Council Regulation (EC) No 367/2006 of  27 February 2006  imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film originating in India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97
Date: 2006-02-27
Institutions: Council of the European Union
Subjects: India, countervailing charge, import, originating product, plastics

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COUNCIL REGULATION (EC) No 367/2006

of 27 February 2006

imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film
originating in India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97

THE COUNCIL OF THE EUROPEAN UNION,

(3)

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 2026/97 of 6 Octo-
ber 1997 on protection against subsidised imports from countries
not member of the European Community (1) (hereinafter referred
to as the basic Regulation), and in particular Article 18 thereof,

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

Whereas:

A. PROCEDURE

(1)

(2)

1.

EXISTING MEASURES AND TERMINATED

INVESTIGATIONS CONCERNING THE SAME PRODUCT

The Council, by Regulation (EC) No 2597/1999 (2),
imposed a definitive countervailing duty on imports of
polyethylene terephthalate (PET) film falling within CN
codes ex 3920 62 19 and ex 3920 62 90 and originating
in India (hereinafter referred to as the definitive counter-
vailing measures). The measures took the form of an ad
valorem duty ranging between 3,8 % and 19,1 % imposed
on imports from individually named exporters, with a
residual duty rate of 19,1 % imposed on imports from all
other companies.

The Council, by Regulation (EC) No 1676/2001 (3),
imposed definitive anti-dumping duties on imports of PET
film originating in India and the Republic of Korea. The
measures took the form of an ad valorem duty ranging
between 0 % and 62,6 % on imports of PET film originat-
ing in India (hereinafter referred to as the definitive anti-
dumping measures), with the exception of imports from
five Indian companies (Ester Industries Limited (hereinaf-
ter referred to as Ester), Flex Industries Limited (hereinafter
referred to as Flex), Garware Polyester Limited (hereinafter
referred to as Garware), MTZ Polyesters Limited (here-
inafter referred to as MTZ), and Polyplex Corporation
Limited (hereinafter referred to as Polyplex)) from whom
undertakings had been accepted by Commission
Decision 2001/645/EC (4).

It is noted that the company formerly known as MTZ Poly-
esters Limited changed name. Its new name is MTZ Poly-
films Limited. This change of name in no way affected the
findings of Regulation (EC) No 2597/1999 and the right of
the company to benefit from the individual duty rate
applied to it under its previous name. The Commission
announced on 17 February 2005 the change of name of
MTZ by a notice published in the Official Journal of the Euro-
pean Union (5). It is further noted that MTZ changed its
address with effect from July 2005, with no other changes
to either the company’s ownership, structure or opera-
tions. The address of the company should therefore be
amended.

(4)

(5)

(6)

(7)

The Council, by Regulations (EC) No 1975/2004 (6)
and (EC) No 1976/2004 (7), extended the definitive coun-
tervailing and anti-dumping measures on imports of PET
film originating in India, to imports of the same product
consigned from Brazil and Israel, whether declared as origi-
nating in Brazil or Israel or not.

On 28 June 2002 (8), the Commission initiated a partial
interim review limited to the form of the definitive coun-
tervailing measures and, in particular to the examination of
the acceptability of an undertaking offered by one Indian
exporting producer, pursuant to Article 19 of the basic
Regulation. This investigation has been terminated by
Council Regulation (EC) No 365/2006 (9).

On 22 November 2003 (10), the Commission initiated a
partial interim review limited to the form of the definitive
anti-dumping measures. This investigation has been con-
cluded by Council Regulation (EC) No 365/2006.

On 4 January 2005 (11), the Commission initiated a partial
interim review limited to the level of the definitive anti-
dumping measures. This investigation has been concluded
by Council Regulation (EC) No 365/2006, which amended
the level of the definitive anti-dumping measures.

(5) OJ C 40, 17.2.2005, p. 8.
(6) OJ L 342, 18.11.2004, p. 1. Regulation as last amended by Regulation

(EC) No 101/2006 (OJ L 17, 21.1.2006, p. 1).

(7) OJ L 342, 18.11.2004, p. 8. Regulation as amended by Regulation

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

(EC) No 101/2006.

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

(2) OJ L 316, 10.12.1999, p. 1.
(3) OJ L 227, 23.8.2001, p. 1.
(4) OJ L 227, 23.8.2001, p. 56.

(8) OJ C 154, 28.6.2002, p. 2.
(9) See page 1 of this Official Journal.
(10) OJ C 281, 22.11.2003, p. 4.
(11) OJ C 1, 4.1.2005, p. 5.

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(8)

(9)

(10)

(11)

the Commission initiated a
On 23 August 2005 (1),
review of Regulations (EC) No 1975/2004 and (EC)
No 1976/2004 with respect to the application of an Israeli
producer for an exemption from the extended measures.
This investigation has been terminated by Council Regula-
tion (EC) No 101/2006.

2. REQUEST FOR AN EXPIRY REVIEW

Following the publication of a notice of
impending
expiry (2) of the definitive countervailing measures in force,
the Commission received a request for the initiation of an
expiry review of Council Regulation (EC) No 2597/1999
pursuant to Article 18 of the basic Regulation, from Com-
munity producers of the like product, i.e. DuPont Teijin
Films, Mitsubishi Polyester Film GmbH, Nuroll SpA and
Toray Plastics Europe (hereinafter referred to as the appli-
cants). The applicants represent a major proportion, in this
case over 50 %, of the total Community production of PET
film.

The request was based on the grounds that the expiry of
the measures would be likely to result in the continuation
or recurrence of subsidisation and injury to the Commu-
nity industry.

Prior to the initiation of the expiry review, and in accor-
dance with Articles 10(9) and 22(1) of the basic Regula-
tion, the Commission notified the Government of India
(hereinafter referred to as the GOI) that it had received a
properly documented review request and invited the GOI
for consultations with the aim of clarifying the situation as
regards the contents of the complaint and arriving at a
mutually agreed solution. However, the Commission did
not receive any answer from the GOI regarding its offer for
consultation.

3.

INITIATION OF AN EXPIRY REVIEW

(12)

The Commission examined the evidence submitted by the
applicants and considered it sufficient to justify the initia-
tion of a review in accordance with the provisions of
Article 18 of the basic Regulation. After consultation of the
Advisory Committee, the Commission initiated an expiry
review of Council Regulation (EC) No 2597/1999 by
means of a notice published in the Official Journal of the
European Union (3).

4.

INVESTIGATION PERIOD

(13)

The investigation covered the period from 1 October 2003
to 30 September 2004 (hereinafter referred to as the review
investigation period or IP). The examination of trends in
the context of injury covered the period from 1 January
2001 up to the end of the review investigation period
(hereinafter referred to as the period considered).

(14)

(15)

(16)

(17)

(18)

(19)

5.

PARTIES CONCERNED BY THE INVESTIGATION

The Commission officially advised the applicants, other
known Community producers, exporting producers,
importers, upstream suppliers, users and the GOI of the
initiation of the investigation. Interested parties had the
opportunity to make their views known in writing. All
interested parties, who so requested and showed that there
were particular reasons why they should be heard, were
granted a hearing. The written and oral comments submit-
ted by the parties were considered and, where appropriate,
taken into account.

In view of the apparently large number of exporting pro-
ducers of PET film in India which were named in the
request, the use of sampling techniques for the investiga-
tion of subsidisation was envisaged in the notice of initia-
tion in accordance with Article 27 of the basic Regulation.
In order to decide whether sampling would be necessary
and, if so, to select a sample, all exporting producers were
asked to make themselves known and to provide, as speci-
fied in the notice of initiation, basic information on their
activities related to the product concerned during the IP.
After examination of the information submitted, and given
the high number of exporting producers which indicated
their willingness to cooperate, it was decided that sampling
was necessary.

The Commission sent questionnaires to all parties known
to be concerned or who made themselves known within
the deadlines set in the notice of initiation. Replies were
received from four Community producers, eight exporting
producers, one importer/user, one up-stream supplier and
the GOI.

From the eight Indian exporting producers, four compa-
nies (Ester, Flex, Garware and Jindal Poly Films Limited
(hereinafter referred to as Jindal)), were selected for the
sample. These were found to constitute the largest repre-
sentative volume of the production, sales and exports to
the Community of PET film, which could reasonably be
to
investigated within the time available, pursuant
Article 27(1) of the basic Regulation.

By a notice published in the Official Journal of the European
Union (4), the Commission announced that the company
formerly known as Jindal Polyester Limited changed its
address. The address of the company should therefore be
amended.

By a notice published in the Official Journal of the European
Union (5), the Commission announced that the company
formerly known as Jindal Polyester Limited changed its
name to Jindal Poly Films Limited. The name of the com-
pany should therefore be amended.

(1) OJ L 218, 23.8.2005, p. 3.
(2) OJ C 62, 11.3.2004, p. 4.
(3) OJ C 306, 10.12.2004, p. 2.

(4) OJ C 189, 9.8.2002, p. 34.
(5) OJ C 297, 2.12.2004, p. 2.

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(20)

The Commission sought and verified all information it
deemed necessary for the determination of subsidisation
and injury as well as to determine whether there is a like-
lihood of continuation or recurrence of subsidisation
and injury and whether maintaining the measures would
be in the Community interest. Verification visits were car-
ried out at the premises of the following interested parties:

(23)

The investigation confirmed that, as in the original inves-
tigation, the product concerned and the PET film produced
and sold on the domestic market in India, as well as the
PET film produced and sold in the Community by the
Community producers had the same basic physical char-
acteristics and uses to the product concerned and were
thus a like product within the meaning of Article 1(5) of
the basic Regulation.

(a) Community producers

— DuPont Teijin Films, Luxemburg and Middles-

brough, United Kingdom,

C. SUBSIDIES

— Mitsubishi Polyester Film GmbH, Wiesbaden,

1.

INTRODUCTION

Germany,

— Nuroll SpA, Pignataro Maggiore, Italy,

— Toray Plastics Europe, Miribel, France;

(b) Government of India

— Ministry of Commerce, New Delhi;

(c) Exporting producers in India

— Ester Industries Limited, New Delhi,

— Flex Industries Limited, New Delhi,

— Garware Polyester Limited, Aurangabad,

— Jindal Poly Films Limited, New Delhi;

(d)

Importer/user

— Coveme SpA, San Lazzaro di Savena, Italy;

(e) Up-stream supplier

— Oxxynova GmbH, Marl, Germany.

6. DISCLOSURE

(25)

(21)

Pursuant to Article 30 of the basic Regulation, the GOI and
the other interested parties were informed of the essential
facts and considerations upon which it is intended to pro-
pose the continuation of measures. They were also given a
reasonable time to comment. Certain parties presented
their comments in writing. In addition, the GOI was
offered,
to
Article 10(11) of the basic Regulation. All submissions
and comments were taken duly into consideration.

consultation

accepted,

pursuant

and

B. PRODUCT CONCERNED AND LIKE PRODUCT

(22)

The product covered by this review is the same product as
the one
concerned by Council Regulation (EC)
No 2597/1999, namely PET film falling within CN codes
ex 3920 62 19 and ex 3920 62 90 originating in India
(hereinafter referred to as the product concerned).

(24) On the basis of the information contained in the review
request and the replies to the Commission’s questionnaire,
the following schemes, which allegedly involve the grant-
ing of subsidies, were investigated:

1.1. Nationwide schemes

(a) Advance licence/Advance release order;

(b) Duty entitlement passbook;

(c) Special economic zones/Export oriented units;

(d) Export promotion capital goods;

(e) Duty free replenishment certificate;

(f)

Income tax exemption;

(g) Export credit:

— pre-export,

— post-export,

(h) Capital infusions.

The schemes (a) to (e) are based on the Foreign Trade
(Development and Regulation) Act 1992 (No 22 of 1992)
which entered into force on 7 August 1992 (hereinafter
referred to as Foreign Trade Act). The Foreign Trade Act
authorises the GOI to issue notifications regarding the
export and import policy. These are summarised in Export
and Import Policy documents, which are issued by the
Ministry of Commerce every five years and updated regu-
larly. One Export and Import Policy document is relevant
to the review investigation period of this case; i.e. the five-
year plan relating to the period 1 April 2002 to 31 March
2007 (hereinafter referred to as EXIM-policy 2002-2007).
In addition, the GOI also sets out the procedures govern-
ing the EXIM-policy 2002-2007 in a ‘Handbook of Proce-
dures — 1 April 2002 to 31 March 2007, Volume I’
(hereinafter referred to as HOP I 2002-2007) (1). The
Handbook of Procedure is also updated on a regular basis.

(1) Notification No 1/2002-2007 of 31 March 2002 of the Ministry of

Commerce and Industry of the GOI.

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(26)

Scheme (f) is based on the Income Tax Act of 1961, which
is amended yearly by the Finance Act.

(27)

Scheme (g) is based on Sections 21 and 35A of the Bank-
ing Regulation Act 1949, which allows the Reserve Bank
of India (hereinafter referred to as RBI) to instruct commer-
cial banks regarding export credits.

(28)

Scheme (h) is an ad hoc subsidy for which no legal basis in
the Indian Law could be established.

eligible for the ALS physical exports and for the ALS for
annual requirement. Manufacturer–exporters supplying
the ultimate exporter are eligible for ALS for intermediate
supplies. Main contractors which supply to the ‘deemed
export’ categories mentioned in paragraph 8.2 of the EXIM-
policy 2002-2007, such as suppliers of an export oriented
unit (hereinafter referred to as EOU), are eligible for ALS
deemed export. Eventually,
intermediate suppliers to
manufacturer-exporters are eligible for ‘deemed export’
benefits under the sub-schemes ARO and back to back
inland letter of credit.

1.2. Regional schemes

(c) Practical implementation

(29) On the basis of the information contained in the review
request and the replies to the Commission’s questionnaire,
the Commission also investigated a number of schemes
which allegedly are granted by regional governments or
authorities in certain Indian States.

(a) State of Uttar Pradesh,

— The schemes are based on the Trade Tax Act,
1948 of the Government of Uttar Pradesh (here-
inafter referred to as the GOUP).

(b) State of Maharashtra,

— Package scheme of incentives (hereinafter referred
to as PSI) of the Government of Maharashtra
(hereinafter referred to as the GOM) 1993. This
scheme is based on resolutions of the GOM Indus-
tries, Energy and Labour Department.

2. NATIONWIDE SCHEMES

2.1. Advance licence scheme (hereinafter referred
to as ALS)/Advance release order (hereinafter
referred to as ARO)

(a) Legal basis

(30)

The detailed description of the scheme is contained in
paragraphs 4.1.1 to 4.1.14 of the EXIM-policy 2002-2007
and Chapters 4.1 to 4.30 of the HOP I 2002-2007.

(b) Eligibility

(31)

The ALS consists of six sub-schemes, as described in more
detail in recital 32. Those sub-schemes, inter alia, differ in
the scope of eligibility. Manufacturer-exporters and
merchant-exporters ‘tied to’ supporting manufacturers are

(32) Advance licences can be issued for:

(i)

P h y s i c a l e x p o r t s : This is the main sub-scheme.
It allows for duty free import of input materials for the
production of a specific resultant export product.
‘Physical’ in this context means that the export prod-
uct has to leave Indian territory. Import allowance and
export obligation including the type of export prod-
uct are specified in the licence.

(ii) A n n u a l

r e q u i r e m e n t : Such a licence is not
linked to a specific export product, but to a wider
product group (e.g. chemical and allied products). The
licence holder can – up to a certain value threshold set
by its past export performance – import duty-free any
input to be used in manufacturing any of the items
falling under such a product group. It can choose to
export any resultant product falling under the prod-
uct group using such duty-exempt material.

(iii) I n t e r m e d i a t e s u p p l i e s : This sub-scheme cov-
ers cases where two manufacturers intend to produce
a single export product and divide the production pro-
cess. The manufacturer-exporter produces the inter-
mediate product.
It can import duty free input
materials and can obtain for this purpose an ALS for
intermediate supplies. The ultimate exporter finalises
the production and is obliged to export the finished
product.

(iv) D e e m e d e x p o r t s : This sub-scheme allows a main
contractor to import inputs free of duty which are
required in manufacturing goods to be sold as ‘deemed
exports’ to the categories of customers mentioned in
paragraph 8.2(b) to (f), (g), (i) and (j) of the EXIM policy
2002-2007. According to the GOI, deemed exports
refer to those transactions in which the goods sup-
plied do not leave the country. A number of catego-
ries of supply is regarded as deemed exports provided
the goods are manufactured in India, e.g. supply of
goods to an EOU or to a company situated in a spe-
cial economic zone (hereinafter referred to as ‘SEZ’).

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(v) A R O : The ALS holder intending to source the inputs
from indigenous sources, in lieu of direct import, has
the option to source them against AROs. In such cases
the Advance Licences are validated as AROs and are
endorsed to the indigenous supplier upon delivery of
the items specified therein. The endorsement of the
ARO entitles the indigenous supplier to the benefits of
deemed exports as set out in paragraph 8.3 of the
EXIM-policy 2002-2007 (i.e. ALS for intermediate
supplies/deemed export, deemed export drawback and
refund of terminal excise duty). The ARO mechanism
refunds taxes and duties to the supplier instead of
refunding the same to the ultimate exporter in the
form of drawback/refund of duties. The refund of
taxes/duties is available both for indigenous inputs as
well as imported inputs.

(vi) B a c k - t o - b a c k i n l a n d l e t t e r o f c r e d i t : This
sub-scheme again covers indigenous supplies to an
ALS holder. The holder of an ALS can approach a
bank for opening an inland letter of credit in favour of
an indigenous supplier. The licence will be invalidated
by the bank for direct import, only in respect of the
value and volume of items being sourced indigenously
instead of importation. The indigenous supplier will
be entitled to deemed export benefits as set out in para-
graph 8.3 of the EXIM-policy 2002-2007 (i.e. ALS for
intermediate supplies/deemed export, deemed export
drawback and refund of terminal excise duty).

(36)

(37)

(38)

(33)

(34)

From the four sampled exporting producers, only one used
the ALS during the IP. More precisely, this exporting pro-
ducer made use of two sub-schemes, namely (i) and (ii)
above. This cooperating exporter explained that, whilst it
made use of the duty entitlement passbook scheme (here-
inafter referred to as DEPB) in 1999 at the time of the
definitive countervailing measures, it had since decided to
stop using the DEPB and to make use of the ALS instead.

For verification purposes by the Indian authorities, a
licence holder is legally obliged to maintain ‘a true and
proper account of licence-wise consumption and utilisa-
tion of imported goods’
in a specified format (Chap-
ter 4.30 HOP I 2002-2007) (hereinafter referred to as the
consumption register). The verification evidenced that the
company properly maintains a consumption register.

documented by Government officials on the licence. The
volume of imports allowed under this scheme is deter-
mined by the GOI on the basis of standard input-output
norms (hereinafter referred to as SIONs). SIONs exist for
most products including the product concerned and are
published in the HOP I 2002-2007.

In case of the sub-scheme (ii) listed above under recital 32
(ALS for annual requirement), only the import allowance
in value is documented on the licence. The licence holder
is obliged to ‘maintain the nexus between imported inputs
and the resultant product’ (paragraph 4.24A(c) HOP I
2002-2007).

Imported input materials are not transferable and have to
be used to produce the resultant export product. The
export obligation must be fulfilled within a prescribed time
frame after issuance of the licence (18 months with two
possible extensions of six months each).

The verification evidenced that the company specific con-
sumption rate of the key raw material needed to produce
one kilogram of PET film, and as reported in the consump-
tion register, was lower than the corresponding SION. In
other words,
the cooperating exporter was allowed
to import duty-free as per the SION more of the said raw
material than actually needed by its manufacturing pro-
cess. The company claimed that the GOI will adjust the
excess benefit when the licences will have expired, i.e.
30 months from the issuance of the licence, see recital 37,
as the common practice is to make use of the two possible
extensions of six months each. However, given that the
first licence was issued to the company on 31 January
2003, the company could not substantiate its allegation
during the on spot verification of the Commission services
which took place in May 2005. In December 2005, when
the company commented upon disclosure, it did not pro-
vide either any evidence that excess remission had been
adjusted. These SIONs clearly lead to an excess remission
of duties. The GOI did not provide any evidence showing
that it systematically adjusted excess remission when
licences expired, neither that there exists a reasonable sys-
tem to adjust the excess remission.

(d) Disclosure comments

(35)

In regard to sub-scheme (i) above, both the import allow-
ance and the export (including deemed export) obligation
are fixed in volume and value by the GOI and are docu-
mented on the licence. In addition, at the time of import
and of export, the corresponding transactions are to be

(39)

Further to disclosure, the GOI indicated that, on three
occasions during 2005, it had modified the ALS in order
to, inter alia, better control the use of the ALS by exporting
producers and that the modifications and the improved
control methods would lead to no excess remission. It was
therefore claimed that any subsidies generated by the ALS
and incorporated into the calculation should not be
countervailed.

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(40)

It should be noted that the changes to the ALS referred to
took effect both after the IP and after the verification visit
of the Commission services, and were therefore unverifi-
able in their practice. In addition, by means of a public
notice released on 10 October 2005, paragraph 4.26 HOP
I 2002-2007 was complemented as follows: ‘the licensing
authority shall also take action against the licensee in case
of non submission of duly filled in appendix 23 (other
name for the consumption register)’ However, there is
no indication of what that action might be.

(41)

It is therefore considered that the abovementioned modi-
fications introduced by the Indian authorities have not
been verified in their practical implementation. In particu-
lar, the consequences of a non submission of the consump-
tion register are not provided. The conclusions set out
below are therefore based on the findings as established
during the IP.

(e) Conclusion

(45)

The sub-schemes are therefore countervailable.

(f) Calculation of the subsidy amount

(46)

The subsidy amount for the exporter which used the ALS
was calculated as follows. The numerator is the import
duties forgone (basic customs duty and special additional
customs duty) on the material imported under the two ALS
sub-schemes used for the product concerned during the IP
(numerator). In accordance with Article 7(1)(a) of the basic
Regulation, fees necessarily incurred to obtain the subsidy
were deducted from the subsidy amounts where justified
claims were made. In accordance with Article 7(2) of the
basic Regulation, the denominator is the export turnover
generated by the product concerned during the IP.

(47)

The company which made use of this scheme during the
IP obtained a subsidy of 6,0 %.

2.2. Duty entitlement passbook scheme (DEPB)

(42)

The exemption from import duties is a subsidy within the
meaning of Article 2(1)(a)(ii) and Article 2(2) of the basic
Regulation, i.e. a financial contribution of the GOI which
conferred a benefit upon the investigated exporters.

(a) Legal basis

(43)

(44)

In addition, the ALS for physical exports and the ALS for
annual requirement are clearly contingent in law upon
export performance, and therefore deemed to be specific
and countervailable under Article 3(4)(a) of the basic Regu-
lation. Without an export commitment a company cannot
obtain benefits under these schemes.

(48)

The detailed description of the DEPB is contained in
paragraph 4.3 of the EXIM-policy 2002-2007 and in
Chapter 4 of the HOP I 2002-2007. At the time of the
original investigation, two forms of DEPB existed – pre-
export and post-export. In April 2000 the pre-export form
of DEPB was discontinued and therefore the investigation
only examined the post-export form of the alleged subsidy.

The sub-schemes used in the present case cannot be con-
sidered as permissible duty drawback systems or substi-
tution 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 item (i),
Annex II (definition and rules for drawback) and Annex III
(definition and rules for substitution drawback) to the
basic Regulation. The GOI did not effectively apply its
verification system or procedure to confirm whether
and in what amounts inputs were consumed in the pro-
duction of the exported product (Annex II(II)(4) to the
basic Regulation and, in the case of substitution drawback
schemes, Annex III(II)(2) to the basic Regulation). The
SIONs for the product concerned were not sufficiently
precise. The SIONs themselves cannot be considered a
verification system of actual consumption, because the
design of those overly generous standard norms does not
enable the GOI to verify with sufficient precision what
amount of inputs were consumed in the export produc-
tion. Furthermore, an effective control done by the GOI
based on the consumption register does not take place.

(b) Eligibility

(49) Any manufacturer-exporter or merchant-exporter is eli-
gible for this scheme. Three companies were found to ben-
efit from this scheme during the IP.

(c) Practical implementation of the DEPB

(50) An eligible exporter can apply for DEPB credits which are
calculated as a percentage of the value of products exported
under this scheme. Such DEPB rates have been established
by the Indian authorities for most products, including the
product concerned. They are determined on the basis of
SIONs, taking into account a presumed import content of
inputs in the export product and the customs duty inci-
dence on such presumed imports, regardless of whether
import duties have actually been paid or not.

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(51)

To be eligible for benefits under this scheme, a company
must export. At the point in time of the export transaction,
a declaration must be made by the exporter to the authori-
ties in India indicating that the export is taking place under
the DEPB. In order for the goods to be exported, the Indian
customs authorities issue, during the dispatch procedure,
an export shipping bill. This document shows, inter alia,
the amount of DEPB credit which is to be granted for that
export transaction. At this point in time, the exporter
knows the benefit it will receive. Once the customs authori-
ties issue an export shipping bill, the GOI has no discre-
tion over the granting of a DEPB credit. The relevant DEPB
rate to calculate the benefit is that which applied at the
time the export declaration is made. Therefore, there is no
possibility for a retroactive amendment to the level of the
benefit.

(52)

It was also found that in accordance with Indian account-
ing standards, DEPB credits can be booked on an accrual
basis as income in the commercial accounts, upon fulfil-
ment of the export obligation. Such credits can be used for
payment of customs duties on subsequent imports of any
goods unrestrictedly importable, except capital goods.
Goods imported against such credits can be sold on the
domestic market (subject to sales tax) or used otherwise.
DEPB credits are freely transferable and valid for a period
of 12 months from the date of issue.

(53) An application for DEPB credits can cover up to 25 export
transactions or, if electronically filed, an unlimited amount
of export transactions. De facto, no strict deadlines to apply
for DEPB credits exist, because the time periods mentioned
in Chapter 4.47 HOP I 2002-2007 are always counted
from the most recent export transaction included in a given
DEPB application.

(54)

The GOI and one exporter brought to the attention of the
Commission services that this scheme would be soon dis-
continued and be replaced by an allegedly ‘WTO compat-
ible’ scheme. The DEPB was originally planned to expire on
1 April 2005. However, as the replacement scheme was
not ready to be implemented, the existence of the DEPB
was prolonged until 1 April 2006. Should the new scheme
not be ready for entry into force by that date, the DEPB
would remain in force as long as necessary.

which are exported bear import duties on their input mate-
rials, (ii) questioned the calculation methodology of the
Commission based on an ‘accrual’ basis as opposed to the
methodology used in the original proceeding of 1999
which led to the definitive countervailing measures and
which was based on a ‘receipt’ basis, (iii) requested imme-
diate termination of the proceeding with respect to the
DEPB on the ground that the GOI has announced its ter-
mination as of 1 April 2006 and (iv) alleged that not to dis-
miss it from the calculation would be a violation of the
provisions contained in Article 27 ASCM in favour of
developing countries.

(56)

Claim (i) has not been further substantiated by the GOI nor
by the exporters. It is anyhow contradicted by the findings
of the investigation as referred to in recitals 50 to 53. This
claim is therefore rejected.

(57) As regards claim (ii), the methodology used in this inves-
tigation aims at better reflecting the impact of the subsidy
over the financial situation of the cooperating exporters
during a given investigation period. In this regard, it was
considered that the benefit is conferred on the recipient at
the point in time when an export transaction is made under
this scheme. This is confirmed, inter alia, by the booking of
DEPB credits on an accrual basis according to Indian
accounting standards. It is further noted that this method-
ology has already been used several times by the Commis-
sion services, notably in the graphite electrode system
case (1) and that this methodology does not result in a
complete re-evaluation of the scheme, which, indeed, has
always been found countervailable. This claim is therefore
rejected.

(58) As to claim (iii), it was indeed found that the GOI has in
the past announced the abolition of the DEPB. The DEPB
was to be terminated on 31 March 2005 but was pro-
longed by the GOI until 30 September 2005. The GOI
then further extended the validity of the scheme until
1 April 2006. In these circumstances, it is still uncertain as
to whether the DEPB will in fact be abolished from 1 April
2006 (see recital (123)).

(d) Disclosure comments

(55) Upon disclosure, the GOI and two exporters, which
received benefits under this scheme, commented on the
DEPB analysis as set out above. They (i) submitted that
DEPB credits can allegedly only be obtained if the goods

(59)

Regarding claim (iv) above, there is no violation of the
developing country provisions contained in Article 27
ASCM. That Article does not preclude, in fact, a WTO
Member from taking countervailing action against the inju-
rious effects of subsidisation by another Member. As the
DEPB has been found to be countervailable, this claim is
therefore rejected.

(1) Council Regulation (EC) No 1628/2004, OJ L 295, 18.9.2004, p. 4

(recital 13).

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(60)

(61)

(62)

(e) Conclusions on the DEPB

The DEPB provides subsidies within the meaning of
Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation.
A DEPB credit is a financial contribution by the GOI, since
the credit will eventually be used to offset import duties,
thus decreasing the GOI’s duty revenue which would be
otherwise due. In addition, the DEPB credit confers a ben-
efit upon the exporter, because it improves the liquidity of
the company.

Furthermore, the DEPB is contingent in law upon export
performance, and therefore deemed to be specific
and countervailable under Article 3(4)(a) of the basic
Regulation.

This scheme cannot be considered a permissible duty
drawback system or substitution drawback system within
the meaning of Article 2(1)(a)(ii) to the basic Regulation. It
does not conform to the strict rules laid down in Annex I
item (i), Annex II (definition and rules for drawback) and
Annex III (definition and rules for substitution drawback)
to the basic Regulation. An exporter is under no obligation
to actually consume the goods imported free of duty in the
production process and the amount of credit is not calcu-
lated in relation to actual inputs used. Moreover, there is
no system or procedure in place to confirm which inputs
are consumed in the production process of the exported
product or whether an excess payment of import duties
occurred within the meaning of item (i) of Annex I and
Annexes II and III to the basic Regulation. Lastly, an
exporter is eligible for the DEPB benefits regardless of
whether it imports any inputs at all. In order to obtain the
benefit, it is sufficient for an exporter to simply export
goods without demonstrating that any input material was
imported. Thus, even exporters which procure all of their
inputs locally and do not import any goods which can be
used as inputs are still entitled to benefit from the DEPB.

(f) Calculation of the subsidy amount

(63)

In accordance with Article 2(2) and Article 5 of the basic
Regulation, the amount of countervailable subsidies was
calculated in terms of the benefit conferred on the recipi-
ent, which is found to exist during the review investigation
period. In this regard, it was considered that the benefit is
conferred on the recipient at the point in time when an
export transaction is made under this scheme. At this
moment, the GOI is liable to forego the customs duties,
which constitutes a financial contribution within the mean-
ing of Article 2(1)(a)(ii) of the basic Regulation.

(65) Where justified claims were made, fees necessarily incurred
to obtain the subsidy were deducted from the credits so
established to arrive at the subsidy amounts as numerator,
pursuant to Article 7(1)(a) of the basic Regulation.

(66)

In accordance with Article 7(2) of the basic Regulation
these subsidy amounts have been allocated over the total
export turnover during the review investigation period as
appropriate denominator, because the subsidy is contin-
gent upon export performance and it was not granted by
reference to the quantities manufactured, produced,
exported or transported. Three companies benefited from
this scheme during the IP and obtained subsidies of
between 9,0 % and 11,0 %.

2.3. Export oriented units

referred
to as ‘EOU’) scheme/special economic zones
(hereinafter referred to as SEZ) scheme

(hereinafter

(a) Legal basis

(67)

The details of these schemes are contained in Chapters 6
(EOU) and 7 (SEZ) respectively of the EXIM-policy 2002-
2007 and of the HOP I 2002-2007.

(b) Eligibility

(68) With the exception of pure trading companies, all enter-
prises which, in principle, undertake to export their entire
production of goods or services may be set up under the
SEZ or the EOU schemes. One company was found to ben-
efit from the EOU scheme during the IP.

(c) Practical implementation

(69)

(70)

SEZ are specifically delineated duty free enclaves and con-
sidered by the EXIM-policy 2002-2007 as foreign territory
for the purpose of trade operations, duties and taxes.

EOU on the other side, are geographically more flexible
and can be established anywhere in India. This scheme is
complementary to the SEZ.

(71) An application for EOU or SEZ status 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 authori-
ties accept the company’s application, the terms and con-
ditions attached to the acceptance will be communicated
to the company. The agreement to be recognised as a com-
pany under SEZ/EOU is valid for a five-year period. The
agreement may be renewed for further periods.

(64)

In light of the above, it is considered appropriate to assess
the benefit under the DEPB as being the sum of the credits
earned on all export transactions made under this scheme
during the investigation period.

(72) A crucial obligation of an EOU or an SEZ as set out in the
EXIM-policy 2002-2007 is to achieve net foreign exchange
(hereinafter referred to as NFE) earnings, i.e. in a reference
period (five years) the total value of exports has to be
higher than the total value of imported goods.

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(73)

EOU/SEZ units are entitled to the following concessions:

(i)

exemption from import duties on all types of goods
(including capital goods, raw materials and consum-
ables) required for the manufacture, production, pro-
cessing, or in connection therewith;

reimbursement of the central sales tax paid on goods pro-
cured locally. This exporter did not make use of the exemp-
tion from import duties on raw materials, as the EOU
facility, in order to produce PET film, uses PET chips as raw
materials. These PET chips are produced in another unit of
this company from raw materials purchased under the
ALS. Thus, the company availed of the benefits described
in (i) and (iii) of recital 73.

(ii) exemption from excise duty on goods procured from

indigenous sources;

(d) Disclosure comments

(iii) reimbursement of central sales tax paid on goods pro-

cured locally;

(iv) facility to sell a part of production on the domestic
market on payment of applicable duties on the fin-
ished product as an exception to the general require-
ment to export the entire production;

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

(vi) possibility of 100 % foreign equity ownership.

(74) Units operating under these schemes are bonded under the
surveillance of customs officials in accordance with Sec-
tion 65 of the Customs Act. 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
should be submitted periodically, as may be required, to
the competent authorities (hereinafter referred to as quar-
terly and annual progress reports). However, ‘at no point in
time shall (an EOU or a SEZ unit) be required to co-relate
every import consignment with its exports, transfers to
other units, sales in DTA or stocks’, as per paragraph 10.2
of Appendix 14-I and paragraph 13.2 of Appendix 14-II to
the HOP I 2002-2007.

(75) Domestic sales are dispatched and recorded on a self-
certification basis. The dispatch process of export consign-
ments of an EOU is supervised by a customs/excise official,
who is permanently posted in the EOU.

(77) One company which availed itself of benefits under the
EOU made comments on certain details of the calculation
of the corresponding subsidy margins. Where these com-
ments were found justified, calculations have been adjusted
as a result.

(e) Conclusions on the EOU

(78)

(79)

(80)

The exemption of an EOU from two types of import duties
(hereinafter referred to as basic customs duty and special
additional customs duty) and the reimbursement of the
central sales tax are a financial contribution of the GOI
within the meaning of Article 2(1)(a)(ii) of the basic Regu-
lation. Government revenue which would be due in the
absence of this scheme is forgone, thus, in addition, con-
ferring a benefit upon the EOU in the meaning of
Article 2(2) of the basic Regulation, because it saved liquid-
ity by not having to pay duties normally due.

Thus, the exemption from basic customs duty and special
additional customs duty and the sales tax reimbursement
constitute subsidies in the meaning of Article 2 of the basic
Regulation. They are contingent in law upon export per-
formance, and therefore deemed to be specific and coun-
tervailable under Article 3(4)(a) of the basic Regulation.
The export objective of an EOU as set out in paragraph 6.1
of the EXIM-policy 2002-2007 is a condition sine qua non to
obtain the incentives.

In addition, it was confirmed that the GOI has no effective
verification system or procedure in place to confirm
whether and in what amounts duty and or sales-tax-free
procured inputs were consumed in the production of the
exported product (Annex II(II)(4) to the basic Regulation
in the case of substitution drawback schemes,
and,
In addition,
Annex III(II)(2) to the basic Regulation).
exemption from duties on capital goods is clearly not a
permissible duty drawback scheme.

(76)

In the present case, the EOU scheme was only used by one
of the cooperating exporters during part of the IP. As the
SEZ scheme was not used, it is therefore not necessary to
analyse the countervailability of this scheme. The cooper-
ating exporter that used the EOU utilized the scheme
to import capital goods free of import duties and to obtain

(81)

The GOI did not carry out a further examination based on
actual inputs involved, although this would normally need
to be done in the absence of an effective verification sys-
tem (Annex II(II)(5) and Annex III(II)(3) to the basic Regu-
lation), nor did it prove that no excess remission took
place.

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(f) Calculation of the subsidy amount

2.4. Export

promotion

capital

goods

scheme

(hereinafter referred to as EPCG)

(82) Accordingly, the countervailable benefit is the remission of
total import duties (basic customs duty and special addi-
tional customs duty) normally due upon importation, as
well as the sales tax reimbursement, both during the review
investigation period.

(83)

(84)

(85)

(i) R e i m b u r s e m e n t o f c e n t r a l s a l e s t a x o n

r e v e n u e g o o d s

The numerator was established as follows. The subsidy
amount for the exporter which used this scheme was cal-
culated on the basis of the sales tax reimbursed on the pur-
chases made for the production sector, i.e., inter alia, parts
and packing materials, 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.

In accordance with Article 7(2) of the basic Regulation this
subsidy amount has been allocated over the export turn-
over generated by all export sales during the review inves-
tigation 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 margin
thus obtained was 0,02 %.

(ii) E x e m p t i o n f r o m i m p o r t d u t i e s

c u s t o m s d u t y
c u s t o m s d u t y )
c e n t r a l s a l e s t a x o n c a p i t a l g o o d s

( b a s i c
a n d s p e c i a l
a d d i t i o n a l
a n d r e i m b u r s e m e n t o f

In accordance with Article 7(3) of the basic Regulation, the
benefit to the company utilising this scheme has been cal-
culated on the basis of the amount of unpaid customs duty
on imported capital goods and of the amount of sales tax
reimbursed on purchases of capital goods, both spread
across a period which reflects the normal depreciation
period of such capital goods in the industry of the product
concerned. The amount so calculated which is then attrib-
utable to the IP has been adjusted by adding interest dur-
ing 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. Fees necessarily incurred to obtain
the
in accordance with
deducted
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 (3) of the basic Regulation this sub-
sidy amount has been allocated over the export turnover
generated by the sector 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, pro-
duced, exported or transported. The subsidy margin thus
obtained was 5,0 %.

subsidy were

(86)

Thus, the total subsidy margin under the EOU scheme for
the company concerned amounts to 5,0 %.

(a) Legal basis

(87)

The detailed description of the EPCG is contained in Chap-
ter 5 of the EXIM-policy 2002-2007 and in Chapter 5 of
the HOP I 2002-2007.

(b) Eligibility

(88) Manufacturer-exporters, merchant-exporters ‘tied to’ sup-
porting manufacturers and service providers are eligible for
this scheme. The four sampled companies were found to
benefit from this scheme during the IP.

(c) Practical implementation

(89) Under the condition of an export obligation, a company is
allowed to import capital goods (new and – since April
2003 – second-hand capital goods up to 10 years old) at a
reduced rate of duty. To this end the GOI issues upon
application and payment of a fee an EPCG licence. Since
April 2000 the scheme provides for a reduced import duty
rate of 5 % applicable to all capital goods imported under
the scheme. Until 31 March 2000, an effective duty rate of
11 % (including a 10 % surcharge) and, in case of high
value imports, a zero duty rate were applicable. In order to
meet the export obligation, the imported capital goods
must be used to produce a certain amount of export goods
during a certain period.

(d) Disclosure comments

(90)

(91)

(92)

Further to disclosure, the GOI claimed that, when adding
interest to determine the full amount of the benefit, there
is no basis for the assumption that a company would have
financed the entire amount of additional customs duties
through loans and that therefore the debt-equity ratio of
each company in the investigation period should be taken
into consideration and only a pro-rata amount should be
used for the calculation.

It is considered that regardless of whether a company bor-
rowed the money or used its own funds to finance its duties
it would anyway incur a cost. In relation to borrowings,
this cost is the interest to be paid thereon. In regard to own
funds, the cost to a company is investment interest fore-
gone. The argument was therefore dismissed.

Three companies which availed themselves of benefits
under the EPCG made minor comments on certain details
of the calculation of the corresponding subsidy margins.
Where these comments were found justified, calculations
have been adjusted as a result.

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(e) Conclusion on EPCG

(b) Practical implementation

(93)

(94)

(95)

(96)

(97)

The EPCG provides subsidies within the meaning of
Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation.
The duty reduction constitutes a financial contribution by
the GOI, since this concession decreases the GOI’s duty
revenue which would be otherwise due. In addition, the
duty reduction confers a benefit upon the exporter, because
the duties saved upon importation improve the company’s
liquidity.

Furthermore, the EPCG is contingent in law upon export
performance, since such licences cannot be obtained with-
out a commitment to export. Therefore it is deemed to be
specific and countervailable under Article 3(4)(a) of the
basic Regulation.

This scheme cannot be considered a permissible duty
drawback system or substitution drawback system within
the meaning of Article 2(1)(a)(ii) of the basic Regulation.
Capital goods are not covered by the scope of such permis-
sible systems, as set out in Annex I, item (i), of the basic
Regulation, because they are not consumed in the produc-
tion of the exported products.

(f) Calculation of the subsidy amount

The numerator was established as follows. The subsidy
amount was calculated, in accordance with Article 7(3) of
the basic Regulation, on the basis of the unpaid customs
duty on imported capital goods spread across a period
which reflects the normal depreciation period of such capi-
tal goods in the PET film industry. Interest was added to
this amount in order to reflect the full value of the benefit
over time. Fees necessarily incurred to obtain the subsidy
were deducted in accordance with Article 7(1)(a) of the
basic Regulation.

In accordance with Article 7(2) and 7(3) of the basic Regu-
lation this subsidy amount has been allocated over the
export turnover during the review investigation period as
appropriate denominator, because the subsidy is contin-
gent upon export performance. The subsidies obtained by
the four sampled companies ranged between 1,3 %
and 2,7 %.

2.5. Duty-free replenishment certificate (hereinafter

referred to as DFRC)

(99) As none of the four sampled companies availed benefits
under the DFRC, no further analysis of the countervailabil-
ity of the DFRC is necessary.

2.6. Income tax exemption scheme (hereinafter

referred to as ITES)

(a) Legal basis

(100) The legal basis for this scheme is contained in the Income
Tax Act of 1961 (hereinafter referred to as ITA), which is
amended yearly by the Finance Act. The latter sets out
every year the basis for the collection of taxes as well as
various exemptions and deductions which can be claimed.
Exporting companies may claim income tax exemptions
under Sections 10A, 10B, and 80HHC of the ITA.

(b) Practical implementation

(101) As none of the four sampled companies availed benefits
under Sections 10A and 10B of the ITA, no further analy-
sis of the countervailability of Sections 10A and 10B of the
ITA is necessary.

(102) Two of the investigated exporters indicated that they
received the benefit of a partial income tax exemption on
profits derived from export sales during the IP under Sec-
tion 80HHC of the ITA. However, given that this provision
of the ITA was abolished from the financial year running
from the 1 April 2004 to the 31 March 2005 onwards, it
will not confer any benefit on the applicant after 31 March
2004. Benefits under Section 80HHC of the ITA shall
in accordance with
therefore not be countervailed,
Article 15(1) of the basic Regulation.

2.7. Export credit
to as ECS)

scheme (hereinafter

referred

(a) Legal basis

(103) The details of the scheme are set out in Master Circular
in
IECD No 5/04.02.01/2002-03 (Export Credit
Foreign
IECD
No 10/04.02.01/2003-04 (Rupee Export Credit) of the
Reserve Bank of India (hereinafter referred to as RBI),
which is addressed to all commercial banks in India.

and Master

Currency)

Circular

(a) Legal basis

(b) Eligibility

(98)

The legal basis for this scheme is contained in para-
graphs 4.2.1 to 4.2.7 of the EXIM-policy 2002-2007 and in
paragraphs 4.31 to 4.36 of the HOP I 2002-2007.

(104) Manufacturing exporters and merchant exporters are
eligible for this scheme. Three companies were found to
benefit from this scheme during the IP.

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(c) Practical implementation

(105) Under this scheme, the RBI mandatorily 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 cred-
its provided to an exporter for financing the purchase, pro-
cessing, 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.

(106) 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.

(d) Disclosure comments

(107) Two companies which were granted benefits under the
ECS made minor comments on certain details of the cal-
culation of the corresponding subsidy margins. Where
these comments were found justified, calculations have
been adjusted as a result.

granted by reference to the quantities manufactured, pro-
duced, exported or transported. The four sampled compa-
nies availed of benefits under the ECS. They obtained
subsidies of between 0,01 % and 1,3 %.

2.8. Capital infusions

(110) As none of the four sampled companies availed benefits
under this ad hoc scheme, no further analysis of its coun-
tervailability is necessary.

3. REGIONAL SCHEMES

3.1. Package scheme of incentives of the Government

of Uttar Pradesh

(111)

It was found that none of the exporting producers made
use of the package scheme of incentives of the Govern-
ment of Uttar Pradesh.

3.2. Package scheme of

incentives (PSI) of

the

Government of Maharashtra (‘GOM’)

(e) Conclusion on the ECS

(a) Legal basis

(108) Firstly, by lowering financing costs as compared with mar-
ket interest rates, the above preferential interest rates con-
fer a benefit in the meaning of Article 2(2) of the basic
Regulation on such exporter. Despite the fact that the pref-
erential credits under the ECS are granted by commercial
banks, this benefit is a financial contribution by a govern-
ment in the meaning of Article 2(1)(iv) of the basic Regu-
lation. The RBI is a public body, which falls therefore under
the definition of a ‘government’ as set out in Article 1(3) of
the basic Regulation and it instructs commercial banks to
grant preferential financing to exporting companies. This
preferential
financing equates to a subsidy, which is
deemed to be specific and countervailable since the pref-
erential interest rates are contingent upon export perfor-
mance, pursuant to Article 3(4)(a) of the basic Regulation.

(112)

In order to encourage the dispersal of industries to the less
developed areas of the State, the GOM has been granting
incentives to new-expansion units set up in developing
regions of the State, since 1964, under a scheme com-
monly known as the ‘Package scheme of incentives’. The
scheme has been amended several times since its introduc-
tion and the ‘1993 Scheme’ was operative from 1 October
1993 to 31 March 2001 whereas the latest amendment,
the ‘2001 scheme’, was introduced on 31 March 2001 and
will be operative up to 31 March 2006. The PSI of the
GOM is composed of several sub-schemes amongst which
the main ones are: (i) the exemption from the local sales
tax and (ii) the refund of the octroi tax.

(f) Calculation of the subsidy amount

(b) Eligibility

(109) The subsidy amount has been calculated on the basis of the
difference between the interest paid for export credits used
during the IP and the amount that would have been pay-
able if the same interest rates were applicable as for ordi-
nary commercial credits used by the individual companies.
This subsidy amount (numerator) has been allocated over
the total export turnover during the review investigation
period as the appropriate denominator in accordance with
Article 7(2) of the basic Regulation, because the subsidy is
contingent upon export performance and it was not

(113)

In order to be eligible, companies must invest in less devel-
oped areas either by setting up a new industrial establish-
ment or by making a large scale capital investment in
expansion or diversification of an existing industrial estab-
lishment. These areas are classified according to their eco-
nomic development into different categories (e.g.
less
developed area, lesser developed area, least developed area).
The main criterion to establish the amount of incentives is
the area in which the enterprise is or will be located and
the size of investment.

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(c) Practical implementation

(114) Exemption from the local sales tax – Goods are normally
subject to central sales tax (for inter-State sales) or State
sales tax (for sales within the State) at varying levels
depending upon the State/States in which transactions are
being made. There is no sales tax on the import or export
of goods, while domestic sales are subject to the sales tax
at the applicable rates. Under the exemption scheme, des-
ignated units are not required to collect any sales tax on
their sales transactions. Similarly, designated units are
exempted from the payment of the local sales tax on their
purchases of goods from a supplier itself eligible for the
scheme. Whereas the sales transaction does not confer any
benefit on the designated selling unit, the purchase trans-
action does confer a benefit to the designated purchasing
unit. Two of the four sampled companies had one unit
each eligible for the PSI of the GOM during the IP. Under
the scheme, these two units were exempted from the sales
tax on certain of their domestic purchases made from sup-
pliers eligible for the exemption scheme.

(115) Refund of the octroi tax – octroi is a tax levied by local
Governments in India, including the GOM, on goods that
enter the territorial limits of a town or a district. Industrial
enterprises are entitled to a refund of the octroi tax from
the GOM, if their facility is located in certain specified
towns and districts within the territory of the State. The
total amount that may be refunded is restricted to 100 %
of the fixed capital investment. From the above two com-
panies with a unit eligible for the PSI of the GOM during
the IP, only one was found to benefit from the refund of
the octroi tax by the GOM.

(d) Disclosure comments

(116) One company which availed itself of benefits under the PSI
of the GOM made minor comments on certain details of
the calculation of the corresponding subsidy margin.
Where these comments were found justified, calculations
have been adjusted as a result.

(e) Conclusion on the PSI of the GOM

(118) The scheme is only available to companies having invested
within certain designated geographical areas within the
jurisdiction of the State of Maharashtra. It is not available
to companies located outside these areas. The level of the
benefit is different according to the area concerned. The
scheme is specific in accordance with Article 3(2)(a) and
Article 3(3) of
the basic Regulation and therefore
countervailable.

(f) Calculation of the subsidy amount

(119) Concerning the sales tax exemption, the subsidy amount
was calculated on the basis of the amount of the sales tax
normally due during the review investigation period but
which remained unpaid under the scheme. Similarly, as far
as octroi is concerned, the benefit to the exporter was cal-
culated as the amount of the octroi tax refunded during the
IP. Pursuant to Article 7(2) of the basic Regulation, these
amounts of subsidy (numerator) have then been allocated
over total sales during the review investigation period as
the appropriate denominator, because the subsidy is not
export contingent and it was not granted by reference to
the quantities manufactured, produced, exported or trans-
ported. During this period two companies benefited from
these schemes. They both obtained subsidies of 1,6 %.

4. AMOUNT OF COUNTERVAILABLE SUBSIDIES

(120) The amount of countervailable subsidies determined in
accordance with the provisions of the basic Regulation,
expressed ad valorem, for the investigated exporting pro-
ducers ranges between 11,7 % and 15,2 %. These amounts
of subsidisation exceed the de minimis threshold mentioned
under Article 14(5)(a) and (b) of the basic Regulation.

(121)

It is therefore considered that, pursuant to Article 18 of the
basic Regulation, subsidisation continued during the IP.

SCHEME

ALS

DEPB

EOU EPCG

ECS

PSI of
the
GOM

%

0

0

Total

%

12,8

11,7

%

%

1,3

0,5

2,7

negl.

1,5

1,3

1,6

14,9

%

0

0

0

%

11,0

9,0

10,5

%

0

0

0

6,0

0

5,0

2,2

0,4

1,6

15,2

COMPANY

Ester Industries
Ltd

Flex Industries
Ltd

Garware Polyes-
ter Ltd

Jindal Poly Films
Ltd

(117) The PSI of the GOM provides subsidies within the mean-
ing of Article 2(1)(a)(ii) and Article 2(2) of the basic Regu-
lation. The two sub-schemes examined constitute a
financial contribution by the GOM, since this concession
decreases the GOM’s revenue which would be otherwise
due. In addition, this exemption/refund confers a benefit
upon the company as it improves the company’s liquidity.

D. LIKELIHOOD OF CONTINUATION OR
RECURRENCE OF SUBSIDISATION

(122)

In accordance with Article 18(2) of the basic Regulation, it
was examined whether the expiry of the measures in force
would be likely to lead to a continuation or recurrence of
subsidisation.

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(123)

It was established that during the IP, the sampled Indian
exporters of the product concerned continued to benefit
from countervailable subsidisation by the Indian authori-
ties. With the exception of one company, the subsidy mar-
gins found during the review are higher than those
established during the original investigation. While certain
programmes that were countervailed in 1999 (like the
DEPB pre-export) were discontinued, other programs that
did not exist in 1999 (like the ALS) have been found to be
countervailable in the present review. The subsidy schemes
analysed above give recurring benefits. With the exception
of the DEPB (see recital (54)), there is no indication that
these programmes will be phased out in the foreseeable
future. According to the GOI, the replacement scheme to
the DEPB is planned to enter into force on the 1 April
2006 at the earliest. The situation arising from the replace-
ment of the DEPB by an allegedly ‘WTO compatible’
scheme on which the Commission has no information,
will need to be assessed in due time. It is also noted that
one of the cooperating exporters that previously received
benefits under the DEPB no longer did so in the IP of this
investigation (see recital 33). This exporter has, however,
benefited from the ALS, which is also a type of duty draw-
back scheme, in the IP of the current investigation. In the
event that the DEPB were to be abolished on 1 April 2006
and if no benefits were to be conferred on exporters
beyond that date, it is considered that there is, through the
existence of an alternative countervailable subsidy scheme
(the ALS), a likelihood of continuation of subsidisation
close to the levels found for the DEPB. In the meantime,
the exporters of the product concerned will continue to
receive countervailable subsidies. Furthermore, it is recalled
that all exporters of the product concerned are eligible for
a number of the programmes investigated. In these circum-
stances, it was considered reasonable to conclude that sub-
sidisation would be likely to continue in the future.

(124) Since it has been demonstrated that subsidisation contin-
ued at the time of the review and will likely continue in the
future, the issue of likelihood of recurrence of subsidisa-
tion is irrelevant.

E. COMMUNITY INDUSTRY

1. COMMUNITY PRODUCTION

producers
to cooperate:

supported

— DuPont Teijin Films,

the

complaint

and

agreed

— Mitsubishi Polyester Film GmbH,

— Nuroll SpA,

— Toray Plastics Europe.

(127) These companies fully cooperated in the investigation.
They accounted for 86 % of the total Community produc-
tion during the IP.

(128)

It is therefore considered that the above four Community
producers account for a major proportion of the total
Community production of the like product. The above four
Community producers are therefore deemed to constitute
the Community industry within the meaning of Article 9(1)
and Article 10(8) of the basic Regulation and will herein-
after be referred to as the ‘Community industry’.

F. SITUATION ON THE COMMUNITY MARKET

1.

PRELIMINARY REMARK

(129) The following price trends are based on Eurostat import
prices and include both conventional customs and anti-
dumping duties, where applicable, and estimated post-
importation costs.

2. CONSUMPTION IN THE COMMUNITY MARKET

(130) Community consumption was established on the basis of
the sales volumes of the Community industry on the Com-
munity market, Eurostat data for all EU imports, and the
sales volumes of the other Community producers on the
Community market.

(131) Between 2001 and the IP, Community consumption
decreased by 7 %. Specifically, it remained broadly stable
between 2001 and 2002, dropped by six percentage points
between 2002 and 2003, and ultimately declined by one
percentage point in the IP.

(125) Within the Community, the like product is manufactured
by 10 producers which constitute the total Community
production within the meaning of Article 9(1) of the basic
Regulation.

Total EC consumption
(tonnes)

2001

2002

2003

IP

271 417 271 787 253 890 251 491

Index (2001=100)

100

100

94

93

2. COMMUNITY INDUSTRY

(126)

It should be noted that in the original investigation the
Community industry consisted of eight producers. The two
new producers are based in the new Member States. Six of
the companies did not support the request and did not
cooperate in the review investigation. The following four

3.

IMPORTS FROM THE COUNTRY CONCERNED

(132) The volume of imports originating in the country con-
cerned has increased by 107 % over the period considered
and reached a level of 12 679 tonnes during the IP, corre-
sponding to a market share of 5,0 %. During the IP of the
original investigation, the market share of the country con-
cerned was 9,6 %, but had fallen to 2,3 % in 2001 follow-
ing the imposition of the measures.

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(133) Prices of imports from the country concerned increased
slightly, by two percentage points, between 2001
and 2003, i.e. after the imposition of the definitive coun-
tervailing measures but thereafter decreased by five per-
centage points in the IP.

(134) On the basis of a model to model comparison, the inves-
tigation showed that imports from the country concerned
were undercutting those of the Community industry by 2
to 21 % in the IP, depending on the cooperating exporter.
This comparison was carried out on the basis of the actual
export prices of the cooperating exporters to the Commu-
nity. The investigations referred to under recitals 5, 6 and 7
evidenced that a large part of the export prices to the Com-
munity were pegged just above the Minimum Import
Prices (hereinafter referred to as ‘MIPs’) established by the
undertakings accepted in the context of the definitive anti-
dumping measures (see recital 2) and that Indian export
prices to other third countries were substantially lower
than the prices to the Community. Therefore, if the under-
cutting calculations had been carried out on the basis of
export prices to other third countries, the undercutting
margins would have been larger than the ones just men-
tioned above.

2001

2002

2003

IP

6 129

7 738

11 520

12 679

Volume of imports
from the country con-
cerned (tonnes)

Index (2001=100)

100

126

188

207

Market share of
imports from the
country concerned

Price of imports from
the country concerned
(EUR/tonne)

2,3 %

2,8 %

4,5 %

5,0 %

2 010

2 025

2 060

1 952

Index (2001=100)

100

101

102

97

(135) The investigation referred to under recital 6 came to the
conclusion that undertakings were unsuitable for the prod-
uct concerned and that they should be withdrawn. These
elements explain to a large extent the trends observed
above as regards imports from India, and also the reason
why the Community industry has not fully recovered from
the past subsidisation (see recital 161).

4.

IMPORTS FOUND TO BE CIRCUMVENTING

(136) As mentioned in recital 4, it was further found that circum-
vention of the original measures concerning imports from
India took place respectively via Brazil and Israel. Conse-
quently, the measures imposed on imports originating in
India were extended in November 2004 to imports of the
same PET film consigned from Brazil and from Israel,
whether declared as originating in Brazil or Israel or not,
with the exception of those produced by a genuine Brazil-
ian producer and a genuine Israeli producer. As referred
to in recital 8, a second Israeli producer was exempted
from the extended measures. The two above proceedings
evidenced that a very limited volume of imports into the
Community from Brazil (around 10 tonnes) and Israel
(around 180 tonnes) were attributed in 2003 to genuine

Brazilian and Israeli producers. It should be recalled that
the date of the above extension of the anti-dumping
and countervailing measures is posterior to the trends
described under recitals 137 and 138.

Volume of imports
from Brazil (tonnes)

Market share of
imports from Brazil

Price of imports from
Brazil (EUR/tonne)

2001

2002

2003

IP

1 231

2 533

2 159

1 225

0,5 %

0,9 %

0,9 %

0,5 %

776

1 612

1 628

1 758

Index (2001=100)

100

208

210

226

Volume of imports
from Israel (tonnes)

Market share of
imports from Israel

Price of imports from
Israel (EUR/tonne)

3 561

4 338

4 620

4 788

1,3 %

1,6 %

1,8 %

1,9 %

2 052

1 821

1 678

1 790

Index (2001=100)

100

89

82

87

(137) The volume of imports from Brazil doubled between 2001
and 2002, declined slightly in 2003, and finally declined
further in the IP to reach a level close to the one of 2001,
potentially as a consequence of the initiation of the afore-
mentioned anti-circumvention investigation during the
course of 2004. Similarly, the market share held by imports
from Brazil increased from 0,5 % in 2001 to 0,9 % in 2002
before declining to 0,5 % during the IP. Imports from Bra-
zil were made at very low prices in 2001. These import
prices increased throughout the period considered to reach
a level of around EUR 1 800/tonne, that is slightly below
import prices from India.

(138) The volume of imports from Israel rose steadily from
around 3 600 tonnes in 2001 to around 4 800 tonnes in
the IP. The market share held by imports from Israel
increased from 1,3 % in 2001 to 1,9 % in the IP. Import
prices from Israel declined from around EUR 2 000/tonne
in 2001 to around EUR 1 800/tonne in the IP. Again, the
Israeli export price during the IP is slightly below import
prices from India.

5.

IMPORTS FROM THE REPUBLIC OF KOREA

(139) As referred to in recital 2, the Council imposed in 2001
definitive anti-dumping measures on imports of PET film
originating in the Republic of Korea, in the form of ad valo-
rem duty rates ranging between 0 and 13,4 %. Quantities of
PET film imported in the Community from the Republic of
Korea declined from around 34 000 tonnes in 2001 to
around 23 200 tonnes in the IP, after the imposition of the
above measures. The market share held by Korean prod-
ucts declined also by around three percentage points
between 2001 and the IP. Prices of Korean products
declined by 7 % between 2001 and 2002, increased by
three percentage points in 2003, and by a further one per-
centage point in the IP. Based on Eurostat statistics, Korean
export prices were consistently above Indian export prices,
but below Community industry’s prices.

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Volume of imports from
South Korea (tonnes)

Market share of imports
from South Korea

Price of imports from
South Korea (EUR/tonne)

2001

2002

2003

IP

34 002

30 187

25 631

23 166

12,5 %

11,1 %

10,1 %

9,2 %

2 514

2 339

2 422

2 434

Index (2001=100)

100

93

96

97

6.

IMPORTS FROM OTHER COUNTRIES

(140) The volume of imports from other third countries not
mentioned above decreased from around 41 000 tonnes in
2001, corresponding to a market share of 15 %, to around
40 000 tonnes in the IP, corresponding to a market share
of 16 %. The market share increased because consumption
(the denominator) declined more than the above imports
(the numerator). Average prices of imports from other
third countries not mentioned above first increased from
around EUR 5 300/tonne in 2001 to around EUR
6 000/tonne in 2002, and then declined to around EUR
4 800/tonne in the IP. Such prices are substantially above
both Indian and Community industry’s prices. Amongst
these third countries, the major individual exporting coun-
try to the Community was the USA, with exported vol-
umes of around 17 500 tonnes during the IP. Prices to the
Community of
imports from the USA (around EUR
6 700/tonne in the IP) were also substantially above those
of imports from the country concerned and above Com-
munity industry prices during the IP.

2. CAPACITY AND CAPACITY UTILISATION RATES

(143) Production capacity decreased marginally (by 3 %) between
2001 and the IP. As production remained stable, while at
the same time capacity declined slightly, the resulting
capacity utilisation slightly increased.

Production capacity
(tonnes)

2001

2002

2003

IP

200 037 202 542 190 393 193 888

Index (2001=100)

100

101

95

97

Capacity utilisation

86 %

93 %

90 %

87 %

Index (2001=100)

100

108

106

102

3.

STOCKS

(144) The level of closing stocks of the Community industry,
after a considerable increase in 2002 compared to 2001,
has steadily decreased since that year. In the IP, the level of
stocks was 28 % lower than in 2001. However, as the like
product is generally produced to order, the level of stocks
is not very meaningful.

2001

2002

2003

IP

Closing stock (tonnes)

22 322

31 479

23 676

16 090

Index (2001=100)

100

141

106

72

4.

SALES VOLUME

2001

2002

2003

IP

41 098

31 324

35 093

39 869

15 %

12 %

14 %

16 %

5 312

6 000

5 125

4 803

Volume of imports from
countries not mentioned
above (tonnes)

Market share of imports
from countries not men-
tioned above

Price of imports from
countries not mentioned
above (EUR/tonne)

(145) The sales by the Community industry on the Community
market to unrelated customers first increased in 2002, after
the imposition of measures, but then decreased by 12 per-
centage points between 2002 and the IP.

EC Sales volume to unre-
lated customers (tonnes)

2001

2002

2003

IP

142 173 156 716 141 959 139 874

Index (2001=100)

100

113

96

90

Index (2001=100)

100

110

100

98

G. ECONOMIC SITUATION OF THE COMMUNITY
INDUSTRY

5.

SALES VOLUME

(141) Pursuant to Article 8(5) of the basic Regulation, the Com-
mission examined all relevant economic factors and indi-
ces having a bearing on the state of the Community
indusry.

1.

PRODUCTION

(142) The Community industry’s production increased by 10 %
in 2002 compared to 2001, before declining and remain-
ing at the level of 2001 in the following years.

(146) The market share held by the Community industry declined
by around two percentage points between 2001 and the
IP. Specifically, the Community industry gained around
four percentage points in 2002, after the imposition of
both countervailing and anti-dumping measures,
lost
almost five percentage points in 2003 and finally lost a fur-
ther one1 percentage point in the IP. The trend and the
level reached showed certain improvement in relation to
the ones observed prior to the imposition of countervail-
ing measures, when the market share held by the Commu-
nity industry had dropped from around 57 % to around
50 %.

Production (tonnes)

171 142 187 620 171 975 169 288

Market share of Commu-
nity industry

2001

2002

2003

IP

2001

2002

2003

IP

61,6 %

65,3 %

60,6 %

59,5 %

Index (2001=100)

100

110

100

99

Index (2001=100)

100

106

98

97

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6. GROWTH

(147) Between 2001 and the IP, the Community consumption
decreased by 7 %. The Community industry lost around
two percentage points of market share, whilst the imports
concerned gained 2,7 percentage point of market share.

since 2002. The increase in 2002 can be explained by
investments in plant and machinery for one producer
and investment to facilitate the closure of certain produc-
tion lines for another producer.

7.

EMPLOYMENT

Net investments (000
EUR)

2001

2002

2003

IP

334 426 38 326

34 979

29 341

(148) The level of employment of the Community industry

Index (2001=100)

100

115

105

88

declined by 8 % between 2001 and the IP.

2001

2002

2003

IP

12.

PROFITABILITY AND RETURN ON INVESTMENTS

Employment product con-
cerned

2 323

2 310

2 235

2 134

Index (2001=100)

100

99

96

92

8.

PRODUCTIVITY

(149) Productivity of the Community industry’s workforce, mea-
sured as output per person employed per year, increased
by 8 % between 2001 and the IP.

Productivity (tonnes per
employee)

2001

2002

2003

IP

74

81

77

79

Index (2001=100)

100

110

104

108

9.

SALES PRICES AND FACTORS AFFECTING DOMESTIC

PRICES

(150) Unit sales prices of the Community industry have increased
by 4 % between 2001 and the IP. This price development
is broadly in line with that of the cost of production and
of the principal raw material, which also showed a rise dur-
ing the period considered.

Unit price EC market
(EUR/tonne)

2001

2002

2003

IP

3 010

3 009

3 130

3 118

Index (2001=100)

100

100

104

104

10. WAGES

(151) Between 2001 and the IP, the average wage per employee
increased by 12 %, a figure that exceeds the rate of increase
of the average nominal unit labour costs (6 %) observed
during the same period in the Community economy at
large.

Annual labour cost per
employee (000 EUR)

2001

2002

2003

IP

56

60

62

63

Index (2001=100)

100

107

110

112

11.

INVESTMENTS

(152) The annual flow of investments in the product concerned
made by the Community industry has constantly decreased

improvement over

(153) Profitability of the Community industry, while showing a
gradual
the period considered,
remained negative between 2001 (– 5,2 %) and the IP
(– 2,5 %). The return on investments (ROI), expressed as
the profit in percent of the net book value of investments,
broadly followed the above profitability trend over the
whole period considered.

2001

2002

2003

IP

– 5,2 %

– 1,9 %

– 2,7 %

– 2,5 %

– 4,6 %

– 1,9 %

– 2,9 %

– 2,9 %

Profitability of EC sales to
unrelated customers (% of
net sales)

ROI (profit in % of net
book value of invest-
ments)

13. CASH FLOW AND ABILITY TO RAISE CAPITAL

(154) The cash-flow situation deteriorated between 2001 and the
IP, mainly due to other non-cash items such as assets
depreciation and inventory movements.

2001

2002

2003

IP

Cash flow (000 EUR)

44 503

42 047

49 486

32 150

Index (2001=100)

100

94

111

72

(155) The investigation has shown that capital requirements of
the Community producers have been adversely affected by
their difficult financial situation. Although several of these
companies are part of large companies, capital require-
ments are not always met to the desired level, as financial
resources are generally allocated within these groups to the
most profitable entities. This relative inability to raise capi-
tal can be linked to the declining investment documented
under recital 152.

14. MAGNITUDE OF SUBSIDISATION

(156) As concerns the impact on the Community industry of the
magnitude of the actual subsidy margins, given the volume
and the prices of the imports from the country concerned,
this impact cannot be considered to be negligible, espe-
cially in transparent and thus highly price sensitive mar-
kets like the one of the product concerned.

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15. RECOVERY FROM THE EFFECTS OF PAST
SUBSIDISATION AND OF PAST DUMPING

(157) While the indicators examined above show some improve-
ment in the economic and financial situation of the Com-
munity industry, further to the imposition of definitive
countervailing measures in 1999, and further to the impo-
sition of anti-dumping measures in 2001, they also evi-
dence that
fragile
the Community industry is
and vulnerable.

still

been more favourable. It is further reminded that the effi-
ciency of the measures, and thereby their remedial effect
on the injurious situation of the Community industry, was
severely undermined by the fact that the undertakings did
not properly function, as referred to in recital 135.

(162)

It is therefore concluded that the situation of the Commu-
nity industry has not improved to the extent that could
have been expected after the imposition of the definitive
countervailing and anti-dumping measures. The Commu-
nity industry is therefore still in a fragile situation.

16. CONCLUSION

(163)

(158) As shown under recitals 132 to 135, the volume of imports
from the country concerned has doubled between 2001
and the IP. Given that consumption declined by 7 % over
the same period, this resulted in a sharp rise of the market
share held by Indian exporters from 2,3 % in 2001 to 5,0 %
during the IP. At the same time, Indian export prices to the
Community remained relatively stable at a level of around
EUR 2 000/tonne thereby undercutting substantially the
prices of the Community industry.

(159) Between 2001 and the IP, the following indicators devel-
oped positively: capacity utilisation and productivity of the
Community industry increased and closing stocks
decreased. Unit sales prices increased in line with the cost
of the raw material between 2001 and the IP, profitability
improved but remained negative in the IP, as well as return
on investment. Wages developed positively.

(160) Conversely, the following indicators developed negatively:
the market share held by the Community industry declined
marginally, production and production capacity declined,
sales volumes declined, and employment, total cash flow
and investments declined. Therefore,
the Community
industry show mixed trends since 2001: while some indi-
cators show positive developments, a number of others
show a negative trend.

(161)

If one compares the above trends with the ones described
in the Regulations imposing provisional and definitive
countervailing measures, again the assessment is mixed. As
concerns market share, the Community industry lost
around two percentage points between 2001 and the IP,
whilst it had lost almost seven percentage points in the
four years preceding the adoption of the definitive coun-
tervailing measures. It can therefore be considered that
measures have achieved one of their goal, namely to slow
the deterioration of market share. On the other hand, the
profitability of the Community industry is worse in the IP
than before the imposition of definitive countervailing
measures. Had the measures not been circumvented by
imports from Brazil and Israel, the situation might have

In addition to the circumvention of the original measures
and the fact that the undertaking did not achieve the
desired effect, it was also analysed whether other factors,
like e.g. imports from other countries, or a hypothetical
inefficiency of the Community industry, could explain the
persistent poor financial situation of the latter. In this
respect it was found that it cannot be excluded that imports
from the Republic of Korea and the decreasing consump-
tion have to a certain extent impacted on the fragile situ-
ation. But these two factors do not explain in isolation the
Community industry’s current situation. Moreover, what is
ultimately relevant is how the Community industry would
develop in the absence of countervailing measures and
whether there is a likelihood of a recurrence of injury. This
issue is examined in the subsequent section.

(164) Subsequent to the disclosure, two exporting producers
claimed that the imports from the USA, the increase of
wages of the Community industry and the decline in Com-
munity consumption are factors having a significant effect
for the fragile situation of
the Community industry.
Regarding the imports from the USA, it is recalled (see
recital 140), that prices of imports from this country were
on average substantially above those of imports from the
country concerned and also above Community industry
prices during the IP. Moreover, it was established that the
prices of imports from this country were substantially
higher than those mentioned above during the whole
period considered. Therefore, it can be reasonably con-
cluded that this factor did not have any negative effect on
the situation of the Community industry. Regarding the
increase in the wage cost per employee during the period
considered (12 %), it should be noted that any negative
effects of this factor on the situation of the Community
industry are to a large extent offset by the parallel drop in
the level of employment during the period considered,
affecting the wage bill only by 3,3 %. Therefore, the claim
that this factor had a significant effect on the situation of
the Community industry could not be accepted. Regard-
ing the decline in consumption, it is indeed acknowledged
above that this factor may to a certain extent have impacted
on the fragile situation of the Community industry. How-
ever, this factor cannot be considered significant given that
the decline in sales volumes to unrelated customers by the
Community industry was merely 2 % in contrast to the
7 % decline in consumption. In the light of the findings set
out in Sections F and G, and on the basis of the above, it is
concluded that imports from the USA cannot have had a
negative effect on the situation of the community industry
and that the other two aforementioned factors could at
best only have played a minor role.

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H. LIKELIHOOD OF CONTINUATION AND/OR
RECURRENCE OF INJURY

presence of at least four other competing producers, would
be able to absorb all of the spare capacity of the four coop-
erating exporting producers.

1.

PRELIMINARY REMARKS

4. CONCLUSION

(165) As already seen, the imposition of countervailing measures
has allowed the Community industry to recover only to
some extent from the injury suffered. Due to several ele-
ments mentioned above, it is still in a fragile and vulner-
able situation. Different factors were therefore examined in
order to determine if the situation of the Community
industry would stay unchanged improve or worsen in case
measures would be allowed to lapse.

(166) The examination of whether it would be likely that injury
would continue and/or recur should measures be repealed
was based in particular on information provided by the
cooperating exporting producers. Information relating to
the import prices from exporters other than the cooperat-
ing exporter, determined on the basis of Eurostat, was also
examined. The pricing behaviour of
the cooperating
exporting producers to other export markets, export prices
to the Community, production capacity and stocks were
examined. Finally, the likely effect of a repeal of the mea-
sures on prices of other imports was also assessed.

2. RELATIONSHIP BETWEEN EXPORT VOLUMES AND
PRICES TO THIRD COUNTRIES AND EXPORT VOLUMES
AND PRICES TO THE COMMUNITY

(167)

It was found that the average export price of Indian sales
to non-EU countries was significantly below the average
export price to the Community and also below the prices
on the domestic market. The Indian exporter’s sales to
non-EU countries were made in significant quantities,
accounting for 73 % of total export sales. Therefore, it was
considered that, should measures lapse, Indian exporters
would have an incentive to shift significant quantities of
exports from other third countries to the more attractive
Community market, at price levels, which, even if they
increased, were likely to be still below the current price lev-
els of export to the Community.

3. UNUSED CAPACITY AND STOCKS

(168) On average, the cooperating Indian producers had signifi-
cant spare capacities representing almost three times the
export quantity to the Community during the IP. Likewise,
average stocks of finished products are significant and, at
the end of the IP, represented 16 % of the volume exported
to the Community. Therefore, the capacity to significantly
increase export quantities to the EC exists, in particular
because there are no indications that third country markets
or the domestic market could absorb any additional pro-
duction. In this regard, it should be noted that it is very
unlikely that the domestic market in India, due to the

(169) The producers in the country concerned have therefore the
potential to raise and/or redirect their export volumes to
the Community market. The investigation showed that, on
the basis of comparable product types, the cooperating
exporting producers sold the product concerned at a lower
price than the Community industry’s (the undercutting
margins range between 2 and 21 %). These low prices
would most likely continue to be charged or even decrease
in line with the lower prices charged to the rest of the
world, as mentioned in recital 134, also in order to regain
the level of market shares held in the period before the
imposition of measures. Such a price behaviour, coupled
with the ability of the exporters in the country concerned
to deliver significant quantities of the product concerned to
the Community market, would in all likelihood have the
effect of reinforcing the price-depressive trend on the mar-
ket, with an expected negative impact on the economic
situation of the Community industry.

(170) As shown above, the situation of the Community industry
remains vulnerable and fragile. It is likely that if the Com-
munity industry was exposed to increased volumes of
imports from the country concerned at subsidized prices,
this would result in a deterioration of its sales, market
shares, sales prices as well as the consequent deterioration
of the financial situation, to the levels found in the original
investigation. On this basis, it is therefore concluded, that
the repeal of the measures would in all likelihood result in
a worsening of the already fragile situation and a recur-
rence of an even more injurious state of the Community
industry.

I. COMMUNITY INTEREST

1.

INTRODUCTION

(171) According to Article 31 of the basic Regulation, it was
examined whether maintenance of the existing counter-
vailing measures would be against the interest of the Com-
munity as a whole. The determination of the Community
interest was based on an appreciation of all the various
interests involved.

(172)

It should be recalled that, in the original investigation, the
adoption of measures was considered not to be against the
interest of the Community. Furthermore, the fact that the
present investigation is a review, thus analysing a situation
in which countervailing measures have already been in
place, allows the assessment of any undue negative impact
on the parties concerned by the current countervailing
measures.

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8.3.2006

(173) On this basis it was examined whether, despite the conclu-
sions on the likelihood of a continuation or recurrence of
injurious subsidisation, compelling reasons existed which
would lead to the conclusion that it is not in the Commu-
nity interest to maintain measures in this particular case.

2.

INTEREST OF THE COMMUNITY INDUSTRY

(174) The Community industry has proven to be a structurally
viable industry. This was confirmed by its export sales that
have remained stable at a high level since 2001 and the
positive development of its economic situation observed
after the imposition of countervailing measures in 1999. In
particular, the fact that the Community industry virtually
stopped its loss of market share in the few years before the
IP contrasts sharply with the situation preceding the impo-
sition of the measures. Also, the Community industry saw
its losses decrease between 2001 and the IP. It is further
recalled that circumvention had been found by imports
from Brazil and Israel and that the undertaking did not
work as desired. Had these developments not occurred, the
situation of the Community industry would have been
even more favourable.

(175)

It can reasonably be expected that the Community indus-
try will continue to benefit from the measures currently
imposed and further recover, probably by regaining mar-
ket share and improving its profitability. Should the mea-
sures not be maintained, it is likely that the Community
industry would suffer injury to a higher extent from
increased imports at subsidized prices from the country
concerned and that its currently poor financial situation
will deteriorate further.

3.

INTEREST OF IMPORTERS/USERS

(176) As indicated in recital 20, only one importing company,
which is also a user of the product concerned, fully coop-
erated in this investigation. For reasons of confidentiality,
exact figures concerning this importer/user can therefore
not be disclosed. However, this importer/user is deemed to
be representative of the situation of other importers/users
in the Community because of its relatively high total turn-
over. This importer purchases the PET film from a variety
of sources, which include India and the Community indus-
try. This company’s resales of the product concerned origi-
nating in India represented less than 20 % of its turnover
during the IP. The profitability of
the cooperating
importer/user stood between 5 to 10 % over turnover in
the IP.

(177)

It is further recalled that, in the original investigation, it
was found that the impact of the imposition of measures
would not be significant for the importers, nor for the
users. Despite the existence of measures for five years,
importers/users in the Community continued to source
their supply, inter alia, from India. No indications were
brought forward either that there would have been any dif-
ficulties in finding other sources. Moreover, it is recalled

that, as regards the effect of the imposition of measures on
users, it was concluded in the original investigation that,
given the negligible incidence of the cost of PET film on
user industries, any cost increase was unlikely to have a sig-
nificant effect on the user industry. No indications of the
contrary were found after the imposition of measures. It is
therefore concluded that the maintenance of the counter-
vailing measures is not likely to have a serious effect on
importers/users in the Community.

4.

INTEREST OF UP-STREAM SUPPLIERS

(178) The original investigation concluded that suppliers of the
Community industry would benefit from the imposition of
measures. As indicated above, only one supplier cooper-
ated to the investigation and confirms this fact, as it almost
only supplies the Community producers and would suffer
from a deterioration of its financial health. It is therefore
considered that the continuation of measures would con-
tinue to have a positive impact for suppliers.

5. CONCLUSION

(179) Given the above, it is concluded that there are no compel-
ling reasons on the grounds of Community interest against
the maintenance of the current countervailing measures.

J. COUNTERVAILING MEASURES

(180) All parties were informed of the essential facts and consid-
erations on the basis of which it is intended to recommend
that the existing measures be maintained. They were also
granted a period to make representations subsequent to
this disclosure.

(181)

follows from the above that, as provided for by
It
Article 21(2) of the basic Regulation, the countervailing
measures applicable to imports of PET film, originating in
India should be maintained. It is recalled that these mea-
sures consist of ad valorem duties.

(182) As outlined in recital 4, the countervailing duties in force
were extended to cover, in addition, imports of PET film
consigned from Brazil and Israel, whether declared as origi-
nating in Brazil or Israel or not. The countervailing mea-
sures to be maintained on imports of
the product
concerned, as set out in recital 181, should be the mea-
sures as extended to imports of PET film consigned from
Brazil and Israel, whether declared as originating in Brazil
or Israel or not. The Brazilian and Israeli exporting produc-
ers who were exempted from the measures as extended by
Regulation (EC) No 1976/2004 and amended by Council
Regulation (EC) No 101/2006 should also be exempted
from the measures as imposed by this Regulation.

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Official Journal of the European Union

L 68/35

(183) The individual company countervailing duty rates specified
in this Regulation reflect the situation found during the
review with respect to the cooperating exporters. Thus,
they are solely applicable to imports of the product con-
cerned produced by these companies and thus by the spe-
cific legal entities mentioned. Imports of the product
concerned manufactured by any other company not spe-
cifically mentioned in the operative part of this Regulation
with its name and address, including entities related to
those specifically mentioned, cannot benefit from these
rates and shall be subject to the duty rate applicable to ‘all
other companies’.

(184) Any claim requesting the application of these individual
countervailing duty rates (e.g. following a change in the
name of the entity or following the setting up of new pro-
duction or sales entities) should be addressed to the Com-
mission (1) forthwith with all relevant information,
in
particular any modification in the company’s activities
linked to production, domestic and export sales associated
with, for instance, that name change or that change in the
production and sales entities. If appropriate, and after con-
sultation of the Advisory Committee, the Regulation will
be amended accordingly by updating the list of companies
benefiting from individual duty rates.

(185)

In order to ensure proper enforcement of the countervail-
ing duty, the residual duty level should not only apply to
non-cooperating exporters but also apply to those compa-
nies which did not have any exports during the IP. How-
ever, the latter companies are invited, when they fulfil the
requirements of Article 20 of the basic Regulation, to
present a request for a review pursuant to that Article in
order to have their situation examined individually,

HAS ADOPTED THIS REGULATION:

The rate of duty applicable to the net free-at-Community-
2.
frontier price, before duty for imports produced in India by the
companies listed below, shall be as follows:

Definitive
duty (%)

Taric addi-
tional code

12,0

A026

12,5

A027

3,8

A028

7,0

A029

7,0

A030

8,7

A031

19,1

A032

Country

Company

India

India

India

India

India

India

India

Ester Industries Limited,
75-76, Amrit Nagar,
Behind South Extension
Part-1,
New Delhi-110 003,
India

Flex Industries Limited,
A-1, Sector 60,
Noida 201 301 (U.P.),
India

Garware Polyester Limited
Garware House,
50-A, Swami Nityanand
Marg,
Vile Parle (East),
Mumbai 400 057,
India

India Polyfilms Limited,
112 Indra Prakash Building,
21 Barakhamba Road,
New Delhi 110 001,
India

Jindal Poly Films Limited,
56 Hanuman Road,
New Delhi 110 001,
India

MTZ Polyfilms Limited,
New India Centre, 5th floor,
17 Co-operage Road,
Mumbai 400 039,
India

Polyplex Corporation Lim-
ited,
B-37, Sector-1,
Noida 201 301,
Dist. Gautam Budh Nagar,
Uttar Pradesh,
India

Article 1

India

All other companies

19,1

A999

A definitive countervailing duty is hereby imposed on
1.
imports of polyethylene terephthalate (PET) film falling within
ex 3920 62 19 (TARIC codes 3920 62 19 03,
CN codes
3920 62 19 13,
3920 62 19 06,
3920 62 19 23,
3920 62 19 16,
3920 62 19 33,
3920 62 19 26,
3920 62 19 43,
3920 62 19 36,
3920 62 19 53,
3920 62 19 46,
3920 62 19 63,
3920 62 19 56,
and
3920 62 19 69, 3920 62 19 76 and 3920 62 19 94)
ex 3920 62 90
and
codes
3920 62 90 94), originating in India.

3920 62 19 09,
3920 62 19 19,
3920 62 19 29,
3920 62 19 39,
3920 62 19 49,
3920 62 19 59,

3920 62 90 33

(TARIC

The definitive countervailing duty applicable to imports
3.
from India, as set out in paragraph 2,
is hereby extended
to imports of the same polyethylene terephthalate film consigned
from Brazil and consigned from Israel (whether declared as origi-
nating in Brazil or Israel or not) (TARIC codes 3920 62 19 01,
3920 62 19 11,
3920 62 19 07,
3920 62 19 04,
3920 62 19 21,
3920 62 19 17,
3920 62 19 14,
3920 62 19 31,
3920 62 19 27,
3920 62 19 24,
3920 62 19 41,
3920 62 19 37,
3920 62 19 34,
3920 62 19 51,
3920 62 19 47,
3920 62 19 44,
3920 62 19 61,
3920 62 19 57,
3920 62 19 54,
3920 62 19 92,
3920 62 19 74,
3920 62 19 67,
3920 62 90 31, 3920 62 90 92) with the exception of those
produced by:

(1) European Commission, Directorate-General for Trade, Directorate B,

J-79 5/17, B-1049 Brussels.

Terphane Ltda BR 101, km 101, City of Cabo de Santo Agostinho,
State of Pernambuco, Brazil (TARIC additional code A569);

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Official Journal of the European Union

8.3.2006

Jolybar Filmtechnic Converting Ltd (1987), Hacharutsim str. 7,
Ind. Park Siim 2000, Natania South, 42504, POB 8380, Israel
(TARIC additional code A570);

Unless otherwise specified, the provisions in force concern-

4.
ing customs duties shall apply.

Article 2

Hanita Coatings Rural Cooperative Association Ltd, Kibbutz
Hanita, 22885, Israel (TARIC additional code A691).

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, 27 February 2006.

For the Council
The President
U. PLASSNIK