Proposal for a Council Regulation imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) originating in India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97
Date: 2007-01-25
Institutions: European Commission
Subjects: India, countervailing charge, import, originating product, plastics

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 25.1.2007 
COM(2007) 26 final 

Proposal for a 

COUNCIL REGULATION 

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

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

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

•  General context 

This proposal is made in the context of the implementation of the basic Regulation and 
is the result of an investigation which was carried out in line with the substantive and 
procedural requirements laid out in the basic Regulation. 

•  Existing provisions in the area of the proposal 

There are no existing provisions in the area of the proposal. 

•  Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Interested  parties  concerned  by  the  proceeding  have  already  had  the  possibility  to 
defend their interests during the investigation, in line with the provisions of the basic 
Regulation. 

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

This proposal is the result of the implementation of the basic Regulation. 

The  basic  Regulation  does  not  foresee  a  general  impact  assessment  but  contains  an 
exhaustive list of conditions that have to be assessed. 

3)  LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

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On 1 December 2005, the Commission announced by a notice (‘notice of initiation’), 
published  in  the  Official  Journal  of  the  European  Union,1  the  initiation  of  an  expiry 
review  of  the  countervailing  measures  applicable  to  imports  into  the  Community  of 
certain polyethylene terephthalate originating in India.  

This expiry review was initiated following a request for review lodged on 30 August 
2005  by  the  Polyethylene  Terephthalate  (PET)  Committee  of  Plastics  Europe  (‘the 
applicant’)  on  behalf  of  producers  representing  a  major  proportion,  in  this  case  more 
than 90 %, of the total Community production of certain polyethylene terephthalate. 

The  enclosed  Commission  proposal  for  a  Council  Regulation  contains  the  definitive 
conclusions regarding subsidization, injury, causality and Community interest.  

Member  States  were  consulted  during  the  Anti-Subsidy  Committees  of  16/01  .  26 
Member States were in favour of the proposed course of action and 1 opposed. 

It  is  proposed  that  the  Council  adopt  the  attached  proposal  for  a  Regulation  which 
should be published in the Official Journal of the European Union on 28 February 2007 
at the latest. 

•  Legal basis 

Council  Regulation  (EC)  No  2026/97  of  6  October  1997  on  protection  against 
subsidized  imports  from  countries  not  members  of  the  European  Community,  as  last 
amended by Council Regulation (EC) No 461/2004 of 8 March 2004. 

•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

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

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

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

•  Choice of instruments 

Proposed instruments: Regulation. 

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

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OJ C 304, 1.12.2005, Notice of initiation (2005/C 304/03 ), p. 4 

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

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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Proposal for a 

COUNCIL REGULATION 

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

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Regulation  (EC)  No  2026/97  of  6  October  1997  on  protection 
against  subsidised  imports  from  countries  not  member  of  the  European  Community2  (‘the 
basic Regulation’), and in particular Article 18 thereof, 

Having  regard  to  Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection 
against  dumped  imports  from  countries  not  members  of  the  European  Community3,  and  in 
particular, Article 14(1) thereof, 

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

Whereas: 

1. Measures in force 

A. PROCEDURE 

(1) 

On  30  November  2000,  by  Regulation  (EC)  No  2603/20004,  the  Council  imposed 
definitive  countervailing  duties  on  imports  of  certain  polyethylene  terephthalate 
('PET')  originating  in  India,  Malaysia,  and  Thailand  ('the  countries  concerned')  ('the 
original  investigation').  The  measures  imposed  had  been  based  on  a  countervailing 
measures investigation initiated pursuant to Article 10 of the basic Regulation. At the 
same  time,  by  Regulation  (EC)  No  2604/20005,  the  Council  imposed  definitive  anti-
dumping duties on imports of the same product originating in the same countries. The 
measures imposed had been based on an anti-dumping investigation initiated pursuant 
to Article 5 of Council Regulation (EC) No 384/96, referred to in the preamble. 

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OJ  L  288,  21.10.1997,  p.1,  as  last  amended  by  Council  Regulation  (EC)  No  461/2004  (OJ  L  77, 
13.3.2004, p.12) 
OJ  L  56,  6.3.1996,  p.1,  as  last  amended  by  Council  Regulation  (EC)  No  2117/2005  (OJ  L  340, 
23.12.2005, p.17) 
OJ L 301, 30.11.2000. p1. 
OJ L301, 30.11.2000. p 21 

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(2) 

Council  Regulation  2604/2000,  as  referred  to  in  recital  (1)  has  been  amended  by 
Council  Regulations  (EC)  No  496/2002,  823/2004,  83/2005  and  1646/20056.  The 
amendments  were  the  results  of  either  review  investigations  initiated  pursuant  to 
Article  11(3)  and  (4)  or  of  price  undertakings  being  accepted  under  Article  8(1)  of 
Council Regulation (EC) No 384/96 as referred to in the preamble and recital 1. 

(3)  Moreover, on 19 August 20047 the Council imposed definitive anti-dumping duties on 
imports  of  certain  PET  originating  in  Australia  and  the  People's  Republic  of  China 
('PRC') and terminated the proceeding on imports of PET originating in Pakistan. 

(4) 

On  11  October  2005,  the  Council  amended  the  level  of  countervailing  measures  in 
force  against  imports  of  PET  from  India8.  The  amendments  were  a  result  of  an 
accelerated review initiated pursuant to Article 20 of the basic Regulation. 

2. Request for a review 

(5) 

(6) 

(7) 

(8) 

(9) 

Following  the  publication  of  a  notice  of  impending  expiry,  the  Commission,  on  30 
August 2005, received a request to review the measures in force pursuant to Article 18 
of the basic Regulation ('expiry review'). 

The  request  for  was  lodged  on  30  August  2005  by  the  Polyethylene  Terephthalate 
Committee  of  Plastics  Europe  ('the  applicant')  on  behalf  of  producers  representing  a 
major proportion, in this case more than 90 %, of total Community production of PET.  

The  request  for  the  expiry  review  was  based  on  the  grounds  that  the  expiry  of  the 
measures would be likely to result in a continuation or recurrence of subsidisation and 
injury to the Community industry.  

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed for the initiation of the review, pursuant to Article 18 of the basic Regulation 
respectively, the Commission initiated these reviews on 1 December 20059. 

It should be noted that prior to the initiation of the expiry review, and in accordance 
with  Articles  22(1)  and  10(9)  of  the  basic  Regulation,  the  Commission  notified  the 
Government  of  India  (‘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. Parallel investigations 

(10)  On 1 December 2005, the Commission also opened a review pursuant to Article 11(2) 
of  Council  Regulation  (EC)  No  384/9610  on  the  anti-dumping  measures  in  force  on 
imports  of  PET  originating  in  India,  Indonesia,  Malaysia,  the  Republic  of  Korea, 

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OJ L 78, 21.3.2002 p.4, OJ L 127, 29.4.2004, p.7, OJ L 19, 21.1.2005, p.1, OJ L 266, 11.10.2005, p. 10. 
Council Regulation (EC) No 1467/2004, (OJ L 271,19.8.2004, p.1) 
OJ L 266, 11.10.2005, p. 1. 
OJ C 304, 1.12.2005, p.4 
OJ L 56, 6.3.1996, p.1. Council Regulation as last amended by Council Regulation (EC) No 2117/2005 
(OJ L 340, 23.12.2005, p.17) 

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Thailand and Taiwan11. A partial interim review pursuant to Article 11(3) of Council 
Regulation  384/96  limited  to  dumping  was  initiated  at  the  same  time  concerning 
imports of the same product originating in the Republic of Korea and Taiwan12.  

4. Review Investigation Period 

(11)  The  review  investigation  period  covered  the  period  from  1  October  2004  to  30 
September  2005  (hereinafter  referred  to  as  the  review  investigation  period  or  RIP). 
The examination of trends in the context of injury covered the period from 1 January 
2002  up  to  the  end  of  the  review  investigation  period  (hereinafter  referred  to  as  the 
period considered). 

5. Parties concerned by the investigation 

(12)  The Commission officially advised the exporting producers, the representatives of the 
exporting  country,  importers,  Community  producers,  users  and  the  applicant  of  the 
initiation of the expiry review. Interested parties were given the opportunity to make 
their views known in writing and to request a hearing within the time limit set out in 
the notice of initiation. All interested parties who so requested and showed that there 
were particular reasons why they should be heard were granted a hearing. 

(13) 

In  view  of  the  apparent  large  number  of  Indian  exporting  producers  as  well  as 
Community producers and importers listed in the request for the expiry reviews, it was 
considered  appropriate,  in  conformity  with  Article  27  of  the  basic  Regulation,  to 
examine  whether  sampling  should  be  used.  In  order  to  enable  the  Commission  to 
decide whether sampling would be necessary and, if so, to select a sample, the above 
parties  were  requested,  pursuant  to  Article  27  of  the  basic  Regulation,  to  make 
themselves  known  within  15  days  of  the  initiation  of  the  reviews  and  to  provide  the 
Commission with the information requested in the notice of initiation. 

(14)  After  examination  of  the  information  submitted,  given  the  low  number  of  exporting 
producers  in  India  indicating  their  willingness  to  co-operate,  it  was  decided  that 
sampling was not necessary as regards exporting producers in India. 

(15)  Having examined the information submitted by Community producers and importers, 
and  given  the  relative  small  number  of  replies,  it  was  considered  that  sampling  for 
none of these categories would be warranted. 

(16)  Questionnaires  were  therefore  sent  to  all  known  exporting  producers  in  the  country 

concerned, importers, suppliers, Community producers and users. 

(17)  Replies to the questionnaires were received from three Indian producers, from twelve 
Community producers, from one importer, one supplier and from ten converters/users. 

(18)  The  Commission  sought  and  verified  all  the  information  it  deemed  necessary  for  its 
analysis and carried out verification visits at the premises of the following companies: 

1. 

Community producers 

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OJ C 304, 1.12.2005, p.9 
OJ C 304, 1.12.2005, p.9 

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Voridian BV (The Netherlands) 

M & G Polimeri Italia Spa (Italy) 

Equipolymers Srl (Italia) 

La Seda de Barcelona SA (Spain) 

Novapet SA(Spain) 

Selenis Industria de Polímeros SA (Portugal) 

Selenis Itália Spa (Italy) 

Community Suppliers 

Interquisa SA (Spain) 

Unrelated importers in the Community 

Global Service International SRL (Italy) 

Community users 

Coca Cola Enterprises Europe Ltd (Belgium)  

2.  Government of India  

Ministry of Commerce, New Delhi 

Government of Maharashtra -Directorate of Industries, Mumbai 

3. 

Exporting producers in India 

SENPET Ltd, Calcutta (formerly Elque Polyesters Limited) 

Futura Polyesters Limited, Chennai (formerly Futura Polymer Limited) 

Pearl Engineering Polymers Limited, New Delhi 

B. PRODUCT CONCERNED AND LIKE PRODUCT 

1. Product concerned 

(19)  The  product  concerned  is  the  same  as  in  the  original  investigation,  i.e.  PET  with  a 
viscosity number of 78 ml/g or higher, according to ISO Standard 1628-5, originating 
in the country concerned. It is currently classifiable within CN Code 3907 60 20. 

2. Like product 

(20)  As  in  the  original  investigation,  it  was  found  that  the  product  concerned,  PET 
produced  and  sold  on  the  domestic  markets  in  the  country  concerned  and  PET 
produced  and  sold  by  the  Community  producers  have  the  same  basic  physical  and 

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chemical characteristics and uses. It is therefore concluded that all types of PET with a 
viscosity of 78 ml/g or higher are alike within the meaning of Article 1(5) of the basic 
Regulation. 

C. LIKELIHOOD OF CONTINUATION OR RECURRENCE OF SUBSIDISATION 

I. Continuation of Subsidisation- Introduction 

(21)  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 
granting of subsidies, were investigated. 

1. 

Subsidy schemes originally investigated 

Nationwide Schemes 

(a)  Duty Entitlement Passbook Scheme (DEPBS) 

(b) 

Income Tax Exemption Scheme (ITES) 

(c)  Export Promotion Capital Goods Scheme (EPCGS) 

(d)  Export 

Processing 

Zones 

(EPZ)/Special 

Economic  

Zones (SEZ)/Export Oriented Units (EOU)  

2. 

Subsidy schemes not originally investigated 

Nationwide Schemes   

(e)  Advance Licence Scheme (ALS) 

(f)  Export Credit Scheme (pre-shipment and post-shipment) (ECS) 

Regional Schemes 

(g)  Gujarat Sales Tax Incentive Scheme (GSTIS) 

(h)  Gujarat Electricity Duty Exemption Scheme (GEDES) 

(i)  West Bengal Incentive Schemes (WBIS) 

(j) 

Package 
Government of Maharashtra 

Scheme 

of 

Incentives 

(PSI) 

of 

the 

(22)  The  schemes  (a)  and  (c)-(e)  specified  above  are  based  on  the  Foreign  Trade 
(Development and Regulation) Act 1992 (No 22 of 1992) which entered into force on 
7  August  1992  (‘Foreign  Trade  Act’).  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, since 1 September 2004 named 'Foreign Trade 
Policy',  and  are  issued  by  the  Ministry  of  Commerce  every  five  years  and  updated 
regularly.  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 
September 2004 to 31 March 2009 (‘EXIM-policy 2004-2009’). In addition, the GOI 

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also sets out the procedures governing the EXIM-policy 2004-2009 in a ‘Handbook of 
Procedures - 1 September 2004 to 31 March 2009, Volume I’ (‘HOP I 2004-2009’). 
The Handbook of Procedure (HOP) is also updated on a regular basis. 

(23)  The Income Tax Scheme specified above under (b) is based on the Income Tax Act of 

1961, which is amended yearly by the Finance Act. 

(24)  The Export Credit Scheme specified above under (f) is based on sections 21 and 35A 
of the Banking Regulation Act 1949, which allows the Reserve Bank of India (‘RBI’) 
to direct commercial banks in the field of export credits.  

(25)  The Gujarat Sales Tax Incentive Scheme specified above under (g) is administered by 
the  Government  of  Gujarat  and  based  on  its  industrial  incentive  policy;  the  Gujarat 
Electricity Duty Exemption scheme stipulated above under (h) is based on the Bombay 
Electricity Duty Act of 1958. 

(26)  The scheme (j) is managed by the state of Maharashtra and is based on resolutions of 

the Government of Maharashtra Industries, Energy and Labour Department.  

(27)  The scheme (i) is set up by the Government of West Bengal through the Commerce & 
Industries Department notification No 588-CI/H of 22 June 1999 (WBIS 1999) which 
was  last  replaced  by  notification  No  134-CI/O/Incentive/17/03/I  of  24  March  2004 
(WBIS 2004). 

(28)  Following the disclosure of the findings concerning the alleged subsidisation, the GOI 
reiterates a number of concerns regarding the countervailability of the schemes and the 
calculation of the subsidy amounts.It also reiterates arguments that there was no likely 
continuation of subsidisation in the present case. To this end, it should be noted that 
this  submission  does  not  contain  any  new  arguments  which  would  alter  the 
conclusions as set out in this regulation..  

II. Nationwide Schemes 

1. Duty Entitlement Passbook Scheme (‘DEPBS’) 

(a) Legal Basis 

(29)  The detailed description of the DEPBS is contained in section 4.3 of the EXIM-policy 

2004-2009 and in section 4.3-.4.4 of the HOP I 2004-2009.  

(30) 

It  was  found  that  none  of  the  cooperating  exporting  producers  obtained  any 
countervailable  benefits  under  the  (DEPBS).  It  was  therefore  not  found  necessary  to 
further analyse this scheme in the scope of this investigation. 

2. Income Tax Schemes 

(31) 

It  was  found  that  that  none  of  the  cooperating  exporting  producers  obtained  any 
countervailable  benefits  under  the  ITES.  It  was  therefore  not  found  necessary  to 
further analyse this scheme in the scope of this investigation. 

3. Export Promotion Capital Goods Scheme (‘EPCGS’)  

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(a) Legal basis 

(32)  The detailed description of the EPCGS is contained in chapter 5 of the EXIM-policy 

2004-2009 and in chapter 5 of the HOP I 2004-2009.  

(b) Eligibility 

(33)  Manufacturer-exporters,  merchant-exporters  “tied  to”  supporting  manufacturers  and 

service providers are eligible for this scheme.  

(c) Practical implementation 

(34)  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  or  zero  rate  of  duty.  To  this  end  the  GOI  issues  upon  application  and 
payment of a fee an EPCG license. 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. 

(35)  The  EPCGS  licence  holder  can  also  source  the  capital  goods  indigenously.  In  such 
case,  the  indigenous  manufacturer  of  capital  goods  may  avail  of  the  benefit  for  duty 
free import of components required to manufacture such capital goods. Alternatively, 
the indigenous manufacturer can claim the benefit of deemed export in respect to the 
supply of capital goods to an EPCGS licence holder. 

(d) Conclusion on EPCG Scheme 

(36)  The  EPCGS  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 its liquidity. 

(37)  Furthermore,  the  EPCGS  is  contingent  in  law  upon  export  performance,  since  such 
licences cannot be obtained without a commitment to export. Therefore it is deemed to 
be specific and countervailable under Article 3(4)(a) of the basic Regulation.  

(38)  Consequently, 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 permissible systems, 
as set out in Annex I, item (i), of the basic Regulation, because they are not consumed 
in the production of the exported products. 

(e) Calculation of the subsidy amount  

(39)  None  of  the  cooperating  exporters  had  purchased  any  capital  goods  in  the  IP.  One 
company  continued  however  to  benefit  from  duty  exemptions  for  capital  goods 
purchased  before  the  IP  at  the  amount  established  in  the  original  investigation..  The 
subsidy  amount  obtained  during  the  RIP  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  actual  depreciation  period  of 
such  capital  goods  of  the  exporting  producer.  In  accordance  with  the  established 

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practice,  the  amount  so  calculated  which  is  attributable  to  the  review  investigation 
period  has  been  adjusted  by  adding  interest  during  this  period  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 from this sum to 
arrive at the subsidy amount as numerator. In accordance with Article 7(2) and 7(3) of 
the basic Regulation this subsidy amount has been allocated over the export turnover 
during  the  review  investigation  period  as  appropriate  denominator,  because  the 
subsidy is contingent upon export performance and it was not granted by reference to 
the quantities manufactured, produced, exported or transported. The subsidy obtained 
for the company that continued to benefit from the scheme was 0.38% 

4. Export Credit Scheme (‘ECS’)  

(a) Legal basis 

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

(b) Eligibility 

(41)  Manufacturing  exporters  and  merchant  exporters  are  eligible  for  this  scheme.  It  was 
found  that  one  of  the  companies  cooperating  in  the  proceeding  availed  of  benefits 
under the ECS. 

(c) Practical implementation 

(42)  Under this scheme, the RBI sets compulsory maximum ceiling interest rates applicable 
to  export  credits,  both  in  Indian  rupees  or  in  foreign  currency,  which  commercial 
banks  can  charge  an  exporter  'with  a  view  to  making  credit  available  to  exporters  at 
internationally  competitive  rates'  .  The  ECS  consists  of  two  sub-schemes,  the  Pre-
Shipment Export Credit Scheme (“packing credit”), which covers credits provided to 
an  exporter  for  financing  the  purchase,  processing,  manufacturing,  packing  and/or 
shipping of goods prior to export, and the Post-Shipment Export Credit Scheme, which 
provides  for  working  capital  loans  with  the  purpose  of  financing  export  receivables. 
The  RBI  also  directs  the  banks  to  provide  a  certain  amount  of  their  net  bank  credit 
towards export finance. 

(43)  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) Conclusion on the ECS 

(44)  Firstly, the preferential interest rates of an ECS credit set by the RBI Master Circulars 
can decrease interest costs of an exporter as compared with credit costs purely set by 
market conditions and confer in this case a benefit within the meaning of Article 2(2) 
of  the  basic  Regulation  on  such  an  exporter.  Only  in  the  case  of  those  co-operating 
exporters,  where  such  interest  rate  differences  were  found  to  exist,  it  was  concluded 
that a benefit was conferred. The differences in rates between the credits given further 

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to the RBI Master Circulars and commercial 'cash credit' rates cannot be explained by 
pure market behaviour of the commercial bank.  

(45)  Secondly, and despite the fact that the preferential credits under the ECS are granted 
by commercial banks, this benefit is a financial contribution by a government within 
the meaning of Article 2(1)(iv) of the basic Regulation. The RBI is a public body and 
falls therefore under the definition of a “government” as set out in Article 1(3) of the 
basic Regulation. It is 100% government-owned, pursues public policy objectives, e.g. 
monetary policy, and its management is appointed by the GOI. The RBI directs private 
bodies,  since  the  commercial  banks  are  bound  by  the  conditions,  inter  alia  the 
maximum  ceilings  for  interest  rates  on  export  credits  mandated  in  the  RBI  Master 
Circulars  and  the  RBI  provisions  that  commercial  banks  have  to  provide  a  certain 
amount  of  their  net  bank  credit  towards  export  finance.  This  direction  obliges 
commercial  banks  to  carry  out  functions  mentioned  in  Article  2(1)(a)(i)  of  the  basic 
Regulation, in this case loans in the form of preferential export financing. Such direct 
transfer  of  funds  in  the  form  of  loans  under  certain  conditions  would  normally  be 
vested  in  the  government,  and  the  practice,  in  no  real  sense,  differs  from  practices 
normally  followed  by  governments,  Article  2(1)(a)(iv)  of  the  basic  Regulation.  This 
subsidy  is  deemed  to  be  specific  and  countervailable  since  the  preferential  interest 
rates  are  only  available  in  relation  to  the  financing  of  export  transactions  and  are 
therefore contingent upon export performance, pursuant to Article 3(4)(a) of the basic 
Regulation.  

(e) Calculation of the subsidy amount 

(46)  The  subsidy  amount  has  been  calculated  on  the  basis  of  the  difference  between  the 
interest  paid  for  export  credits  used  during  the  review  investigation  period  and  the 
amount that would have been payable if the same interest rates were applicable as for 
ordinary  commercial  credits  used  by  the  particular  company.  This  subsidy  amount 
(numerator)  has  been  allocated  over  the  total  export  turnover  during  the  review 
investigation period as appropriate denominator in accordance with Article 7(2) basic 
Regulation, because the subsidy is contingent upon export performance and it was not 
granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported. The company that availed of benefits under the ECS obtained a subsidy of 
0.1%. 

5. Export Oriented Units Scheme (‘EOUS’)/Special Economic Zones Scheme (‘SEZS’) 

(47) 

It was found that none of the cooperating exporting producers obtained countervailable 
benefits  under  the  SEZS.  However,  two  Indian  companies  had  the  status  of  an  EOU 
and  received  countervailable  subsidies  in  the  RIP.  The  description  and  assessment 
below is therefore limited to the EOUS. 

(a) Legal basis 

(48)  The details of the EOU scheme are contained in chapter 6 of the EXIM-policy 2004-

2009 and the HOP I 2004-2009.  

(b) Eligibility 

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

(c) Practical implementation 

(50)  As found in the original investigation, EOUs can be located and established anywhere 

in India.  

(51)  An application for EOU 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. Upon acceptance by the authorities of the 
company’s  application,  the  terms  and  conditions  attached  to  this  acceptance  will  be 
communicated to the company. The agreement to be recognised as a company under 
EOU  is  valid  for  a  five-year  period.  The  agreement  may  be  renewed  for  further 
periods. 

(52)  A crucial obligation of an EOU as set out in the EXIM-policy 2004-2009 is to achieve 
net  foreign  exchange  (‘NFE’)  earnings,  i.e.  in  a  reference  period  (5  years)  the  total 
value of exports has to be higher than the total value of imported goods. 

(53)  EOU units are entitled to the following concessions: 

(i) 

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

(ii) 

exemption from excise duty on goods procured from indigenous sources; 

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

(iv) 

the facility to sell part of production on the domestic market of up to 50% of 
FOB  value  of  exports,  subject  to  fulfilment  of  positive  NFE  earnings  upon 
payment of concessional duties, i.e. excise duties on finished products; 

v) 

partial  reimbursement  of  duty  paid  on  fuel  procured  from  domestic  oil 
companies; 

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

(vii)  possibility of 100% foreign equity ownership. 

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

officials in accordance with Section 65 of the Customs Act.  

(55)  They  are  legally  obliged  to  maintain  a  proper  account  of  all  imports,  of  the 
consumption  and  utilisation  of  all  imported  materials  and  of  the  exports  made  in 
accordance  with  6.11.1  HOP  2004-2009.  These  documents  should  be  submitted 

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periodically,  to  the  competent  authorities  through  quarterly  and  annual  progress 
reports. 

(56)  However,  “at  no  point  in  time  [an  EOU]  shall  be  required  to  co-relate  every  import 
consignment  with  its  exports,  transfers  to  other  units,  sales  in  DTA  or  stocks”,  as 
section 6.11.2 of the HOP I 2004-2009 states.  

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

(58) 

In the present case, the EOUS was used by two of the co-operating exporters. These 
co-operating exporters utilized the scheme to import raw materials and capital goods 
free of import duties, to procure goods domestically free of excise duty and to obtain 
sales tax reimbursement and to sell part of its production on the domestic market. One 
of the exporting companies also utilized the scheme to obtain partial reimbursement of 
duty paid on fuel procured from domestic oil companies. They thereby availed of all 
benefits as described in recital (53) above under (i) to (v). The investigation showed 
that the exporters concerned did not avail of benefits under the income tax exemption 
provisions of the EOUS.  

(d) Conclusions on the EOUS  

(59)  The exemptions of an EOU from two types of import duties (“basic customs duty” and 
“special  additional  customs  duty”)  and  the  reimbursement  of  sales  tax  are  financial 
contributions  of  the  GOI  within  the  meaning  of  Article  2(1)(a)(ii)  of  the  basic 
Regulation. Government revenue which would be due in the absence of this scheme is 
forgone, thus, in addition, conferring a benefit upon the EOU in the meaning of Article 
2(2)  of  the  basic  Regulation,  because  it  saved  liquidity  by  not  having  to  pay  duties 
normally due and by obtaining a sales tax reimbursement.  

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

(61)  Thus,  only  the  exemption  from  basic  customs  duty,  special  additional  customs  duty, 
the partial reimbursement of duty paid on fuel procured from domestic oil companies 
and the sales tax reimbursement, constitute subsidies within the meaning of Article 2 
of  the  basic  Regulation.  They  are  contingent  in  law  upon  export  performance,  and 
therefore deemed to be specific and countervailable under Article 3(4)(a) of the basic 
Regulation. The export objective of an EOU as set out in paragraph 6.1 of the EXIM-
policy 02-07 is a conditio sine qua non to obtain the incentives. 

(62)  One of the cooperating exporters asserted that the Commission has departed from the 
reasoning  used  in  the  original  investigation  in  terms  of  the  assessment  of  the  duty 
exemption  of  raw  materials  and  that  only  excess  remission  if  any  should  be 
countervailed..  However,  in  reply  to  this  it  should  be  noted  that  at  the  time  of  the 
original investigation, in the assessment of the countervailable amount, the question on 

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whether the EOU was a permissible duty draw back system or not was made 'without 
prejudice  to  the  question  of  whether  the  scheme  constitutes  a  draw  back  system  in 
conformity  the  provisions  of  the  basic  Regulation13'.  (Within  the  framework  of  this 
review,  the  scheme  as  a  whole,  along  with  the  monitoring  system  was  carefully 
investigated.  

(63)  The  investigation  revealed  that  these  subsidies  cannot  be  considered  as  permissible 
duty  drawback  systems  or  substitution  drawback  systems  within  the  meaning  of 
Article 2(1)(a)(ii) of the basic Regulation. They do not conform to the strict rules laid 
down in Annex I (items (h) and (i)), Annex II (definition and rules for drawback) and 
Annex III (definition and rules for substitution drawback) of the basic Regulation. In 
the  circumstance  that  the  sales  tax  reimbursement  and  import  duty  exemption 
provisions  are  used  for  purchasing  capital  goods,  they  are  already  not  in  conformity 
with the rules for permitted drawback systems since capital goods are not consumed in 
the production process, as required by Annex I item (h) (sales tax reimbursement) and 
(i) (import duties remission). 

(64) 

In  addition,  it  has  not  been  established  that  that  the  GOI  has  a  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)  of  the  basic  Regulation  and,  in  the  case  of  substitution 
drawback schemes, Annex III(II)(2) of the basic Regulation). The verification system 
in  place  aims  at  monitoring  the  Net  foreign  exchange  earning  obligation  and  not  the 
consumption of imports in relation to the production of exported goods. 

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

(66)  Concerning  further  verification  steps  installed  it  should  be  recalled,  that  an  EOU  is 
already  de  jure  and  at  no  point  in  time  is  required  to  co-relate  every  import 
consignment  with  the  corresponding  resultant  product.  Only  if  such  controls  were  in 
place  would  the  Indian  authorities  be  able  to  obtain  sufficient  information  about  the 
final destination of inputs so as to allow for an efficient check that the duty/sales tax 
exemptions  do  not  exceed  inputs  for  export  production.  Monthly  tax  returns  for 
domestic  sales  on  a  self  assessment  basis,  which  are  periodically  assessed  by  the 
Indian authorities, do not suffice. In addition, the purpose of the monthly tax returns is 
to monitor excise duties and not to control the destination of inputs. Company internal 
systems,  which  are  kept  without  legal  obligation,  would  not  as  such  suffice  since  a 
duty  drawback  verification  system  would  need  to  be  designed  and  enforced  by  a 
government and should not left to the discretion of the management of each individual 
company concerned. Consequently, the investigation has established that the EOU is 

13 

Recital 26, Council Regulation (EC) No 2603/2000OJ L 301, 30.11.2000. p1. 

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explicitly not required by the Indian EXIM policy to record the nexus between input 
materials and the finished product and no effective control mechanism was set up by 
the GOI to determine which inputs were consumed in export production and in what 
amounts.  

(67)  Also,  the  GOI  neither  carried  out  a  further  examination  based  on  actual  inputs 
involved,  although  this  would  normally  be  required  in  the  absence  of  an  effective 
verification  system  (Annex  II(II)(5)  and  Annex  III(II)(3)  to  the  basic  Regulation). 
Furthermore  no  evidence  was  provided  by  the  GOI  demonstrating  that  no  excess 
remission took place. 

(68) 

In light of the above, the company's claim that the Commission has departed from the 
reasoning  used  in  the  original  investigation  in  terms  of  the  assessment  of  the  duty 
exemption  of  raw  materials  and  that  only  excess  remission  if  any  should  be 
countervailed has to be rejected. 

(e) Calculation of the subsidy amount 

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

(i)  Exemption  from  import  duties  (basic  customs  duty  and  special  additional  customs  duty), 
sales tax reimbursement on raw materials and reimbursement of duty paid on fuel procured 
from domestic oil companies 

(70)  The  subsidy  amount  for  the  exporters  that  are  EOUS  was  calculated  on  the  basis  of 
import duties forgone (basic customs duty and special additional customs duty) on the 
materials  imported  for  the  EOU  as  a  whole,  the  sales  tax  reimbursed,  and  the 
reimbursement  of  duties  paid  on  domestically  purchased  fuel  all  during  the  review 
investigation period. Fees necessarily incurred to obtain the subsidy were deducted in 
accordance with Article 7(1)(a) of the basic Regulation from this sum to arrive at the 
subsidy amount as numerator. In accordance with Article 7(2) of the basic Regulation 
this subsidy amount has been allocated over the appropriate export turnover generated 
during  the  review  investigation  period  as  appropriate  denominator,  because  the 
subsidy is contingent upon export performance and it was not granted by reference to 
the quantities manufactured, produced, exported or transported. The subsidy margins 
thus obtained were 0.9 % and 5.8% respectively for the two companies.  

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

(71)  Capital  goods  are  not  physically  incorporated  into  the  finished  goods.  In  accordance 
with Article 7(3) of the basic Regulation, the benefit to the investigated companies has 
been calculated on the basis of the amount of unpaid customs duty on imported capital 
goods  spread  across  a  period  which  reflects  the  normal  depreciation  period  of  such 
capital  goods  in  the  investigated  companies.  In  order  to  determine  such  normal 
depreciation  period  the  actual  depreciation  periods  used  by  the  two  co-operating 
exporters  concerned  have  been  used  as  a  reference,  i.e.  18  years.  The  amount  so 

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calculated is then attributable to the review investigation period and has been adjusted 
by  adding  interest  during  this  period  in  order  to  reflect  the  value  of  the  benefit  over 
time  and  thereby  establish  the  full  benefit  of  this  scheme  to  the  recipient.  In 
accordance with Article 7(2) and 7(3) of the basic Regulation, this subsidy amount has 
been  allocated  over  the  appropriate  export  turnover  generated  during  the  review 
investigation  period  as  appropriate  denominator,  because  the  subsidy  is  contingent 
upon  export  performance  and  it  was  not  granted  by  reference  to  the  quantities 
manufactured, produced, exported or transported. The subsidy margins thus obtained 
for the two companies were 1.8% and 0.4% respectively. 

(72)  Thus, the total subsidy margin under the EOUS for the companies concerned amounts 

to 2.7% and 6.2% respectively. 

6. Advance Licence Scheme (‘ALS’)  

(a) Legal basis 

(73)  The  detailed  description  of  the  scheme  is  contained  in  sections  4.1  to  4.1.14  of  the 

EXIM-policy 2004-2009 and chapters 4.1 to 4.30 of the HOP I 2004-2009.  

(b) Eligibility 

(74)  The ALS consists of six sub-schemes, as described in more detail below. Those sub-
schemes  inter  alia  differ  in  the  scope  of  eligibility.  Manufacturer-exporters  and 
merchant-exporters  “tied  to”  supporting  manufacturers  are  eligible  for  the  ALS 
physical  exports  and  for  the  ALS  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  2004-2009,  such  as  suppliers  of  an  export  oriented  unit 
(‘EOU’),  are  eligible  for  ALS  deemed  export.  Eventually,  intermediate  suppliers  to 
manufacturer-exporters  are  eligible  for  “deemed  export”  benefits  under  the  sub-
schemes Advance Release Order (‘ARO’) and back to back inland letter of credit. 

(c) Practical implementation 

(75)  Advance licences can be issued for: 

(i)  Physical exports: This is the main sub-scheme. It allows for duty free import of 
input  materials  for  the  production  of  a  specific  resultant  export  product.  The 
export  must  be  “physical”  in  the  sense  that  the  export  product  has  to  leave 
Indian  Territory.  The  terms  of  the  import  allowance  and  export  obligation 
including the type of export product are specified in the licence. 

(ii)  Annual requirement: 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 product group using such duty-exempt material.  

(iii)  Intermediate supplies: This sub-scheme covers cases where two manufacturers 
intend  to  produce  a  single  export  product  and  divide  the  production  process. 

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The  manufacturer-exporter  produces  the  intermediate  product.  It  can  import 
duty  free  input  materials  and  can  obtain  for  this  purpose  an  ALS  for 
intermediate  supplies.  The  ultimate  exporter  finalizes  the  production  and  is 
obliged to export the finished product.  

(iv)  Deemed  exports:  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 - g) and 
(i - j) of the EXIM policy 2004-2009. The finished goods will, in other words, 
not have to leave the country but are by virtue of the status of the customer to 
be  considered  deemed  exports.  This  would  include  supply  to  an  EOU  or  to  a 
licence holder under the Export Promotion Capital Goods scheme. 

(v)  ARO: The ALS holder intending to source the inputs from indigenous sources, 
instead 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 02-07 (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)  Back to back inland letter of credit: 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 
paragraph  8.3  of 
intermediate 
supplies/deemed  export,  deemed  export  drawback  and  refund  of  terminal 
excise duty).  

the  EXIM-policy  02-07  (i.e.  ALS  for 

(76) 

It  was  established  that  during  the  review  investigation  period,  one  co-operating 
exporter  only  obtained  concessions  under  three  sub-schemes  linked  to  the  product 
concerned, i.e. (i) ALS physical exports, (v) ARO and (iv) ALS deemed export. . It is 
therefore  not  necessary  to  establish  the  countervailability  of  (ii)  annual  requirement, 
(iii) Intermediate supplies, and (vi) the back to back inland letter of credit scheme.  

(77)  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 utilisation of 
imported  goods”  in  a  specified  format  (chapter  4.30  and  appendix  23  HOP  I  2004-
2009),  i.e.  an  actual  consumption  register  (“appendix  23  register”).  As  of  May  2005 
appendix  23  must  not  only  be  preserved  with  the  company  but  it  must  also  be 
countersigned  by  a  chartered  accountant  and  sent  to  the  Indian  authorities.  The 
obligation  to  submit  the  appendix  23  applies  to  licences  issued  after  the  entry  into 
force of the new rules in May 2005. The practical implementation of this new system 
could  therefore  not  be  verified  as  no  report  relating  to  these  licences  was  due  at  the 
time of the investigation.  

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(78) 

In regard to the sub-schemes (i), (iv) and (v) listed above, both the import allowance 
and the export (including deemed export) obligation are fixed in volume and value by 
the GOI and are documented on the licence. In addition, at the time of import and of 
export, the corresponding transactions are to be documented by Government officials 
on the licence. The volume of imports allowed under this scheme is determined by the 
GOI  on  the  basis  of  standard  input-output  norms  (‘SIONs’).  SIONs  exist  for  most 
products including the product concerned and are published in the HOP II 2004-2009. 

(79) 

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 6 
months each).  

(80)  The  advance  licence  holder  intending  to  source  the  inputs  from  domestic  sources, 
instead  of  direct  imports  has  the  option  to  source  them  against  Advance  Release 
Orders  (ARO).  In  such  cases  the  advance  licences  are  validated  as  ARO's  and  are 
endorsed to the supplier upon delivery of the items specified therein.  

(81) 

In  the  course  of  the  review  investigation,  it  was  established  that  the  input  materials 
imported  according  to  the  SIONs  import  allowance  duty-free  under  the  various  sub-
schemes  by  the  co-operating  exporter  exceeded  the  material  needed  to  produce  the 
reference  quantity  of  the  resultant  export  product.  Thus,  the  SIONs  for  the  product 
concerned were not accurate.  

(d) Conclusion 

(82)  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.  

(83) 

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

(84)  ALS 'deemed export' is de facto contingent upon export performance. It was only used 
by one company to a minor extent and only when supplying EOUs or units in a SEZ, 
both  categories  mentioned  in  paragraph  8.2(b)  of  the  EXIM-policy  02-07.  This 
company  stated  that  its  customers  eventually  exported  the  product  concerned.  The 
objective  of  an  EOU/SEZ  is  exportation  as  set  out  in  paragraph  6.1  of  the  EXIM-
policy  02-07.  Thus,  a  domestic  supplier  obtains  benefits  under  the  ALS  deemed 
export,  because  the  GOI  anticipates  export  earnings  subsequently  received  by  an 
exporter located in an EOU/SEZ. According to Article 3(4)(a) of the basic Regulation, 
a subsidy shall be considered as export contingent when the facts demonstrate that the 
granting  of  a  subsidy,  though  not  legally  contingent  upon  export  performance,  is  in 
fact tied to actual or anticipated export earnings.  

(85) 

In this case the cooperating company made no use of advance licence for the purpose 
of  importing  duty  free  imports.  Instead  the  company  obtained  a  benefit  by  sourcing 
raw  materials  from  domestic  suppliers  through  the  conversion  of  the  licences  into 
ARO.  Under  this  scheme  the  right  of  exemption  of  taxes  and  duties  falls  on  the 

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20 

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supplier instead of to the ultimate exporter in the form of drawback/refund of duties. 
The  exemption  of  taxes/duties  is  available  both  for  indigenous  inputs  as  well  as 
imported inputs. The investigation revealed there was a significant difference in price 
between raw material sourced through the indigenous unrelated supplier by use of the 
ARO  scheme  as  opposed  to  raw  materials  sourced  through  an  indigenous  supplier 
when  no  licence  was  used.  The  benefit  of  the  exemption  from  duties  and  taxes  was 
passed  on  through  lower  prices  from  the  supplier  to  the  company  using  the  raw 
material  and  concerned  by  this  proceeding.  The  company  could  make  a  clear 
distinction  between  the  purchase  prices  of  raw  material  under  the  use  of  the  licence 
and the price paid for the same raw material when no licence was used. The company 
defined the benefit thus obtained as the difference in price between supplies sourced 
under the ARO and the price of supplies sourced without such licence. 

fully 

the  new  verification  system  was  not  yet 

(86)  None  of  the  three  sub-schemes  used  in  the  present  case  can  be  considered  as 
permissible  duty  drawback  systems  or  substitution  drawback  systems  within  the 
meaning  of  Article  2(1)(a)(ii)  of  the  basic  Regulation.  They  do  not  conform  to  the 
strict rules laid down in Annex I item (i), Annex II (definition and rules for drawback) 
and Annex III (definition and rules for substitution drawback) of the basic Regulation. 
Although  the  GOI  mentioned  that  the  system  had  undergone  a  change  as  from  May 
2005, it should be clear that these changes had no impact on the schemes during the 
RIP,  since 
implemented. 
Notwithstanding  the  possible  change  of  the  verification  system  by  the  GOI,  the 
investigation  revealed  that  during  the  RIP  the  GOI  did  not  effectively  apply  its 
verification  system.  Nor  did  it  apply  procedures  to  confirm  whether  and  in  what 
amounts  inputs  were  consumed  in  the  production  of  the  exported  product  (Annex 
II(II)(4)  of  the  basic  Regulation  and,  in  the  case  of  substitution  drawback  schemes, 
Annex III(II)(2) of the basic Regulation). The SIONs for the product concerned were 
not  sufficiently  precise  and  overestimated  the  raw  material  consumption.  The 
investigation revealed that the SIONs are being amended in view of better reflecting 
the  consumption  of  inputs  but  these  new  SION's  were  not  in  place  during  the  RIP. 
Thus,  it  is  confirmed  that  the  SIONs  themselves  cannot  be  considered  a  verification 
system of actual consumption, since these generous standard norms do not enable the 
GOI to verify with sufficient precision what amount of inputs were actually consumed 
in the export production. Furthermore, an effective control done by the GOI based on a 
correctly kept actual consumption register (“appendix 23 register”, formerly appendix 
18 ), did not take place for the licences used in the RIP. In addition, the GOI did not 
carry out a further examination based on actual inputs involved, although this would 
normally  need  to  be  carried  out  in  the  absence  of  an  effectively  applied  verification 
system (Annex II(II)(5) and Annex III(II)(3) to the basic Regulation), nor did it prove 
that no excess remission took place.  

(87)  These three sub-schemes are therefore countervailable.  

(e) Calculation of the subsidy amount 

(88) 

In the absence of permitted duty drawback systems or substitution drawback systems, 
the  subsidy  amount  has  been  established,  as  demonstrated  by  the  company,  on  the 
basis  of  the  difference  in  price  between  the  same  raw  material  purchased  with  and 
without the licence.  

EN 

21 

   EN 

 
(89) 

In accordance with Article 7(2) of the basic Regulation, the subsidy amount has been 
allocated over the total export turnover generated as appropriate denominator, because 
the subsidy is contingent upon export performance and was not granted by reference to 
the quantities manufactured, produced, exported or transported.  

(90)  One company benefited from this scheme during the review investigation period and 

obtained subsidies of 20.9%. 

III. Regional Schemes  

Gujarat Sales Tax Incentive Scheme (GSTIS) and  Gujarat 

1 
Exemption Scheme (GEDES)  

Electricity 

Duty 

(91) 

It  was  found  that  none  of  the  cooperating  exporting  producers  obtained  any 
countervailable benefits under the Gujarat Sales Tax Incentive Scheme (GSTIS) or the
 Gujarat  Electricity  Duty  Exemption  Scheme  (GEDES).  It  was  therefore  not  found 
necessary to further analyse this scheme within the scope of this investigation. 

2 

West Bengal Incentive Schemes (WBIS) 

(WBIS  1999)  which  was 

(92)  The  detailed  description  of  the  WBIS  is  set  out  in  Government  of  West  Bengal 
(GOWB)  Commerce  &  Industries  Department  notification  No  588-CI/H  of  22  June 
1999 
replaced  by  notification  No  134-
last 
CI/O/Incentive/17/03/I  of  24  March  2004  (WBIS  2004).  The  scheme  conferred  a 
number of benefits on the recipient such as deferred payment of sales tax, subsidy for 
installation of capital goods, and development subsidies. The investigation established 
that one company had benefited from these schemes in the past. However, the impact 
of  these  benefits  during  the  RIP  was  negligible.  For  this  reason  it  was  not  found 
necessary to further analyse these schemes within the scope of this investigation. 

3 

Package Scheme of Incentives (‘PSI’) of the Government of Maharashtra (‘GOM’) 

(a) Legal basis 

(93) 

In  order  to  encourage  the  dispersal  of  industries  in  the  Maharashtra  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.  The  scheme  has  been 
amended many times since its introduction and the '2001 Scheme' was operative from 
1 April  2001 until  31 March  2006 after which it was extended for one year until 31 
March 2007. The PSI of the GOM is composed of several sub-schemes amongst which 
the  main  ones  are:  (i)  the  refund  of  octroi  tax  /entry  tax,  (ii)  the  exemption  from 
electricity  duty  and  (iii)  the  exemption  from  local  sales  tax  which  expired  on 
24.10.2004.  The  investigation  revealed  that  the  only  sub  scheme  used  by  one  of  the 
cooperating exporting producers was the local sales tax exemption.  

(b) Eligibility 

(94) 

In order to be eligible, companies must as a rule invest in less developed areas either 
by  setting  up  a  new  industrial  establishment  or  by  making  a  large  scale  capital 
investment  in  expansion  or  diversification  of  an  existing  industrial  establishment. 
These  areas  are  classified  according  to  their  economic  development  into  different 
categories  (e.g.  less  developed  areas,  lesser  developed  areas  and  least  developed 

EN 

22 

   EN 

 
areas). 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 the investment. 

(c) Practical implementation 

(95)  Under  the  local  sales  tax  exemption  scheme  which  expired  in  October  2004, 
designated units were not required to collect any sales tax on their sales transactions. 
Similarly, designated units were exempted from the payment of the local sales tax on 
their  purchases  of  goods  from  a  supplier  itself  eligible  for  the  scheme.  Whereas  the 
exemption  in  relation  to  sales  transactions  does  not  confer  any  benefit  on  the 
designated  sales  unit,  the  exemption  in  relation  to  purchase  transactions,  however, 
does confer a benefit on the designated purchasing unit. The investigation established 
that the company concerned enjoyed sales tax exemption until 24 October 2006. 

(d) Conclusion 

(96)  The PSI of the GOM provides subsidies within the meaning of Article 2(1)(a)(ii) and 
Article 2(2) of the basic Regulation. The sub scheme examined constitutes 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. 

(97)  The  sub-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  for  companies  located  outside  these  areas.  The  level  of  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. 

(e) Calculation of the subsidy amount 

(98)  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.  Since  the  sales  tax  exemption  scheme 
expired  on  24.10.2004m  only  the  sales  unpaid  during  the  period  1.10.2004  – 
24.10.2004  were  taken  into  consideration  because  only  this  period  fell  in  the  review 
investigation  period.  Pursuant  to  Article  7(2)  of  the  basic  Regulation,  the  amount  of 
subsidy  (numerator)  has  then  been  allocated  over  the  total  company  turnover  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  transported.  During  the  RIP  one  company 
benefited  from  the  sub  scheme;  however  the  subsidy  amount  obtained  was  less  than 
0.1% i.e. negligible. 

IV. Amount of countervailable subsidies 

(99)  The amount of countervailable subsidies in accordance with the provisions of the basic 
Regulation,  expressed  ad  valorem,  for  the  investigated  exporting  producers  ranges 
between 2.7% and 20.9 %. 

(100)  Although there was a high level of cooperation in terms of proportion of exports to the 
Community  it  should  be  noted  that  several  exporting  producers  did  not  cooperate  in 

EN 

23 

   EN 

 
the  proceeding,  including  the  exporting  producer  with  the  highest  subsidy  margin  in 
the  original  investigation.  The  capacity  and  production  of  the  non  cooperating 
producers in India is significant and it is also likely that these exporting producers will 
continue  to  avail  of  benefits  under  the  investigated  subsidisation  schemes  at  at  least 
the same rate as that established in the original investigation. 

SCHEME→ 

DEPBS 

ITES  EPGS  EOU  ALS  ECS  GSTIS  GEDES  WBIS  PSI  Total

COMPANY↓ 

 % 

%   %  

%   %   %   %  

%  

%  

%   %  

Senpet 
(Former Elque)  nil 

nil 

nil 

2.7 

nil 

nil 

nil 

Futura 

nil 

nil 

nil  

6.2 

nil 

0.1 

nil 

nil 

nil 

nil 

nil 

nil 

2.7 

nil 

6.3 

Pearl 

nil 

nil 

0.3 

Nil 

20.6 nil 

nil 

nil 

nil 

neg  20.9 

V. CONCLUSIONS 

(101)  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. 

(102)  As set out under recitals (21) to (100) above, it was established that during the review 
investigation  period  Indian  exporters  of  the  product  concerned  continued  to  benefit 
from  countervailable  subsidisation  by  the  Indian  authorities.  In  fact,  the  subsidy 
margins found during the review are higher than those established during the original 
investigation, except for one exporting producer. The subsidy schemes concerned give 
recurring benefits and there is no indication that these programmes will be phased out 
in the foreseeable future. In the absence of information on how the amendment to the 
ALS verification system will be implemented in practice, no conclusions can be drawn 
as to the possible effect of these changes. Under these conditions, the exporters of the 
product in question will continue to receive countervailable subsidies. Each exporter is 
eligible  for  several  of  the  subsidy  programmes.  Under  these  circumstances,  it  was 
considered reasonable to conclude that subsidisation would be likely to continue in the 
future. 

(103)  Since it has been demonstrated that subsidisation continued at the time of the review 
and  is  likely  to  continue  in  the  future,  the  issue  of  likelihood  of  recurrence  of 
subsidisation is irrelevant. 

D. DEFINITION OF THE COMMUNITY INDUSTRY 

1. 

Community production 

(104)  PET is manufactured in the Community by the following companies: 

Twelve  producers  which  requested  the  expiry  review,  supported  them  and  co-
operated in the investigation (see recital (107)) 

EN 

24 

   EN 

 
Two producers which have requested the expiry review but have not co-operated in 
the current investigation; 

One subsidiary of a Korean producer located in the Community who has cooperated 
in the investigation and has supported the request; 

(105)  PET  produced  by  all  these  companies  constitutes  the  total  Community  production 

within the meaning of Article 9(1) of the basic Regulation. 

2. 

Community industry 

(106)  The  Commission  examined  whether 

the  co-operating  Community  producers 
requesting  or  supporting  the  request  for  the  expiry  reviews  represented  a  major 
proportion  of  the  total  Community  production  of  PET.  Those  Community  producers 
accounted  for  88%  of  the  total  Community  production  of  PET.  Those  Community 
producers  who  did  not  fully  cooperate  were  excluded  from  the  definition  of  the 
Community  industry.  The  Commission  therefore  considered  that  the  twelve  fully 
cooperating  Community  producers  represent  the  Community  industry  within  the 
meaning  of  Articles  9(1)  and  10(8)  of  the  basic  Regulation.  In  the  original 
investigations  the  Community  industry  represented  more  than  85%  of  the  total  PET 
production in the Community at that time. 

(107)  The following twelve Community producers constitute the Community industry. 

Voridian BV (The Netherlands) 

M & G Polimeri Italia Spa (Italy) 

Equipolymers Srl (Italia) 

La Seda de Barcelona SA (Spain) 

Novapet SA (Spain) 

Selenis Industria de Polimeros SA (Portugal) 

Aussapol Spa (Italy) 

Advansa Ltd (UK) 

Wellman BV (The Netherlands) 

Boryszew subsidiary Elana Wse (Poland) 

V.P.I. SA (Greece) 

SK Eurochem Sp.Z. o.o. (Poland) 

EN 

25 

   EN 

 
E. SITUATION ON THE COMMUNITY MARKET 

1. 

Consumption in the Community market 

(108)  Community  consumption  was  established  on  the  basis  of  the  sales  volumes  of  the 
Community industry, of estimates of the sales of the other Community producers on 
the  Community  market  based  on  data  provided  at  the  complaint  stage,  and  Eurostat 
data for all Community imports from third countries. 

(109)  Between 2002 and the RIP, Community consumption of the product concerned in the 
Community  continuously  increased  to  reach  a  total  of  2.400.000  tonnes  in  the  RIP. 
The  overall  increase  over  the  period  was  18%.  The  increase  was  partly  due  to  new 
applications  (beer  and  wine  bottles,  inter  alia)  and  partly  due  to  the  increase  of 
consumption in the accession countries.  

Table 1 

2002 

2003 

2004 

RIP 

Community 
consumption (tonnes) 

2.041.836

2.213.157

2.226.751

2.407.387 

Index 

100 

108 

109 

118 

2. 

Imports from India 

2.1 

Volume, market share and prices of imports 

(110)  Between  2002  and  the  RIP,  total  imports  from  India  increased  by  13%.  Whereas 
imports decreased by 17% from 2002 to 2003, they increased by 100 percentage points 
in 2004 and decreased again during the RIP to around 6800 tonnes, i.e. by around 70 
percentage points. Import prices rose by 5 percentage points in 2003 and by further 3 
and 7 percentage points respectively in 2004 and during the RIP. This price trend only 
partially reflects the strong increase of the raw material costs.Market share of Indian 
imports remained relatively small throughout the period considered, i.e. 0.3% in 2002, 
0.2% in 2003, 0.5% in 2004 and 0.3% in the RIP. 

Table 2 

India 

2002 

2003 

2004 

RIP 

Volume (tonnes) 

6 046

4 999

11 079

6 831 

Index 

Price (EUR per tonne) 

Index 

100

883

100

83 

930

105

183

955

108

113 

1018 

115 

Market share 

0,3% 

0,2% 

0,5% 

0,3% 

3. Imports from other countries  

EN 

26 

   EN 

 
 
 
 
(111)  The  volume  of  imports  from  other  third  countries  increased  by  25  percentage  points 
during  the  period  considered.  The  biggest  increase  was  observed  in  2003,  when 
imports rose by 41 percentage points. After the imposition of anti-dumping measures 
on Chinese exports in 2004, imports declined by 14 percentage points in 2004 and by 
2 further percentage points in the RIP. Market shares followed a similar trend passing 
from 15.9% in 2002 to 20.6% in 2003, to 18.5% in 2004 and to 16.9% during the RIP. 
The increase of the market share of imports was lower than the increase of the imports 
in  absolute  terms,  due  to  the  stronger  consumption.  Import  prices  were  on  average 
constantly  lower  than  the  EU  prices  between  2002  and  2004.  Only  during  the  RIP, 
were they slightly above Community industry prices. 

Table 3 

2002 

2003 

2004 

RIP 

Volume (tonnes) 

324 749

456 499

411 020

406 562 

Index 

Average price (EURpert) 

100

869

Index 

100 

141

821

94

127

907

104

125 

1061 

122 

Market share 

15,9%

20,6%

18,5%

16,9% 

Main exporters 

Korea 

Pakistan 

China 

USA 

Taiwan 

113 685

129 188

139 296

127 734 

28 558

83 208

55 125

73 426 

47 875

131 343

49 678

72 814 

20 570

16 105

49 763

50 393 

42 136 

36 986 

16 796 

29 382 

F. ECONOMIC SITUATION OF THE COMMUNITY INDUSTRY 

1. 

Preliminary remarks 

(112)  At the beginning of the review, sampling of the Community  producers was foreseen 
but considering that their number was not excessive, it was decided to include all of 
them and the injury factors have been assessed on the basis of information collected at 
the level of the entire Community industry. 

(113)  Pursuant  to  Article  8(5)  of  the  basic  Regulation,  the  Commission  examined  all 
relevant economic factors and indices having a bearing on the state of the Community 
industry.  

2.1. 

Production 

(114)  The Community industry’s production increased by 20% between 2002 and the RIP, 
i.e.  from  a  level  of  1.465.000  tonnes  in  2002  to  1.760.000  tonnes  in  the  RIP.  The 

EN 

27 

   EN 

 
 
 
 
yearly increase was 4.8% in 2003 and 4.6% in 2004. A further increase occurred in the 
RIP,  when  production  soared  by  150.000  tonnes,  i.e.  by  10.8%.  This  was  due  to  the 
restructuring  process  undertaken  by  the  industry  with  the  aim  to  better  control  the 
production  costs  and  thereby  take  advantage  of  the  growing  consumption  in  the 
Community market which,  as  stated  above, increased by 19% between 2002 and the 
RIP (from 2 million tonnes in 2002 to 2.4 million tonnes in the RIP).  

Table 4 

2002 

2003 

2004 

RIP 

Production (tonnes) 

1 464 522

1 534 480

1 602 086

1 760 828 

Index 

100 

105 

109 

120 

2.2.  Capacity and capacity utilisation 

(115)  Production capacity increased by 22% between 2002 and the RIP, i.e. from a level of 
1.760.000 tonnes in 2002 to 2.156.000 tonnes in the IP. The increase occurred mainly 
in  the  RIP,  when  production  capacity,  compared  to  the  year  2004,  increased  by 
300.000  tonnes,  i.e.  16.7%.  This  significant  increase  of  production  capacity  was 
parallel  to  the  increase  of  production  over  the  same  period  (see  recital  (114)).  The 
increase  in  production  capacity  resulted  from  additional  investments  in  production 
lines  designed  to  take  advantage  of  the  growing  market.  The  capacity  utilisation 
increased  by  4  percentage  points  in  2003,  remained  on  this  level  in  2004  and  then 
decreased in the RIP by 5 percentage points to the level of 82%. The decrease between 
2004 and  the RIP results  from  the  significant increase of  production capacity  in  that 
period.  Consequently,  a  higher  production  volume  in  the  RIP,  when  compared  with 
2004, coincided with a lower capacity utilisation rate. 

Table 5 

2002 

2003 

2004 

RIP 

Production capacity (tonnes) 

1 760 332

1 762 378

1 848 315 

2 156 294 

Index  

Capacity utilisation 

Index 

100 

83%

100 

100 

87%

105 

105 

87% 

104 

122 

82% 

98 

2.3. 

Sales and market share 

(116)  The volume sold by the Community industry on the Community market increased by 
21% between 2002 and the RIP. A growth of 2% in 2003 was followed by an increase 
in both 2004 and RIP, by 8 and 11 percentage points respectively. Notwithstanding the 
increase  of  sales,  due  to  the  higher  consumption  the  Community  industry's  market 
share  fell  by  4  percentage  points  in  2003  and  then  gradually  rose  by  5  percentage 
points in 2004 and 1 percentage point in the RIP. 

Table 6 

2002 

2003 

2004 

RIP 

Sales in the EC (tonnes) 

1 306 768

1 333 976

1 438 883 

1 586 902 

Index  

100 

102 

110 

121 

EN 

28 

   EN 

 
Market share 

64% 

60% 

65% 

66% 

2.4.  Growth 

(117)  Overall,  it  has  to  be  noted  that  the  Community  industry’s  market  share  increased  by 
2% in the period considered, which shows that its growth lagged behind the growth of 
consumption of the overall market. 

2.5.  Employment 

(118)  The level of employment of the Community industry increased by 18% in the period 
considered.  The  main  increase  occurred  in  2003  (11  percentage  points)  and  2004 
(further 6 percentage points). Although this rising tendency continued in the RIP, the 
increase amounted to only 2 percentage points. This increase of 18% during the whole 
period is linked to the production level which increased by 20%.  

Table 7 

Employees 

Index  

2.6. 

Productivity 

2002 

2003 

2004 

RIP 

1 010

1 124

1 170

1 190 

100 

111 

116 

118 

(119)  The Community industry’s productivity, measured as the output in tonnes per person 
employed per year, increased overall over the period considered. After initially falling 
by 6% in 2003 compared to the year 2002 and remaining at this level in 2004, when 
productivity in the RIP increased significantly by more than 8% compared to 2004, a 
period when production increased significantly. 

Table 8 

2002 

2003 

2004 

RIP 

Productivity(t/employee) 
Index 

1450

1365

1369

1480 

100 

94 

94 

102 

2.7. Wages 

(120)  It  has  to  be  noted  that  PET  chips  production  is  a  capital  intensive  industry  and  that 
therefore labour costs have a limited impact on the overall cost of the product. During 
the  period,  wages  increased  by  12%,  compared  to  a  20%  increase  of  the  overall 
production  cost.  Another  significant  indicator  is  the  cost  of  wages  spent  per  tonne 
produced. During the period, this cost decreased by 6%. 

Table 9 

2002 

2003 

2004 

RIP 

Wages (million Euro) 

Index 

Wages 
produced(€) 

per 

tonne 

62,3

100

44,4

29 

EN 

63,0

101

42,9

66,3

106

43,6

69,5 

112 

41,9 

   EN 

 
Index 

100 

96 

98 

94 

2.8. 

Sales prices and factors affecting Community prices 

(121)  The unit sales prices increased from 924 EUR/tonne in 2002 to 1058 EUR/tonne in the 
RIP. Overall, the tendency was rising (by 15% in the whole period). This increase is to 
a large extent a consequence of the increase in the price of raw materials, which is due 
to the increase in the oil price. Although the Community industry had increased prices 
it was not in the position  to  pass the increase on to the downstream sector and  fully 
reflect the increase of raw materials prices in its sales prices. This was principally due 
to the fact that the increase in the price of raw materials was higher than the increase 
of  PET  prices.  With  the  aim  to  maintain  its  market  share,  the  Community  industry 
could only moderately increase its prices and thus experienced price suppression. 

Table 10 

2002 

2003 

2004 

RIP 

average 

Weighted 
(EUR/tonne) 
Index 

price 

924

902

1006

1058 

100 

98 

109 

115 

2.9.  Cost of production of the main raw materials 

(122)  Bearing in mind that around 850 kg of purified terephthalic acid (PTA) and 350 kg of 
mono ethylene glycol (MEG) (the main raw materials) are needed to produce 1 tonne 
of  PET,  the  costs  of  raw  materials  (PTA  and  MEG)  increased  significantly 
respectively by 67% and by 31% between 2002 and the RIP to reach the level of 770 
EUR/tonne (PTA) and 721 EUR/tonne (MEG) (average of the RIP). Although a small 
decline in prices of PTA has been noted in the third quarter of 2005 when the prices 
dropped to the level of 700 EUR/tonne, and a substantially stable price was observed 
for  MEG,  it  has  to  be  pointed  out  that  the  raw  materials  are  purchased  in  advance 
based on long term contracts. As a result, for the period considered, despite the small 
decline in prices of PTA at the end of the RIP, the Community industry still bears the 
consequences  of  the  heavily  increased  costs.  In  addition,  due  to  the  situation  on  the 
world oil market the prices of raw materials for the production of PET are susceptible 
to unpredictable changes but they are most likely to remain at a high level. All these 
factors  contribute  to  an  increased  level  of  vulnerability  of  the  Community  PET 
producers.  It  should  be  noted,  however,  that  the  main  raw  materials  are  products 
traded  on  a  global  level,  and  should  therefore  also  affect  the  Indian  exporting 
producers to the same extent.  

Table 11 

2002 

2003 

2004 

RIP 

average  cost 

(EUR/tonne)

-PTA 

Index 

EN 

566

123

718

156

770 

167 

460

100

30 

   EN 

 
 
 
 
 
-MEG 

Index 

551

100 

550

100 

650

118 

721 

131 

(123)  By  comparison  the  average  unit  cost  per  tonne  of  PET  chips  produced  by  the 

Community industry was the following: 

Table 12 

2002 

2003 

2004 

RIP 

average 

cost 

899

918

1013

1092 

Weighted 
(EUR/tonne) 
Index 

100 

102 

113 

121 

(124)  During the period considered, as indicated in tables 11 and 12, the main raw materials 
have continuously increased (PTA by 67%, MEG by 31%), while the overall cost of 
production  raised  only  by  21%.  However,  as  shown  in  table  10,  prices  have  only 
increased by 15% due to the fact that the Community industry was not in a position to 
pass the increase onto the downstream sector and fully reflect the rise of raw materials 
prices in its sales prices. 

2.10.  Stocks 

(125)  The evolution of stocks over the whole period considered, i.e. between 2002 and the 
RIP, is down by 10%. However, as in the original investigations, stocks should not be 
considered  as  a  meaningful  indicator  as  regards  PET  produced  by  the  Community 
industry,  given  the  seasonal  nature  of  the  PET  market  throughout  the  year.  When 
compared to the production, stocks represent around 5/6% of the output. 

Table 13 

2002 

2003 

2004 

RIP 

Stocks (tonnes) 

101 554

110 695

90 422

91 123 

Index 

100 

109 

89 

90 

2.11.  Profitability, return on investments and cash flow 

(126)  Profitability on sales represents the profit generated by sales of the product concerned 
in the Community. Return on total assets and cash flow could only be measured at the 
level of the narrowest group of products which included the like product, pursuant to 
Article  8(8)  of  the  basic  Regulation.  Moreover,  return  on  investments  has  been 
calculated on the basis of return on total assets, as return on total assets is considered 
more relevant for the analysis of the trend.  

Table 14 

2002 

2003 

2004 

RIP 

Pre-tax profit margin on sales 
in the Community 

2,7% 

-1,8% 

-0,7% 

-3,2% 

Return on total assets 

2,0% 

-1,4% 

-0,6% 

-2,4% 

EN 

31 

   EN 

 
 
 
Cash flow(% of total sales) 

18,1% 

5,5% 

10,1% 

-2,6% 

(127)  Further to the price suppression starting in 2002 and coinciding with a strong increase 
of  dumped  imports  from  the  PRC,  Taiwan,  Malaysia,  Korea  and  Australia  (until 
2004), and of subsidised imports from India the financial situation of the Community 
industry  deteriorated  and  turned  into  losses  in  2003.  After  a  small  recovery  in  2004 
due to the anti-dumping measures imposed on PRC and Australia, losses increased to -
3,2% in the RIP. It is therefore noted that there is a clear downward trend. 

(128)  The trends for return on total assets and for cash flow developed similarly i.e. showed 
a relatively good situation in 2002, a sharp deterioration in 2003, a small recovery in 
2004 and a further deterioration in the RIP. 

2.12.  Investments and ability to raise capital 

Table 15 

2002 

2003 

2004 

RIP 

Investments ('000 EUR) 

31.779

42.302

63.986

50.397 

Index 

100 

133 

201 

159 

(129)  The  investments  were  partly  dedicated  to  an  increase  of  capacity  and  partly  to  the 
improvement of the production process. The bulk of the expenditure was made in 2004 
and during the RIP, coinciding with the increase of the capacity and with the aim to 
keep the market share in view of the increased consumption. Nevertheless, the current 
situation  of  the  Community  industry  and  the  evolution  of  the  Community  and  world 
markets  for  PET  marked  out  by  lack  of  profitability  were  not  an  incentive  to  make 
excessive  investments.  Although  in  some  circumstances  Community  producers  have 
been  able  to  raise  capital  (in  particular  from  related  companies),  the  lack  of 
profitability of PET did not encourage investment and in some cases the decision was 
postponed. 

2.13.  Magnitude of the actual margin of subsidy  

(130)  As  concerns  the  impact  on  the  Community  industry  of  the  magnitude  of  the  actual 
margin of subsidy of Indian imports, given the price sensitivity of the market for this 
product, this impact cannot be considered to be negligible. It should be noted that this 
indicator  is  more  relevant  in  the  context  of  the  likelihood  of  recurrence  of  injury 
analysis. Should measures lapse, it is likely that subsidized imports would come back 
at  such  volumes  and  prices  that  the  impact  of  the  magnitude  of  the  subsidy  margin 
would be significant. 

2.14  Recovery from the effects of past subsidisation  

(131)  While  the  indicators  examined  above  show  some  improvement  in  some  economic 
indicators  of  the  Community  industry,  further  to  the  imposition  of  definitive 
countervailing  measures  in  2001,  they  also  provide  evidence  that  the  Community 
industry is still fragile and vulnerable.  

3. 

Conclusion on the situation of the Community industry 

EN 

32 

   EN 

 
(132)  The  constant  increase  of  consumption  partly  due  to  new  applications  (inter  alia  beer 
and  wine  bottles)  and  partly  due  to  the  increase  of  consumption  in  the  accession 
countries,  obliged  the  Community  industry  to  increase  capacity  and  production  in 
order  not  to  lose  market  share.  To  do  so,  an  important  restructuring  process 
accompanied  by  a  frequent  change  of  the  ownership  of  the  different  producers,  took 
place  in  2004  and  during  the  RIP.  In  parallel,  the  number  of  production  lines  was 
generally  increased  in  order  to  follow  the  increase  of  the  consumption  and  to 
concurrently  achieve  economies  of  scale.  Thus,  some  economic  indicators,  i.e. 
consumption,  capacity  production,  production,  EU  sales  and  employment  indeed 
followed a positive trend. In addition, the sales price also increased during the period 
considered.  However,  all  those  restructuring  efforts  described  above  could  not 
counterbalance the impact of the constant and massive increase of raw material prices 
in the period considered. The higher raw material costs could not be passed on to the 
downstream  sector  to  the  extent  it  would  have  been  necessary  to  maintain  a  certain 
level  of  profitability.  This  caused  a  serious  deterioration  of  the  profitability  which 
decreased from +2.7% in 2002 to -3.2% during the RIP. Similar negative trends were 
observed for the return on investments and for the cash flow. 

(133)  This  coincided  with  the  low  price  level  of  the  imports  from  the  country  concerned 
which  clearly  contributed  to  the  downward  pressure  on  the  price  of  the  Community 
industry. However, given the small volumes of subsidised imports in the framework of 
this expiry review, the focus is on the likelihood of recurrence of injury analysis. Thus, 
despite  the  apparent  positive  developments  concerning  production,  sales  and  sales 
price, the overall financial situation of the Community deteriorated and is reflected in 
the negative developments of profitability (from 2,7% profit in 2002 to 3,2% losses in 
the RIP), of export sales, production cost, return on investments and cash flow.  

(134)  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  one  percentage  point  between 
2002  and  the  RIP,  whilst  it  had  earned  five  percentage  points  in  the  four  years 
preceding the adoption of the definitive countervailing measures. On the other hand, 
the profitability of the Community industry during the RIP is less negative than before 
the  imposition  of  definitive  countervailing  measures.  Consequently,  despite  some 
apparent  positive  trends  showed  by  the  injury  indicators,  the  situation  of  the 
Community  industry  is  still  far  from  the  levels  that  could  be  expected  had  it  fully 
recovered from the injury found in the original investigations. 

(135)  It  is  therefore  concluded  that  the  situation  of  the  Community  industry  has  slightly 
improved, as compared to the period preceding the imposition of measures, but is still 
very  fragile  and  vulnerable.  Furthermore,  the  price  pressure  from  imports  of  the 
country concerned did not allow the Community industry to fully reflect the increase 
in the price of raw materials in its sales prices. 

G. LIKELIHOOD OF RECURRENCE OF INJURY 

Relationship between export volumes and prices to third countries and export volumes 
and prices to the Community  

(136)  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 

EN 

33 

   EN 

 
prices on the domestic market. The Indian exporter’s sales to non-EU countries were 
made  in  significant  quantities,  accounting  for  over  95%  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 still be below the current price levels of export to the Community.  

Production capacity, unused capacity and stocks 

(137)  As  indicated  further  under  recital  (140),  the  exporting  producers  in  India  have  the 
potential  to  increase  their  export  volumes  to  the  Community  market.  India  had  a 
significant growth in its production capacity from the level of 330.000 tonnes in 2003 
to 600.000 tonnes in 2005. According to market forecasts, it is expected to increase by 
a  further  220.000  tonnes  in  2008.  In  2005,  the  domestic  sales  amounted  to  220.000 
tonnes and exports to 290.000 tonnes (including 6.831 tonnes to the EU). On the basis 
of the data available, on average, the current spare capacity should amount to around 
90.000 tonnes and has to be considered as significant as it represents around 4% of the 
current Community consumption. This estimate is confirmed by the results of the co-
operating Indian producers, who had significant spare capacities.  

(138)  Concerning the stock level, the investigation has shown that the level of stocks held by 
the  co-operating  Indian  producers  was  not  significant.  However,  it  should  be  noted 
that the level of stocks is not a meaningful factor as the market for PET is cyclical.  

(139)  To  conclude,  although  the  imports  to  the  EU  were  low,  there  exists  a  risk  that 

significant exports could be diverted to the EU. 

Conclusions 

(140)  The  producers  in  the  country  concerned  therefore  have  the  potential  to  raise  and/or 
redirect their export volumes to the Community market. The investigation showed that 
the cooperating exporting producers sold the product concerned at a lower price than 
the Community industry. 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 (137), also in order to regain the level of market shares held in the 
period  before  the  imposition  of  measures.  Such  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 market, with an expected negative impact 
on the economic situation of the Community industry. 

(141)  As  shown  above,  the  situation  of  the  Community  industry  remains  vulnerable  and 
fragile. It is likely that if the Community 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 recurrence of an 
even more injurious state of the Community industry. 

EN 

34 

   EN 

 
(142)  On the basis of the foregoing it is concluded that the import prices would most likely 
be  lower  on  the  Community  market  in  the  absence  of  anti-subsidy  measures,  as  the 
producers  in  India  would  possibly  try  to  increase  their  market  shares.  Such  price 
behaviour,  coupled  with  the  ability  of  the  exporting  producers  in  India  to  sell 
significant quantities of PET on the Community market, would in all likelihood have 
the  effect  of  reinforcing  the  price  pressure,  with  an  expected  negative  impact  on  the 
situation of the Community industry. 

H. COMMUNITY INTEREST 

1. 

Introduction 

(143)  According  to  Article  31  of  the  basic  Regulation,  it  was  examined  whether  the 
maintenance of the existing anti-subsidy measures would be against the interest of the 
Community as a whole. The determination of the Community interest was based on an 
appreciation of all the various interests involved. The present investigation analyses a 
situation  in  which  anti-subsidy  measures  have  already  been  in  place  and  allows  for 
assessment of any undue negative impact on the parties concerned due to the current 
anti-subsidy measures. 

(144)  On this basis, it was examined whether, despite the conclusions 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 Community interest to maintain 
measures in this particular case. 

2. 

Interest of the Community industry 

(145)  As outlined above, there is a clear likelihood of recurrence of injurious subsidisation if 
measures were to be repealed. All the Community producers but two fully co-operated 
and indicated their support for the ongoing measures.  

(146)  The continuation of anti-subsidy measures on imports from India would enhance the 
possibility  for  the  Community  industry  to  reach  a  reasonable  level  of  profitability 
because  it  is  likely  that  in  the  short  medium  term,  it  would  be  able  to  increase  sales 
quantities and thereby benefit from economies of scale and at the same time is likely 
to  be  able  to  moderately  increase  their  sales  price  and  thereby  reach  a  satisfactory 
profit  level.  Even  if  subsidised  imports  in  the  RIP  originating  in  the  India  were  low 
and, therefore, could not have caused severe injury, they would be likely to negatively 
affect  the  situation  of  the  Community  industry  if  the  anti-subsidy  measures  were 
repealed.  These  measures  are  thus  essential  to  guarantee  the  viability  of  the 
Community  industry’s  PET  chips  business,  which  has  been  facing  competition  from 
subsidised imports from India for several years.  

3. 

Interest of importers  

(147)  Low  cooperation  was  obtained  from  the  importers/traders,  and  amongst  those 
cooperating  importers  none  were  purchasing  from  India.  However,  the  cooperating 
importers/traders could be regarded as representative as their sales volume represented 
around 5% of the EU consumption. They would prefer a market with zero duties also 
if they are constantly enjoying good financial results.  

EN 

35 

   EN 

 
(148)  The investigation showed that there are still alternative sources of supply with no anti-
subsidy or anti-dumping measures, i.e. from Mexico, Brazil, USA, Turkey, Pakistan, 
Iran, Saudi Arabia, available. The importers/traders would thus be able to rely on (or 
to switch to) considerable alternative sources of supply. 

(149)  Bearing in mind that the measures in force did not considerably affect the importers, it 
is  concluded  that  maintaining  the  existing  countervailing  measures  against  imports 
originating  in  India  would  continue  not  have  a  significant  negative  effect  on  the 
situation of the importers in the Community. 

4. 

Interest of converters/users 

(150)  The  Commission  sent  questionnaires  to  47  known  converters/users.  Only  ten 
converters/users  with  an  overall  low  representativity  replied  to  the  questionnaire. 
According  to  the  information  on  purchases  supplied  in  their  responses  to  the 
questionnaire, co-operating converters/users during the IP represent about 20% of total 
Community  consumption  of  PET.  They  purchased  during  the  IP  95%  of  their  PET 
from  Community  producers  and  the  remainder  from  imports  originating  in  countries 
other  than  the  country  subject  to  this  review.  A  number  of  arguments  against  the 
imposition of duties were presented. 

(151)  Five converters (transforming PET chips in preforms and bottle grade and representing 
10% of the consumption) replied to the questionnaire. The cost of PET chips accounts 
for  55%  of  their  final  product  (mostly  preforms).  It  has  been  established  that  they 
import  negligible  quantities  from  India  and  other  third  countries.  Nevertheless  they 
oppose the continuation of duties claiming that the measures could have the effect of 
artificially raising the prices in Europe.  

(152)  Five  users  accounting  for  about  10%  of  the  consumption  supplied  rather  incomplete 
data. The low level of co-operation from the big users is likely to be due to the fact 
that  the  last  investigation  concerning  imports  of  PET  from  the  PRC,  Australia  and 
Pakistan  took  place  only  two  years  ago.  PET  costs  account  for  around  6/7%  of  the 
overall cost and are therefore rather limited. Although they have declared no imports 
from India, similarly as the converters, they oppose the imposition of duties claiming 
that the measures could have the effect of artificially raising the prices in Europe. 

(153)  Considering the rather good financial situation of the downstream industry, in contrast 
to the one of the Community industry, no converter/user put forward the argument that 
maintaining the current duties could lead to a loss of jobs or to moving manufacturing 
facilities overseas. 

(154)  Furthermore, in terms of output, the Community industry adapted its size to match the 
increased  consumption  and  therefore  it  is  very  likely  that  the  unused  capacity  of  the 
Community industry could fully cover the amount of the imports. 

(155)  Bearing in mind that there are still alternative sources of supply with no anti- subsidy 
or  anti-dumping  measures,  i.e.  from  Mexico,  Brazil,  USA,  Turkey,  Pakistan,  Iran, 
Saudi Arabia, the Community users would moreover be able to rely on (or to switch 
to) diversified suppliers of the product concerned. 

EN 

36 

   EN 

 
(156)  As  concerns  the  performance  of  the  user  industry,  the  investigation  has  shown  that 
during  the  period  considered  the  co-operating  users  increased  their  turnover, 
maintained  employment  stable  and  rather  improved  overall  their  profitability. 
Therefore  it  was  found  that  they  were  not  negatively  affected  by  the  anti-subsidy 
measures. 

(157)  On  the  basis  of  the  above,  it  is  concluded  that  maintaining  the  existing  anti-subsidy 
measures  against  imports  originating  in  India  would  not  have  a  significant  negative 
effect on the situation of the users in the Community. 

5. 

Interest of suppliers 

(158)  The suppliers of raw material (mono ethylene glycol (MEG) and purified terephthalic 
acid (PTA), DMT and IPA, all petrochemical products derivatives of naphtha, clearly 
indicated their support for the measures and provided good co-operation. They would 
benefit if measures are maintained as the Community industry would be likely to be 
able to recover allowing them to improve their performance.  

6. 

Conclusion on Community interest 

(159)  Taking  into  account  all  of  the  above  factors,  it  is  concluded  that  there  are  no 
compelling  reasons  against  the  maintenance  of  the  current  anti-subsidy  measures 
against India. 

I. COUNTERVAILING MEASURES 

(160)  All  interested  parties  were  informed  of  the  essential  facts  and  considerations  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. 
The  Government  of  India  made  comments  on  injury  aspects  alleging  that  it  was  not 
demonstrated that the Community industry suffered continued injury and that import 
pressure  from  India  was  not  the  reason  that  the  European  producers  did  not  fully 
reflect the increase of the raw materials cost in their sale price. It is to be recalled that , 
as  indicated  in  the  analysis  of  the  situation  of  the  Community  industry,  its  financial 
situation  deteriorated  and,  as  explained  in  recital  (127),  the  low  price  level  of  the 
imports from the country concerned clearly contributed to the downward pressure on 
the price of the Community industry. However, given the small volumes of subsidised 
imports in the framework of this expiry review, the likelihood of recurrence of injury 
had to be examined. In this regard it was concluded, as stated in recital (127) above, 
that  in  absence  of  measures,  increased  volume  of  imports  from  India  at  low  prices 
would  have  a  negative  impact  on  the  situation  of  the  Community  industry. 
Furthermore,  one  Indian  exporter  alleged  that  in  the  absence  of  measures  it  is  not 
likely  that  India  will  re-direct  sales  to  the  Community.  This  exporter  claimed  that 
emerging  markets  are  more  attractive  than  the  Community,  that  Indian  demand  is 
growing  fast  and  that,  therefore,  no  spare  capacity  is  available.  It  is  however  to  be 
considered that, notwithstanding an increase of the demand in the Indian market, the 
investigation  at  company  level  indicated  spare  capacities,  as  also  confirmed  by  the 
market  intelligence.  It  is  therefore  concluded  that  none  of  the  disclosure  comments 
received were such as to alter the conclusions as contained in this regulation. 

EN 

37 

   EN 

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

(162)  The individual company countervailing duty rates specified in this Regulation reflect 
the situation found during the review with respect to the co-operating exporters. Thus, 
they are solely applicable to imports of the product concerned manufactured by these 
companies  and  thus  by  the  specific  legal  entities  mentioned.  Imports  of  the  product 
concerned produced by any other company not specifically 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 ". 

(163)  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 
production or sales entities) should be addressed to the Commission 14 forthwith with 
all relevant information, in particular any modification in the company's activity 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 
consultation of the Advisory Committee, the Regulation will be amended accordingly 
by updating the list of companies benefiting from individual duty rates. 

(164)  In  order  to  ensure  proper  enforcement  of  the  countervailing  duty,  the  residual  duty 
level  should  not  only  apply  to  non-cooperating  exporters  but  also  apply  to  those 
companies  which  did  not  have  any  exports  during  the  RIP.  However,  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: 

Article 1 

1 A definitive countervailing duty is hereby imposed on imports of polyethylene terephthalate 
having a viscosity of 78 ml/g or higher, according to ISO Standard 1628-5, falling within CN 
code 3907 60 20 and originating in India. 

2. Except as provided for in Article 2, the rate of the countervailing duty applicable to the net, 
free-at-Community  frontier  price,  before  duty  for  products  manufactured  by  the  companies 
listed below shall be as follows: 

Country 

Company 

Countervaili
ng 
duty 
(EUR/tonne)

TARIC 
code 

additional 

India 

Reliance Industries Limited 

 41,3 

A181 

14 

European Commission, Directorate-General for Trade, Directorate H, J-79 5/17, B-1049 Brussels 

EN 

38 

   EN 

 
                                                 
India 

India 

India 

India 

India 

Pearl  Engineering  Polymers 
Ltd 

 31,3 

A182  

Senpet Ltd  

Futura Polyesters Ltd 

 22,2 

 0 

South Asian Petrochem Ltd 

 106,5 

All other companies 

 41,3 

A183 

A184 

A585 

A999 

3. In cases where goods have been damaged before entry into free circulation and, therefore, 
the price actually  paid or  payable is apportioned for the determination of the customs value 
pursuant  to  Article  145  of  Commission  Regulation  (EEC)  No  2454/9315,  the  amount  of 
countervailing duty, calculated on the basis of the amounts set above, shall be reduced by a 
percentage which corresponds to the apportioning of the price actually paid or payable. 

4.  Notwithstanding paragraphs 1 and 2,  the  definitive  countervailing duty shall not apply to 
imports released for free circulation in accordance with Article 2. 

5. Unless otherwise specified, the provisions in force concerning customs duties shall apply. 

Article 2 

Imports shall be exempt from the countervailing duties imposed by Article 1 provided 
1. 
that they are produced and directly exported (i.e. invoiced and shipped) to a company acting 
as an importer in the Community by the companies mentioned in paragraph 3, declared under 
the appropriate TARIC additional code and that the conditions set out in paragraph 2 are met. 

2. 
When  the  request  for  release  for  free  circulation  is  presented,  exemption  from  the 
duties  shall  be  conditional  upon  presentation  to  the  customs  service  of  the  Member  State 
concerned of a valid ‘Undertaking Invoice’ issued by the exporting companies mentioned in 
paragraph 3, containing the essential elements listed in the Annex. Exemption from the duty 
shall  further  be  conditional  on  the  goods  declared  and  presented  to  customs  corresponding 
precisely to the description on the ‘Undertaking Invoice’. 

Imports  accompanied  by  an  ‘Undertaking  Invoice’  shall  be  declared  under  the 

3. 
following TARIC additional codes: 

Country 

Company 

TARIC 
code 

additional 

India 

Pearl  Engineering  Polymers 
Ltd 

A182 

15 

OJ L 253, 11.10.1993, p.1 Regulation as last amended by Commission Regulation (EC) No 2286/2003 
(OJ L 343, 31.12.2003, p.1) 

EN 

39 

   EN 

 
 
                                                 
India 

India 

Reliance Industries Ltd 

A181 

South Asian Petrochem Ltd 

A585 

Article 3 

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, 

For the Council 
The President 

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ANNEX  

Elements to be indicated in the Undertaking Invoice referred to in Article 2(2): 

1. The Undertaking Invoice number. 

2. The TARIC additional code under which the goods on the invoice may be customs-cleared 
at Community borders (as specified in the Regulation). 

3. The exact description of the goods, including: 

— the product reporting code number (PRC) (as established in the undertaking offered by the 
producing exporter in question), 

— CN code, 

— quantity (to be given in units). 

4. The description of the terms of the sale, including: 

— price per unit, 

— the applicable payment terms, 

— the applicable delivery terms, 

— total discounts and rebates. 

5. Name of the company acting as an importer to which the invoice is issued directly by the 
company. 

6.  The  name  of  the  official  of  the  company  that  has  issued  the  undertaking  invoice  and  the 
following signed declaration: 

‘I, the undersigned, certify that the sale for direct export to the European Community of the 
goods  covered  by  this  invoice  is  being  made  within  the  scope  and  under  the  terms  of  the 
undertaking offered by …… [company], and accepted by the European Commission through 
Decision 2000/745/EC . I declare that the information provided in this invoice is complete and 
correct.’ 

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