only goods that are consumed in the production
of the exported goods (Annex II of the basic Regulation)
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
the transferred
its related companies with the use of
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
actual
imported goods from the sole related company
imports.
assigned with the
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.

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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) above.

information, no adjustment

for

(31)

This review does not affect the date on which Council
Regulation (EC) No 1601/1999 will expire pursuant to
Article 18(1) of the basic Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

The table in Article 1(2) of Council Regulation (EC) No
1601/1999 is hereby amended by adding the following:

VSL Wires Limited, G-1/3 MIDC,
Tarapur Industrial Area, Boisar District, Thane,
Maharashtra, 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, 19 July 2004.

For the Council
The President

C. VEERMAN