Proposal for a Council Regulation amending Council Regulation (EC) No 2603/2000 imposing a definitive countervailing duty on imports of certain polyethylene terephthalate originating, inter alia, in India
Date: 2005-09-08
Institutions: European Commission
Subjects: India, chemical product, countervailing charge, import (EU), originating product, plastics

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.9.2005 
COM(2005) 416 final 

Proposal for a 

COUNCIL REGULATION  

amending Council Regulation (EC) No 2603/2000 imposing a definitive countervailing 
duty on imports of certain polyethylene terephthalate originating, inter alia, in India  

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

This  proposal  concerns  the  application  of  Council  Regulation  (EC)  No  2026/97  of  6 
October 1997 on protection against subsidized imports from countries not members of 
the European Community, as last amended by Council Regulation (EC) No 461/2004 
of 8 March 2004 ("the basic Regulation") in the proceeding concerning the definitive 
countervailing duty imposed by Council Regulation (EC) No 2603/2000 on imports of 
certain polyethylene terephthalate (PET) originating, inter alia, in India 

•  General context 

This proposal is made in the context of the 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  already  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 implementation of the basic Regulation. 

The  basic  Regulation  does  not  foresee  a  general  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 

In  November  2000,  the  Council,  by  Regulation,  imposed  a  definitive  countervailing 
duty of EUR 41,3 per tonne on imports into the Community of PET originating, inter 

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alia, in India.  

The  Commission  received  an  application  for  an  accelerated  review  by  South  Asian 
Petrochem Limited, a new exporting producer in India. 

The Commission initiated on 12 January 2005 this accelerated review with a view to 
determine  if  and  to  what  extent  the  imports  of  PET  produced  and  exported  to  the 
Community by South Asian Petrochem Limited should be subject to the countervailing 
duty currently in force. 

The  investigation  revealed  the  existence  of  countervailable  subsidisation.  A  specific 
countervailing  duty  rate  of  EUR  106,5  per  tonne  was  established  for  South  Asian 
Petrochem Limited. 

Consequently, it is proposed to amend Council Regulation (EC) 2603/2000 imposing a 
countervailing duty on imports of PET originating, inter alia, in India by including the 
specific duty rate established for South Asian Petrochem Limited and by accepting the 
undertaking offered. 

It is therefore proposed that the Council adopt the attached proposal for a Regulation 
which should be published in the Official Journal of the European Union no later than 
11 October 2005. 

•  Legal basis 

Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against dumped 
imports from countries not members 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 exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

The form of action is described in the above-mentioned basic Regulation and leaves no 
scope for national decision. 

Indication  of  how  financial  and  administrative  burden  falling  upon  the  Community, 
national governments, regional and local authorities, economic operators and citizens is 
minimized and proportionate to the objective of the proposal is not applicable. 

•  Choice of instruments 

Proposed instrument: Regulation. 

Other means would not be adequate for the following reason(s). 

The above-mentioned basic Regulation does not foresee alternative options. 

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4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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Proposal for a 

COUNCIL REGULATION  

amending Council Regulation (EC) No 2603/2000 imposing a definitive countervailing 
duty on imports of certain polyethylene terephthalate originating, inter alia, in India  

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  (‘the 
basic Regulation’), and in particular Article 20 thereof, 

Having  regard  to  the  proposal  submitted  by  the  Commission2  after  consulting  the  Advisory 
Committee, 

Whereas:  

A. PREVIOUS PROCEDURE 

(1) 

The Council, by Regulation (EC) No 2603/20003, imposed a definitive countervailing 
duty  on  imports  of  certain  polyethylene  terephthalate  (‘PET’)  with  a  coefficient  of 
viscosity  of  78  ml/g  or  higher,  according  to  DIN  (‘Deutsche  Industrienorm’)  53728, 
normally declared within CN code 3907 60 20 and originating, inter alia, in India (‘the 
product concerned’). The measures took the form of a specific duty ranging between 
EUR 0 and 41,3 per tonne for co-operating individual Indian exporters, with a specific 
duty of EUR 41,3 per tonne for all other Indian exporters. 

B. CURRENT PROCEDURE 

1. Request for review 

(2) 

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Following  the  imposition  of  definitive  measures,  the  Commission  received  a  request 
for the initiation of an accelerated review of Council Regulation (EC) No 2603/2000 
pursuant to Article 20 of the basic Regulation from an Indian producer of the product 
concerned,  South  Asian  Petrochem  Limited  (‘the  applicant’).  The  applicant  claimed 
not  to  be  related  to  any  other  exporter  of  the  product  concerned.  Furthermore,  it 
asserted  that  it  had  not  exported  the  product  concerned  during  the  original 

OJ L 288, 21.10.97, p.1., Regulation as last amended by Council Regulation (EC) No 461/2004 (OJ L 
77, 13.3.2004, p.12). 
OJ C […], […], p. […]. 
OJ L 301, 30.11.2000, p.1, Regulation as last amended by Council Regulation (EC) No 822/2004 (OJ L 
127, 29.4.2004, p.3). 

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investigation  period  (1  October  1998  to  30  September  1999),  but  had  exported  the 
product concerned to the Community subsequently. 

2. Initiation of an accelerated review 

(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 Journal of the European Union4 an 
accelerated  review  of  Council  Regulation  (EC)  No  2603/2000  with  regard  to  the 
applicant. 

3. Product concerned 

(4) 

The product covered by this review is the same product as the one under consideration 
in Council Regulation (EC) No 2603/2000 (see recital (1) above). 

4. Investigation period 

(5) 

The  investigation  of  subsidisation  covered  the  period  from  1  October  2003  to  30 
September 2004 (‘the review investigation period’). 

5. Parties concerned 

(6) 

(7) 

(8) 

The  Commission  officially  advised  the  applicant  and  the  Government  of  India  (‘the 
GOI’)  of  the  initiation  of  the  investigation.  Furthermore,  it  gave  other  interested 
parties the opportunity to make their views known in writing and to request a hearing. 
However,  no  such  views  or  any  request  for  a  hearing  were  received  by  the 
Commission. 

The Commission sent a questionnaire to the applicant and received a full reply within 
the  set  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 applicant in Calcutta and in Haldia. 

C. SCOPE OF THE REVIEW 

The  Commission  examined  the  same  subsidy  schemes  which  were  analysed  in  the 
original  investigation.  It  also  examined  whether  the  applicant  had  used  any  other 
subsidy  schemes,  or  had  received  ad  hoc  subsidies  in  relation  to  the  product 
concerned.  

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OJ C 8, 12.01.2005, p.2. 

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D. RESULTS OF THE INVESTIGATION 

1. New exporter qualification 

(9) 

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

(10)  The investigation confirmed that the applicant had not exported the product concerned 
during the original period of investigation, i.e. from 1 October 1998 to 30 September 
1999, and that it had begun exporting to the Community after this period. Furthermore, 
the  applicant  was  not  individually  investigated  during  the  original  investigation  for 
reasons other than a refusal to co-operate with the Commission. 

(11)  Consequently,  it  is  confirmed  that  the  applicant  should  be  considered  as  a  new 
exporter.  Therefore,  in  accordance  with  Article  20  of  the  basic  Regulation,  an 
individual countervailing duty rate should be determined for the applicant. 

2. Subsidisation 

(12)  On the basis of the information contained in the applicant’s reply to the Commission’s 
questionnaire  and  further  collected  in  the  course  of  the  investigation,  the  following 
schemes were investigated: 

–  Duty Entitlement Passbook Scheme; 

–  Export Credit Scheme; 

–  Export Oriented Unit Scheme/Special Economic Zones Scheme; 

–  Export Promotion Capital Goods Scheme; 

–  Income Tax Exemption Scheme; 

–  West Bengal Incentives Scheme. 

2.1 Schemes originally investigated and used by the company  

2.1.1 Export Oriented Unit Scheme (‘EOUS’)/ Special Economic Zones Scheme (‘SEZS’) 

(a) Legal basis 

(13)  These  schemes  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’).  This  act  authorises  the  GOI  to  issue  notifications  regarding  trade  policy, 
formerly  called  ‘Export-Import  Policy’  and  since  1  September  2004  named  ‘Foreign 
Trade Policy’. The Foreign Trade Policy 2004 to 2009 (‘FTP’), which incorporates the 
Export and Import Policy 2002 to 2007, is relevant to the review investigation period 

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of this case. In addition, the GOI also sets out the procedures governing the FTP in a 
‘Handbook of Procedures Volume I’ (‘HOP I’)5.  

(14)  The  details  of  these  schemes  are  contained  in  chapters  6  (EOUS)  and  7  (SEZS) 

respectively of the FTP and of the HOP I.  

(b) Eligibility 

(15)  With  the  exception  of  pure  trading  companies,  all  enterprises  which,  in  principle, 
undertake to export their entire production of goods or services may be set up under 
the  EOUS  or  SEZS.  However,  unlike  services  and  agriculture,  undertakings  in  the 
industrial  sectors  have  to  fulfil  a  minimum  investment  threshold  in  fixed  assets  (10 
million Indian rupees) to be eligible for the EOUS. 

(c) Practical implementation 

(16)  The  SEZS  is  the  successor  scheme  of  the  former  Export  Processing  Zones  Scheme 
(‘EPZS’).  SEZs  are  specifically  delineated  duty  free  enclaves  and  considered  by  the 
FTP as foreign territory for the purpose of trade operations, duties and taxes. 35 SEZs 
have been approved by the Indian authorities.  

(17)  EOUs  on  the  other  side,  are  geographically  more  flexible  and  can  be  established 

anywhere in India. This scheme is complementary to the SEZS.  

(18)  An application for operation under these schemes must include details for a period of 
the  next  five  years  on,  inter  alia,  planned  production  quantities,  projected  value  of 
exports, import requirements and indigenous requirements. If the authorities accept the 
company’s  application,  the  terms  and  conditions  attached  to  the  acceptance  is 
communicated  to  the  company.  The  agreement  recognising  the  company  as  an 
undertaking under the EOUS or SEZS is valid for a five-year period. The agreement 
may be renewed for further periods. 

(19)  A crucial obligation of an EOU or an SEZ enterprise as set out in the FTP 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 than the total value of imported goods. 

(20)  EOUS/SEZS units are entitled to the following concessions: 

(i) 

exemption  from  import  duties  on  all  types  of  goods  (including  capital  goods, 
raw  materials  and  consumables)  required  for  the  manufacture,  production, 
processing, or in connection therewith; 

(ii) 

exemption from excise duty on goods procured from indigenous sources; 

(iii)  reimbursement of central sales tax paid on goods procured locally; 

(iv) 

‘duty drawback on all industry rates’ with regard to furnace oil procured from 
domestic oil companies; 

5 

Notification No 1/2002-07 of 31.03.2002 of the Ministry of Commerce and Industry of the GOI. 

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(v) 

facility to sell a part of the production on the domestic market on payment of 
applicable  duties  on  the  finished  product  as  an  exception  to  the  general 
requirement to export the entire production; 

(vi)  exemption from income tax normally due on profits realised on export sales in 
accordance with Section 10A or Section 10B of the Income Tax Act, for a 10 
years period after starting their operations, but no longer than up to 2010; 

(vii)  possibility of 100 % foreign equity ownership. 

(21)  Although  the  concessions  under  both  schemes  are  largely  comparable,  some 
differences  exist.  For  instance,  only  an  EOU  can  obtain  a  50%  reduction  of  duties 
payable upon domestic sales (‘DTA sales’), whereas in an SEZ 100% of the duties are 
payable on such sales. An EOU unit can sell up to 50% of its turnover domestically at 
such reduced rate. 

(22)  Units  operating  under  these  schemes  are  bonded  under  the  surveillance  of  customs 

officials in accordance with Section 65 of the Indian Customs Act. 

(23)  They  are  legally  obliged  to  maintain,  in  a  specified  format,  a  proper  account  of  all 
imports, of the consumption and utilisation of all imported materials and of the exports 
made.  These  documents  must  be  submitted  periodically,  as  may  be  required,  to  the 
competent authorities (‘quarterly and annual progress reports’). 

(24)  However, ‘at no point in time [an EOU or a SEZ unit] shall be required to co-relate 
every  import  consignment  with  its  exports,  transfers  to  other  units,  sales  in  DTA  or 
stocks’, as paragraphs 6.11.2 and 7.13.2 of the HOP I state.  

(25)  Domestic sales are dispatched and recorded on a self-certification basis without prior 
intimation of specific transactions. The dispatch process of export consignments of an 
EOU  is  supervised  by  a  customs/excise  official,  who  is  permanently  posted  in  the 
EOU. The company is obliged to reimburse the GOI for the salary of such permanent 
bond officer. 

(26) 

(27) 

‘All  activities  of  SEZ  units  within  the  zone,  unless  otherwise  specified,  including 
export  and  re-import  of  goods  shall  be  through  self-certification  procedure’,  as 
paragraph  7.29  of  the  HOP  I  states.  Thus,  no  routine  examinations  of  the  export 
consignments of an SEZ unit by customs authorities take place.  

In the present case, the EOUS was used by the applicant. As the SEZS was not used, it 
is  therefore  not  necessary  to  analyse  the  countervailability  of  this  scheme.  The 
applicant utilized the EOUS to import raw materials and capital goods free of import 
duties,  to  procure  goods  domestically  free  of  excise  duty,  to  obtain  sales  tax 
reimbursement  as  well  as  duty  drawback  on  furnace  oil  and  to  sell  part  of  its 
production  on  the  domestic  market.  Thus,  it  availed  of  all  benefits  as  described  in 
recital  (20)  above  under  (i)  to  (v).  The  applicant  did  not  avail  of  benefits  under  the 
income tax exemption provisions of the EOUS (see recital (53) below). 

(d) Conclusions on the EOUS 

(28)  The  exemptions  of  an  EOU  from  two  types  of  import  duties  (the  so-called  ‘basic 
customs duty’ and ‘special additional customs duty’), the reimbursement of sales tax 

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and the duty drawback on furnace oil are financial contributions of the GOI within the 
meaning  of  Article  2(1)(a)(ii)  of  the  basic  Regulation.  Government  revenue  which 
would be due in the absence of this scheme is forgone, thus, in addition, conferring a 
benefit within the meaning of Article 2(2) of the basic Regulation upon the applicant, 
because it saved liquidity by not having to pay duties normally due and by obtaining a 
sales tax reimbursement.  

(29)  The  exemptions  from  excise  duty  and  its  import  duty  equivalent  (the  so-called 
‘additional  customs  duty’),  however,  do  not  lead  to  revenue  forgone  which  is 
otherwise due. Excise and additional customs duty, if paid, could be used as a credit 
for own future duty liabilities (the so-called ‘CENVAT mechanism’). Therefore, these 
duties are not definitive. By the means of ‘CENVAT’-credit only an added value bears 
a definitive duty for the company, not the input materials.  

(30)  Thus,  only  the  exemption  from  basic  customs  duty,  special  additional  customs  duty, 
the sales tax reimbursement and the duty drawback on furnace oil constitute subsidies 
within  the  meaning  of  Article  2  of  the  basic  Regulation.  They  are  contingent  in  law 
upon  export  performance,  and  therefore  deemed  to  be  specific  and  countervailable 
under Article 3(4)(a) of the basic Regulation. The export objective of an EOU as set 
out in paragraph 6.1 of the FTP is a conditio sine qua non to obtain the incentives.  

(31)  Furthermore,  these  subsidies  cannot  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  Annex  I 
(items  (h)  and  (i)),  Annex  II  (definition  and  rules  for  drawback)  and  Annex  III 
(definition and rules for substitution drawback) of the basic Regulation.  

(32) 

(33) 

Insofar as the sales tax reimbursement and import duty exemption provisions are used 
for  purchasing  capital  goods,  they  are  already  not  in  conformity  with  the  rules  for 
permitted drawback systems because those goods are not consumed in the production 
process,  as  required  by  Annex  I  item  (h)  (sales  tax  reimbursement)  and  (i)  (import 
duties remission).  

In  addition,  and  also  concerning  the  other  benefits  which  are  available  under  this 
scheme, it is found that the GOI has no effective verification system or procedure in 
place  to  confirm  whether  and  in  what  amounts  duty  free  procured  inputs  or  inputs 
subject to sales tax reimbursement and duty drawback on furnace oil were consumed 
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(II)(2)  of  the  basic 
Regulation). 

(34)  An  EOU  is  allowed  to  sell  a  significant  amount  of  its  production,  up  to  50%  of  its 
annual  turnover,  on  the  domestic  market.  Therefore,  no  obligation  in  law  exists  to 
export the total amount of manufactured resultant products. Moreover, due to the self-
certification procedure these domestic transactions take place without the supervision 
and control of a government official. Consequently, the bonded premises of an EOU 
are  at  least  in  part  not  subject  to  a  physical  control  by  the  Indian  authorities.  This, 
however, increases the importance of further verification elements, notably control of 
the nexus between duty free inputs and resultant export products in order to qualify as 
a duty drawback verification system.  

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(35)  Concerning  further  verification  steps  installed  it  should  be  recalled,  as  mentioned 
above under recital (24) that an EOU is already de jure at no point in time required to 
co-relate every import consignment with the destination of the corresponding resultant 
product.  Only  such  consignment  controls,  however,  would  provide  the  Indian 
authorities  with  sufficient  information  about  the  final  destination  of  inputs  to  check 
that the duty exemptions, sales tax reimbursements and duty drawback on furnace oil 
do not exceed inputs for export production. Monthly tax returns for domestic sales on 
a self-assessment  basis, which are  periodically assessed by the Indian authorities, do 
not suffice. Company internal systems, which are kept without a legal obligation under 
the FTP, e.g. a batch sheets system, do not suffice to replace such key requirement for 
a duty drawback verification system either. In addition, a duty drawback verification 
system needs to be designed and enforced by a government and should not be left to 
the discretion of the management of each individual company concerned to set up an 
information  system.  Consequently,  it  is  found  that,  since  an  EOU  is  explicitly  not 
required  by  the  Indian  FTP  to  record  the  nexus  between  input  materials  and  the 
resultant product, no effective control mechanism was set up by the GOI to determine 
which inputs were consumed in export production and in what amounts.  

(36)  Also,  the  GOI  neither  carried  out  a  further  examination  based  on  actual  inputs 
involved,  although  this  would  normally  need  to  be  carried  out  in  the  absence  of  an 
effective  verification  system  (Annex  II(II)(5)  and  Annex  III(II)(3)  to  the  basic 
Regulation), nor did it prove that no excess remission took place. 

(37)  Upon  disclosure,  the  applicant  argued  that  not  the  same  methodology,  within  the 
meaning  of  Article  22(4)  of  the  basic  Regulation,  was  used  in  the  case  at  hand  as 
compared with the original investigation when assessing the EOUS. It must be noted 
that exporters in the original investigation provided evidence that no excess remission 
occurred and for this reason the duty exemption on raw material procurements under 
the EOUS was originally not countervailed.  

(38)  However,  the  applicant  did  not  provide  such  evidence  in  the  case  at  hand.  In  this 
context, it is also noted that it sold the product concerned on the domestic market as 
well,  i.e.  not  all  duty  free  procured  input  materials  were  necessarily  consumed  in 
export production. Furthermore, in particular the fact that according to the Indian law 
EOUS exporters are not obliged to co-relate import consignments with the destination 
of  the  corresponding  resultant  product,  constitutes  a  circumstance  not  established  in 
the original investigation. Therefore, the scheme has been assessed in the present case 
in  accordance  with  the  provisions  of  Article  22(4)  of  the  basic  Regulation,  which 
stipulates  that  new  circumstances  need  to  be  considered.  Consequently,  the  present 
finding, that the EOUS does not constitute a permitted duty drawback or substitution 
drawback system, is confirmed. 

(f) Calculation of the subsidy amount 

(39)  Accordingly,  in  the  absence  of  a  permitted  duty  drawback  system  or  substitution 
drawback  system,  the  countervailable  benefit  is  the  remission  of  total  import  duties 
(basic  customs  duty  and  special  additional  customs  duty)  normally  due  upon 
importation, as well as the sales tax reimbursement and duty drawback on furnace oil, 
all during the review investigation period. 

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(40)  Upon  disclosure,  the  applicant  claimed  that  the  subsidy  amount,  including  interest 
adjustments for non recurring subsidies, should be calculated only on the basis of the 7 
months  of  the  review  investigation  period  during  which  it  was  in  commercial 
operation. Alternatively, the applicant requested to consider only a 10 months period, 
which includes its trial production period. 

(41)  According  to  Article  5  of  the  basic  Regulation,  the  amount  of  countervailable 
subsidies shall be calculated in terms of the benefit conferred on the recipient, which is 
found to exist during an investigation period.  In conformity with the same provision 
and standard EC practice, a period of 12 months was chosen as review investigation 
period  and  findings  are  based  on  this  period  of  time.  No  provision  in  the  basic 
Regulation stipulates that start up phases of a company shall be disregarded. The claim 
of the applicant had therefore been rejected. 

(i)  Exemption  from  import  duties  (basic  customs  duty  and  special  additional 

customs duty) and sales tax reimbursement on raw materials 

(42)  The  subsidy  amount  for  the  applicant  was  calculated  on  the  basis  of  import  duties 
forgone  (basic  customs  duty  and  special  additional  customs  duty)  on  the  materials 
imported,  as  well  as  sales  tax  and  the  duty  drawback  on  furnace  oil  eligible  for 
reimbursement, all during the review investigation period. Fees necessarily 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  export  turnover  as  appropriate  denominator,  because  the  subsidy  is  contingent 
upon  export  performance  and  it  was  not  granted  by  reference  to  the  quantities 
manufactured, produced, exported or transported. The subsidy rate thus obtained was 
12,6%.  

(43) 

In this context, the applicant claimed that only the proportion of the subsidy amount 
directly  attributable  to  the  product  concerned  should  be  used  as  numerator.  The 
applicant produces a small amount of PET of lower viscosity as the product concerned 
and  the  intermediate  product  amorphous  PET-chips,  which  do  not  fall  under  the 
product scope of this investigation. It suggested apportioning the subsidy amount on 
the basis of the turnover of the product concerned in relation to the total turnover. 

(44)  However, it is noted that the various input materials cannot be per se linked either to 
the  product  concerned  or  PET  of  a  lower  viscosity  and  the  intermediate  product 
because the same input materials could be used for the production of all these types. 
Moreover, as set out in recitals (32) to (38) above, no proper verification system with 
regard to the final destination of the input materials was in place. In such case and in 
line with Article 7(2) of the basic Regulation, both numerator and denominator were 
determined on the basis of the total product range of the applicant in order to allocate 
the  subsidy  amount  attributable  to  the  product  concerned.  The  applicant  did  not 
substantiate that any alternative methodology would lead to a more precise result. In 
particular, it is noted that even if the claim was accepted, the denominator would be 
reduced pro rata, thus leading to the identical overall result.  

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(ii)  Exemption  from  import  duties  (basic  customs  duty  and  special  additional 

customs duty) on capital goods 

(45)  Unlike  raw  materials,  capital  goods  are  not  physically  incorporated  into  the  finished 
goods.  In  accordance  with  Article  7(3)  of  the  basic  Regulation,  the  benefit  to  the 
investigated  company  has  been  calculated  on  the  basis  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  industry  of  the  product 
concerned  (i.e.  18,465  years),  which  leads  to  a  depreciation  rate  of  rounded  5,42%. 
The amount so calculated which is then attributable to the review investigation period 
has been adjusted by adding interest during this period in order to reflect the value of 
the  benefit  over  time  and  thereby  establishing  the  full  benefit  of  this  scheme  to  the 
recipient.  The  amount  of  interest  added  was  based  on  the  commercial  interest  rate 
during the review investigation period in India. Fees necessarily 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) 
and  7(3)  of  the  basic  Regulation,  this  subsidy  amount  has  been  allocated  over  the 
export  turnover  generated  during  the  review  investigation  period  as  appropriate 
denominator,  because  the  subsidy  is  contingent  upon  export  performance  and  it  was 
not  granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported. The subsidy rate thus obtained was 0,9%.  

(46)  Upon disclosure, the applicant argued that its company specific depreciation period of 
18,93  years  should  be  used  instead  of  18,465  years,  which  is  the  combined  average 
together with the originally established depreciation period. Further, it claimed that its 
individual depreciation period reflects the industry standard nowadays in India. 

(47)  However,  as  set  out  above,  Article  7(3)  of  the  basic  Regulation  requires  to  focus  on 
the  normal,  i.e.  average,  depreciation  period  of  the  industry  and  not  on  a  company 
specific  period.  Moreover,  the  applicant  did  not  substantiate  that  the  industry 
depreciation standard of the industry concerned has generally increased. The argument 
was therefore rejected. 

(48)  Furthermore,  the  applicant  claimed  that  for  calculating  the  subsidy  amount  the 

depreciation rate should not have been rounded up. 

(49)  However,  it  is  noted  that  the  rounding  has  no  impact  on  the  overall  result,  thus  this 

comment being of no consequence. 

(50)  Consequently,  the  total  subsidy  rate  under  the  EOUS  for  the  applicant  amounts  to 

13,5%. 

2.2. Schemes originally investigated but not used by the company 

2.2.1 Duty Entitlement Passbook Scheme (‘DEPBS’) 

(51)  The applicant had not availed itself of benefits under the DEPBS.  

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2.2.2 Export Promotion Capital Goods scheme (‘EPCGS’) 

(52) 

It was established that the applicant had not imported capital goods under the EPCGS 
and, therefore, had not availed itself of the EPCGS.  

2.2.3 Income Tax Exemption Scheme  

(53) 

It was established that the applicant did not, in the absence of taxable profits, receive 
the  benefit  of  an  income  tax  exemption  under  Section  10B  of  the  Income  Tax  Act 
1961 during the review investigation period.  

2.3. Other schemes used by the company in relation to the product concerned and found 
countervailable 

2.3.1 Export Credit Scheme (‘ECS’) 

(a) Legal basis 

(54)  The ECS is based on sections 21 and 35A of the Indian Banking Regulation Act 1949, 
which allow the Reserve Bank of India (‘RBI’) to direct commercial banks in the field 
of export credits.  

(55)  The details of the scheme are set out in Master Circular IECD No. 35/04.02.02/2004-
IECD  No. 
(Foreign  Currency  Export  Credit)  and  Master  Circular 
05 
27/04.02.02/2004-05  (Rupee  Export  Credit)  of  the  RBI,  which  are  addressed  to  all 
commercial banks in India.  

(b) Eligibility 

(56)  Manufacturing exporters and merchant exporters are eligible for this scheme. 

(c) Practical implementation 

(57)  Under this scheme, the RBI mandatory sets 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  ECS  consists  of  two  sub-schemes,  the  Pre-
Shipment  Export  Credit  Scheme  (‘packing  credit’),  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  the  purpose  of  financing  export  receivables. 
The  RBI  also  directs  the  banks  to  provide  a  certain  amount  of  their  net  bank  credit 
towards export finance. 

(58)  As  a  result  of  these  RBI  Master  Circulars,  exporters  can  obtain  export  credits  at 
preferential  interest  rates  compared  with  the  interest  rates  for  ordinary  commercial 
credits (‘cash credits’), which are purely set under market conditions. In this respect, 
the  Master  Circular  on  Rupee  Export  Credit  notes  that  ‘ceiling  rates  of  interest  on 
credit extended to exporters as prescribed in this Circular are lower than the maximum 
lending  rates  normally  charged  to  other  borrowers  and  are,  therefore,  indicated  as 
concessive in this sense.’  

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(59)  Due to the RBI Master Circulars, the applicant enjoyed preferential interest rates for 

ECS credits as compared with its cash credit interest rates.  

(d) Conclusion on the ECS 

(60)  Firstly, the preferential interest rates of an ECS credit set by the RBI Master Circulars 
mentioned  in  recital  (55)  decreased  interest  costs  of  the  applicant  as  compared  with 
credit  costs  purely  set  by  market  conditions,  thus  conferring  a  benefit  within  the 
meaning of Article 2(2) of the basic Regulation on it. Secondly, and despite the fact 
that  the  preferential  credits  under  the  ECS  are  granted  by  commercial  banks,  this 
benefit  is  to  be  considered  as  a  financial  contribution  by  a  government  within  the 
meaning of Article 2(1)(iv) of the basic Regulation. In this context, it should be noted 
that  neither  Article  2(1)(iv)  of  the  basic  Regulation  nor  the  WTO  Agreement  on 
Subsidies  and  Countervailing  Measures  (‘ASCM’)  require  a  charge  on  the  public 
accounts,  e.g.  reimbursement  of  the  commercial  banks  by  the  GOI,  to  establish  a 
subsidy, but only government direction to carry out functions illustrated in points (i), 
(ii) or (iii) of Article 2(1) of the basic Regulation. The RBI is a public body and falls 
therefore under the definition of a ‘government’ as set out in Article 1(3) of the basic 
Regulation.  It  is  100%  government-owned,  pursues  public  policy  objectives,  e.g. 
monetary policy and its management is appointed by the GOI. The RBI directs private 
bodies in the sense that the commercial banks are bound by certain conditions,  inter 
alia, (i) by the maximum ceilings for interest rates on export credits mandated in the 
RBI  Master  Circulars  and  (ii)  by  the  RBI  provisions  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 mentioned 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, within the meaning of Article 2(1)(a)(iv) of the basic 
Regulation, the practice, in no real sense, differs from practices normally followed by 
governments. Furthermore, this subsidy is deemed to be specific and countervailable 
since  the  preferential  interest  rates  are  only  available  in  relation  to  export  financing 
and  are  therefore  contingent  upon  export  performance  within  the  meaning  of  Article 
3(4)(a) of the basic Regulation. 

(e) Calculation of the subsidy amount 

(61)  The  subsidy  amount  has  been  calculated  on  the  basis  of  the  difference  between  the 
interest accrued for export credits used during the review investigation period and the 
amount that would have been payable if the same interest rates were applicable as for 
ordinary commercial credits used  by the applicant. This subsidy amount (numerator) 
has been allocated over the total export turnover during the review investigation period 
as appropriate denominator in accordance with Article 7(2) basic Regulation, because 
the subsidy is contingent upon export performance and it was not granted by reference 
to  the  quantities  manufactured,  produced,  exported  or  transported.  The  ECS  subsidy 
rate so established is 0,4%. 

2.3.2 West Bengal Incentive Scheme (‘WBIS’) 

(62)  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 
replaced  by  notification  No  134-
last 
1999 

(‘WBIS  1999’)  which  was 

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CI/O/Incentive/17/03/I  of  24  March  2004  (‘WBIS  2004’).  The  investigation 
established  that  the  benefit  obtained  by  the  applicant  was  insignificant  and,  thus, 
WBIS is not analysed further. 

3. Total amount of countervailable subsidies 

(63)  Taking account of the definitive findings relating to the schemes as set out above, the 

rate of countervailable subsidies for the applicant is as follows: 

ECS 

EOUS  Total 

South Asian 

0,4% 

13,5% 

13,9% 

Petrochem Limited

E. AMENDMENT OF THE MEASURES BEING REVIEWED 

(64) 

In  accordance  with  Article  15(1)  of  the  basic  Regulation,  the  amount  of  the 
countervailing duty should be less than the total amount of countervailable subsidies, 
if  such  lesser  duty  were  to  be  adequate  to  remove  the  injury  to  the  Community 
industry. In the original investigation a general injury elimination level of 44,3% was 
established, which is higher than the subsidy rate established for the applicant.  

(65)  On the basis of the findings made during the review investigation, it is considered that 
imports of the product concerned into the Community produced and exported by the 
applicant  should  be  subject  to  a  level  of  countervailing  duty  corresponding  to  the 
individual  rate  of  subsidies  established  for  this  company,  i.e.  13,9%.  Since  the  duty 
imposed  by  Council  Regulation  (EC)  No  2603/2000  took  the  form  of  a  specific 
amount  per  tonne,  the  above-mentioned  duty  rate  for  the  applicant  has  also  been 
converted into a specific amount of EUR 106,5 per tonne. 

(66)  Council Regulation (EC) No 2603/2000 should therefore be amended accordingly. 

F. UNDERTAKING  

(67)  The  applicant  offered  a  price  undertaking  concerning  its  exports  of  the  product 
concerned  to  the  Community,  in  accordance  with  Article  13(1)  of  the  basic 
Regulation. 

(68)  After  examination  of  the  offer,  the  Commission  considered  the  undertaking  as 
acceptable  since  it  would  eliminate  the  injurious  effects  of  subsidisation.  Moreover, 
the  regular  and  detailed  reports  which  the  applicant  undertook  to  provide  to  the 
Commission  will  allow  effective  monitoring.  Furthermore,  the  nature  of  the  product 
and the sales structure of the applicant is such that the Commission considers that the 
risk of circumvention of the undertaking is limited. 

(69) 

In  order  to  ensure  the  effective  respect  and  monitoring  of  the  undertaking,  when  the 
request  for  release  for  free  circulation  pursuant  to  the  undertaking  is  presented, 
exemption from the duty is conditional upon presentation to the customs authorities of 
the Member State concerned a valid ‘Commercial Invoice’ issued by the applicant and 
containing  the  information  listed  in  the  Annex  to  Council  Regulation  (EC)  No 

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2603/2000. Where no such invoice is presented, or when it does not correspond to the 
product presented to customs, the appropriate rate of the countervailing duty should be 
payable in order to ensure the effective application of the undertaking. 

(70) 

In the event of a breach or withdrawal of the undertaking, a countervailing duty may 
be imposed pursuant to Article 13(9) and 13(10) of the basic Regulation. 

G. DISCLOSURE AND DURATION OF THE MEASURES 

(71)  The  applicant  and  the  GOI  were  informed  of  the  essential  facts  and  considerations 
upon which it was intended to propose that Council Regulation (EC) No 2603/2000 be 
amended  and  were  given  the  opportunity  to  comment.  Only  the  applicant  made 
comments, essentially on the EOUS, which have been addressed in the context of the 
respective conclusions above under section 2.1.1.(d), 

HAS ADOPTED THIS REGULATION: 

Article 1 

The  following  shall  be  inserted  into  the  table  under  producers  in  India  in  Article  1(3)  of 
Council Regulation (EC) No 2603/2000: 

South Asian Petrochem Limited 

106,5 

A585 

Article 2 

The following shall be inserted into the table in Article 2(3) of Council Regulation (EC) No 
2603/2000 with regard to imports accompanied by an ‘Undertaking Invoice’: 

South Asian Petrochem Limited 

India 

A585 

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

Article 3 

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

Done at Brussles, 

For the Council 
The President 

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