Proposal for a Council Regulation imposing a definitive countervailing duty on imports of sulphanilic acid originating in India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97 and a partial interim review pursuant to Article 19 of Regulation (EC) No 2026/97 and amending Regulation (EC) No [INSERT[ imposing a definitive anti-dumping duty on imports of sulphanilic acid originating in the People’s Republic of China and India following an expiry review pursuant to Article 11(2) of Regulation (EC) No 384/96
Date: 2008-09-12
Institutions: European Commission
Subjects: China, India, anti-dumping duty, anti-dumping legislation, chemical product, import, originating product

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.9.2008 
COM(2008)550 final 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive countervailing duty on imports of sulphanilic acid originating in 
India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97 
and a partial interim review pursuant to Article 19 of Regulation (EC) No 2026/97 and 
amending Regulation (EC) No [INSERT[ imposing a definitive anti-dumping duty on 
imports of sulphanilic acid originating in the People’s Republic of China and India 
following an expiry review pursuant to Article 11(2) of Regulation (EC) No 384/96 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

This proposal concerns (i) 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  anti-subsidy  Regulation')  in  the  anti-subsidy  proceeding 
concerning  imports  of  sulphanilic  acid  originating  in  India  and  (ii)  the  application  of 
Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection  against 
dumped  imports  from  countries  not  members  of  the  European  Community,  as  last 
amended by Council Regulation (EC) No 2117/2005 of 21 December 2005 ('the basic 
anti-dumping  Regulation')  in  the  anti-dumping  proceeding  concerning  imports  of 
sulphanilic acid originating in India. 

General context 

This proposal is made in the context of the implementation of the basic anti-dumping 
and anti-subsidy Regulations and is the result of an investigation which was carried out 
in  line  with  the  substantive  and  procedural  requirements  laid  out  in  these  basic 
Regulations. 

Existing measures in the area of the proposal 

Council  Regulation  (EC)  No  1338/2002  imposing a  definitive  countervailing  duty  on 
imports of sulphanilic acid originating in India, as last amended by Council Regulation 
(EC) No 123/2006 and Council Regulation (EC) No [INSERT] imposing a definitive 
anti-dumping duty on imports of sulphanilic acid originating in the People’s Republic 
of  China  and  India  following  an  expiry  review  pursuant  to  Article  11(2)  of  Council 
Regulation (EC) No 384/96. 

Consistency with the other policies and objectives of the Union 

Not applicable. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

Consultation of interested parties 

Interested parties concerned by the proceeding have 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. 

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LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

On  24  July  2007,  the  Commission  initiated  an  expiry  review  of  the  countervailing 
measures applicable to imports into the Community of sulphanilic acid originating in 
India. 

This expiry review was initiated following a request for a review lodged on 24 April 
2007 by two Community producers representing 100% of the Community production 
of sulphanilic acid. 

On 29 September 2007, the Commission initiated on its own initiative a partial interim 
review  limited  to  the  level  of  subsidisation,  since  there  was  sufficient  prima  facie 
evidence  available  to  the  Commission  that  the  circumstances  with  regard  to 
subsidisation  on  the  basis  of  which  measures  were  established  had  changed  and  that 
these changes were of a lasting nature. 

The  enclosed  Commission  proposal  for  a  Council  Regulation  contains  the  definitive 
findings on subsidisation, injury and Community interest. 

It is therefore proposed that the Council adopt the attached proposal for a Regulation 
which should be published in the Official Journal of the European Union no later than 
23 October 2008. 

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 because the form of action is 
described  in  the  aforementioned  basic  Regulation  and  leaves  no  scope  for  national 
decision 

An  indication  of  how  the  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 because the aforementioned basic Regulation does 
not foresee alternative options. 

BUDGETARY IMPLICATION 

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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 sulphanilic acid originating in 
India following an expiry review pursuant to Article 18 of Regulation (EC) No 2026/97 
and a partial interim review pursuant to Article 19 of Regulation (EC) No 2026/97 and 
amending Regulation (EC) No [INSERT[ imposing a definitive anti-dumping duty on 
imports of sulphanilic acid originating in the People’s Republic of China and India 
following an expiry review pursuant to Article 11(2) of Regulation (EC) No 384/96 

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  subsidized  imports  from  countries  not  members  of  the  European  Community1  (‘the 
basic Regulation’), and in particular Articles 15, 18 and 19 thereof, 

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

Whereas: 

1. 

PROCEDURE 

1.1. 

Previous investigations and existing measures 

(1) 

(2) 

In  July  2002,  by  Regulation  (EC)  No  1338/20022,  the  Council  imposed  a  definitive 
countervailing  duty  ('the  existing  measures')  of  7,1  %  on  imports  of  sulphanilic  acid 
falling  within  CN  code  ex  2921  42  10  (TARIC  code  2921  42  10  60)  originating  in 
India.  The  measures  imposed  had  been  based  on  the  findings  of  an  anti-subsidy 
proceeding  initiated  pursuant  to  Article  10  of  the  basic  Regulation  ('the  original 
investigation').  
At  the  same  time,  by  Regulation  (EC)  No  1339/20023,  the  Council  imposed  a 
definitive anti-dumping duty of 18,3% on imports of the same product originating in 
India. 

(3)  Within  the  framework  of  the  above-mentioned  countervailing  and  anti-dumping 
proceedings, the Commission, by Decision 2002/611/EC4 accepted a price undertaking 
offered  by  the  Indian  exporting  producer,  Kokan  Synthetics  and  Chemicals  Pvt.  Ltd 
('Kokan'). 

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OJ  L  288,  21.10.1997,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  461/2004  (OJ  L  77, 
13.3.2004, p. 12). 
OJ L 196, 25.7.2002, p. 1.  
OJ L 196, 25.7.2002, p. 11.  
OJ L 196, 25.7.2002, p. 36. 

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(4) 

(5) 

(6) 

(7) 

(8) 

In  December  2003,  Kokan  informed  the  Commission  that  it  wished  to  withdraw  its 
undertaking  voluntarily.  Accordingly,  the  Commission  Decision  accepting  the 
undertaking was repealed by Decision 2004/255/EC5. 
In  April  2005,  following  a  request  lodged  by  Kokan,  the  Commission  initiated6  a 
partial interim review pursuant to Article 19 of the basic Regulation and Article 11(3) 
of  Regulation  (EC)  No  384/967  ('the  basic  anti-dumping  Regulation')  respectively, 
limited in scope to the examination of the acceptability of an undertaking to be offered 
by the company. 
Following  an  investigation,  in  December  2005,  by  Decision  2006/37/EC8,  the 
Commission  accepted  an  undertaking  offered  by  Kokan  in  connection  with  the  anti-
dumping  and  countervailing  proceedings  concerning  imports  of  sulphanilic  acid 
originating in India. 

In  January  2006,  as  a  result  of  the  investigation  referred  to  above  in  recital  (6),  by 
Council  Regulation  (EC)  No  123/20069,  Regulation  (EC)  1338/2002  imposing  a 
definitive  countervailing duty on imports of sulphanilic acid originating in India and 
Regulation (EC) No 1339/2002 imposing a definitive anti-dumping duty on imports of 
sulphanilic acid originating, inter alia, in India, were amended to take into account the 
acceptance of the said undertaking.  

Following a review in accordance with the provisions of Article 11(2) of Regulation 
(EC) No 384/96, the  Council, by Regulation (EC) No  [INSERT]10,  imposed an anti-
dumping  duty  on  imports  of  sulphanilic  acid  originating  in  the  People's  Republic  of 
China and India. 

1.2. 

Request for a review 

(9) 

Following the publication of a notice of impending expiry11 of the existing measures, 
the Commission, on 24 April 2007, received a request for an expiry review pursuant to 
Article  18  of  the  basic  Regulation.  This  request  was  lodged  by  two  Community 
producers  (the  'applicants')  representing  100%  of  the  Community  production  of 
sulphanilic acid. 

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

(11)  The Commission examined the evidence submitted by the applicants and considered it 
sufficient  to  justify  the  initiation  of  a  review  in  accordance  with  the  provisions  of 
Article 18 of the basic Regulation. After consultation of the Advisory Committee, the 
Commission  announced  on  24  July  2007,  by  a  notice  of  initiation  published  in  the 

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OJ L 80, 18.3.2004, p. 29. 
OJ C 101, 27.4.2005, p. 34. 
OJ  L  56,  6.3.1996,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  2117/2005  (OJ  L  340, 
23.12.2005, p.17). 
OJ L 22, 26.1.2006, p. 52. 
OJ L 22, 26.1.2006, p. 5. 
OJ L [INSERT]. 
OJ C 272, 9.11.2006, p. 18. 

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(12) 

Official Journal of the European Union12, the initiation of an expiry review pursuant 
to Article 18 of the basic Regulation. 

It should be noted that prior to the initiation of the expiry review, and in accordance 
with  Articles  10(9)  and  22(1)  of  the  basic  Regulation,  the  Commission  notified  the 
Government of India (hereinafter referred to as '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.  The  GOI  did  not  react  to  this  offer  of  consultations. 
Consultations were likewise offered and held with the Indian authorities in the context 
of the partial interim review referred to below. These consultations did not arrive at a 
mutually agreed solution that would have warranted that the review not be initiated. 

1.3. 

Partial interim review 

(13)  By a notice of initiation published in the Official Journal of the European Union on 29 
September 200713 (the "Article 19 notice of initiation"), the Commission, pursuant to 
Article  19  of  the  basic  Regulation,  initiated  on  its  own  initiative  a  partial  interim 
review  limited  to  the  level  of  subsidisation,  since  there  was  sufficient  prima  facie 
evidence  available  to  the  Commission  that  the  circumstances  with  regard  to 
subsidisation on the basis of which measures had been established have changed and 
that these changes were of a lasting nature. 

(14)  The review was limited to the level of subsidisation of the company Kokan listed in 
the Annex to the Article 19 notice of initiation as well as to other exporters that were 
invited to make themselves known under the conditions and within the time limit set 
out in the notice of initiation. 

1.4. 

Investigation 

1.4.1. 

Investigation period 

(15)  The  investigation  of  continuation  or  recurrence  of  subsidisation  covered  the  period 
from  1  April  2006  to  31  March  2007  ('review  investigation  period'  or  'RIP').  This 
period was also used for the examination of the alleged changed circumstances that led 
to the initiation of the partial interim review.  The examination of the  trends relevant 
for the assessment of a likelihood of a continuation or recurrence of injury covered the 
period  from  2003  to  the  end  of  the  review  investigation  period  ('the  period 
considered'). 

1.4.2.  Parties concerned by the investigation 

(16)  The  Commission  officially  advised  the  exporting  producers,  importers  and  users 
known  to  be  concerned  and  their  associations,  the  representatives  of  the  exporting 
country,  the  applicant  and  the  Community  producers  of  the  initiation  of  the  expiry 
review and the partial interim 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. 

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OJ C 171, 24.7.2007, p. 14. 
OJ C 229, 29.9.2007, p. 9. 

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(17)  All interested parties, who so requested and showed that there were particular reasons 

why they should be heard, were granted a hearing. 

(18)  Questionnaires  were  sent  in  the  expiry  review  to  all  parties  known  to  be  concerned, 
namely to the two Community producers, to the exporting producer in India and to the 
known  importers  and  users  and  to  the  GOI.  In  regard  to  the  partial  interim  review, 
questionnaires were sent to the exporting producer in India and to the GOI.  

(19)  Replies  to  the  questionnaires  were  received  from  the  GOI,  both  of  the  Community 
producers and the exporting producer from the country concerned, as well as from four 
users.  None  of  the  importers  replied  to  the  questionnaire  and  no  other  importers 
supplied  the  Commission  with  any  information  or  made  themselves  known  in  the 
course of the investigations. 

(20)  The  Commission  sought  and  verified  all  the  information  it  deemed  necessary  for  a 
determination  of  the  likelihood  of  a  continuation  or  recurrence  of  subsidization  and 
resulting injury and of the Community interest as well as of alleged changed level of 
subsidisation.  In  this  regard  the  Commission  carried  out  verification  visits  at  the 
premises of the GOI in Delhi, the Government of Maharashtra in Mumbai, the Reserve 
Bank of India in Mumbai, and the following companies:  

(a) 

Exporting producer in India: 

• 

Kokan Synthetics & Chemicals Pvt Ltd., Mumbai, India; 

(b) 

Community producers: 

• 

• 

Ardenity, Givet, France, 

CUF Quimicos Industrials, Estarreja, Portugal; 

(c) 

Users: 

• 

• 

Kemira Germany GmbH, Leverkusen, Germany, 

Robama SA, Palafolls, Spain. 

2. 

PRODUCT CONCERNED AND LIKE PRODUCT 

2.1. 

 Product concerned 

(21)  The  product  under  review  is  sulphanilic  acid  originating  in  India  ('the  product 
concerned'), currently classifiable within CN code ex 2921 42 10 (TARIC 2921 42 10 
60).  There  are  basically  two  grades  of  sulphanilic  acid,  which  are  determined 
according  to  their  purity:  a  technical  grade  and  a  purified  grade.  In  addition,  the 
purified grade is sometimes commercialised in the form of a salt of sulphanilic acid. 
Sulphanilic  acid  is  used  as  a  raw  material  in  the  production  of  optical  brighteners, 
concrete additives, food colorants and speciality dyes. While there are different uses of 
sulphanilic  acid,  all  grades  and  forms  are  perceived  by  users  to  be  reasonably 
substitutable, are used interchangeably in most applications and are therefore, treated, 
as was the case in the original investigation, as one single product. 

2.2. 

Like product 

(22)  As established in the original investigation, these review investigations confirmed that 
sulphanilic acid and its salts are pure commodity products, and their quality and basic 

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physical  characteristics  are  identical  whatever  the  country  of  origin.  The  product 
concerned  and  the  products  manufactured  and  sold  by  the  exporting  producer 
concerned  on  its  domestic  market  and  exported  to  third  countries,  as  well  as  those 
manufactured and sold by the Community producers on the Community market have 
thus  been  found  to  have  the  same  basic  physical  and  chemical  characteristics  and 
essentially  the  same  uses  and  are  therefore considered  to  be  like  products  within  the 
meaning of Article 1(5) of the basic Regulation. 

3. 

LIKELIHOOD  OF  CONTINUATION  OR  RECURRENCE  OF 
SUBSIDISATION  

3.1. 

 Introduction 

(23)  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. 

•  Subsidy schemes investigated in original investigation 

–  Nationwide Schemes 

(a) 

(b) 

(c) 

(d) 

(e) 

 Export  Processing  Zones  Scheme  ('EPZS')/Special  Economic  Zones  Scheme 
('SEZS')/Export Oriented Units Scheme ('EOUS') 

 Duty Entitlement Passbook Scheme ('DEPBS') 

 Export Promotion Capital Goods Scheme ('EPCGS') 

 Income Tax Exemption Scheme ('ITES') 

 Advance Licence Scheme ('ALS')/Advance Authorisation Scheme ('AAS') 

–  Regional Schemes 

(f) 

 Package Scheme of Incentives ('PSI') of the Government of Maharashtra 

•   

Subsidy schemes not investigated in original investigation 

–  Nationwide Schemes 

(g) 

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

(24)  The  schemes  (a),  (b),  (c)  and  (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,  which,  since  1  September  2004,  has  been 
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 
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’).  

(25)  The Income Tax Exemption Scheme specified above under (d) is based on the Income 

Tax Act of 1961, which is amended yearly by the Finance Act. 

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(26)  The scheme (f) is managed by the State of Maharashtra and is based on resolutions of 

the Government of Maharashtra Industries, Energy and Labour Department.  

(27)  The Export Credit Scheme specified above under (g) 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.  

3.2. 

(28) 

 Export  processing  zones  Scheme  ('EPZS')/Special  Economic  Zones  Scheme 
(‘SEZS’)/ Export Oriented Units Scheme (‘EOUS’) 

It was found that the cooperating exporting producer was not located in an SEZS nor 
in an EPZS. However, the cooperating exporting producer had been set up under the 
EOUS  and  received  countervailable  subsidies  in  the  RIP.  The  description  and 
assessment below is therefore limited to the EOUS. 

3.2.1.  Legal basis 

(29)  The  details  of  the  EOUS  are  contained  in  chapter  6  of  the  EXIM-policy  2004-2009 

and the HOP I 2004-2009.  

3.2.2.  Eligibility 

(30)  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  industrial  sectors  have  to  fulfil  a  minimum  investment 
threshold in fixed assets (10 million Indian rupees) to be eligible for the EOUS.  

3.2.3.  Practical implementation 

(31)  EOUS can be located and established anywhere in India.  

(32)  An application for  EOUS  status must include details for the next five years of, 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  the  EOUS  is 
valid for a five-year period. The agreement may be renewed for further periods. 

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

(34)  EOUS units are entitled to the following concessions: 

–  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; 

–  exemption from excise duty on goods procured from indigenous sources; 

–  reimbursement of central sales tax paid on goods procured locally; 

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

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

–  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; 

–  possibility of 100% foreign equity ownership. 

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

officials in accordance with Section 65 of the Customs Act.  

(36)  These  units  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 section 6.11.1 of the HOP I 2004-2009. These documents should be 
submitted  periodically  to  the  competent  authorities  through  quarterly  and  annual 
progress reports. 

(37)  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 (Domestic Tariff 
Area) or stocks”, as section 6.11.2 of the HOP I 2004-2009 states.  

(38)  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.  

(39) 

In the present case, the co-operating exporting producer utilized the scheme to procure 
goods domestically free of excise duty, to obtain central sales tax reimbursement and 
to  obtain  partial  reimbursement  of  duty  paid  on  fuel  procured  from  domestic  oil 
companies.  The  investigation  showed  that  the  exporting  producer  concerned  did  not 
avail of benefits under the income tax exemption provisions of the EOUS.  

3.2.4.  Conclusions on the EOUS  

(40) 

In the case of exemption from excise duty on goods procured from indigenous sources, 
it  was  found  that  the  duty  paid  on  purchases  by  a  non-EOUS  unit  can  be  used  as  a 
credit  for  its  own  future  duty  liabilities,  e.g.  towards  payment  of  excise  duty  on 
domestic sales (the so-called “CENVAT” mechanism). Therefore, the excise duty paid 
on purchases is not definitive. By the means of “CENVAT”-credit only an added value 
bears  a  definitive  duty,  not  the  input  materials.  Thus,  by  exempting  excise  duty  on 
purchases  by  an  EOUS  unit,  no  additional  government  revenue  is  foregone  and 
consequently no additional benefit accrues to the EOUS. 

(41)  The reimbursement of the central sales tax and the partial reimbursement of duty paid 
on fuel procured from domestic oil companies constitute subsidies 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  conferring  a  benefit  upon  the  EOUS 
within  the  meaning  of  Article  2(2)  of  the  basic  Regulation,  because  it  improved  its 
liquidity by obtaining reimbursements of the central sales tax and duties normally paid 
on fuel. The subsidies 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 EOUS as set out in paragraph 6.1 of the EXIM-
policy 02-07 is a conditio sine qua non to obtain the incentives. 

3.2.5.  Calculation of the subsidy amount 

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(42)  The subsidy amount was calculated on the basis of the central sales tax reimbursed on 
goods  procured  locally  and  the  partial  reimbursement  of  duties  paid  on  domestically 
purchased  fuel  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  the  numerator.  In 
accordance  with  Article  7(2)  of  the  basic  Regulation  this  subsidy  amount  was 
allocated  over  the  appropriate  export  turnover  generated  during  the  RIP  as  the 
appropriate denominator, because the subsidy is contingent upon export performance 
and it was not granted by reference to the quantities manufactured, produced, exported 
or transported. The subsidy margin thus obtained was 3,2%.  

3.3. 

Duty Entitlement Passbook Scheme (‘DEPBS’) 

3.3.1.  Legal Basis 

(43)  A detailed description of the DEPBS is contained in section 4.3 of the EXIM-policy 

2004-2009 and in section 4.37-4.53 of the HOP I 2004-2009.  

3.3.2.  Findings 

(44) 

It was found that the cooperating exporting producer did not obtain any benefits under 
the DEPBS in the RIP. It was therefore not necessary to further analyse this scheme in 
this investigation. 

3.4. 

 Export Promotion Capital Goods Scheme (‘EPCGS’)  

3.4.1.  Legal basis 

(45)  A  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.  

3.4.2.  Findings 

(46) 

It was found that the cooperating exporting producer did not obtain any benefits under 
the EPCGS in the RIP. It was therefore not necessary to further analyse this scheme in 
this investigation. 

3.5. 

 Income Tax Exemption Scheme ('ITES') 

(47) 

It was found that the cooperating exporting producer did not obtain any benefits under 
the  ITES  in  the  RIP.  It  was  therefore  not  found  necessary  to  further  analyse  this 
scheme in this investigation. 

3.6. 

 Advance Licence Scheme (‘ALS’)/Advance Authorisation Scheme ('AAS')  

3.6.1.  Legal basis 

(48)  A  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. The name 
of the scheme changed to the Advance Authorisation Scheme from 1 April 2006. 

3.6.2.  Findings 

EN 

12 

   EN 

 
(49) 

It was found that the cooperating exporting producer did not obtain any benefits under 
the  AAS  in  the  RIP.  It  was  therefore  not  found  necessary  to  further  analyse  this 
scheme in this investigation. 

3.7. 

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

3.7.1.  Legal basis 

(50) 

In order to encourage the establishment of industries in the State of 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, under a scheme 
commonly known as the 'Package Scheme of Incentives' ('PSI'). 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/deferral of local sales tax. 
According to the GOM, the 2001 scheme does not include the latter tax scheme, i.e. 
neither  sales  tax  exemption  nor  sales  tax  deferrals.  However,  the  investigation 
established that a company's entitlement to benefits under the scheme is stipulated in 
the  'Eligibility  Certificate'.  The  investigation  revealed  that  the  only  sub-scheme  used 
by the cooperating exporting producer during the RIP was, in fact, the one concerning 
sales tax deferrals (part of (iii) above).  

3.7.2.  Eligibility 

(51) 

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

3.7.3.  Practical implementation 

(52)  The Eligibility Certificate issued by the GOM to  the cooperating exporting  producer 
provided  that  the  company  was,  under  the  sales  tax  deferral  sub-scheme,  allowed  to 
defer the payment of State sales taxes collected on its domestic sales for a period of 12 
years from the year of collection.  

3.7.4.  Conclusion 

(53)  The sales tax deferral sub-scheme of 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 postpones the collection of the GOM's revenue which would be otherwise 
due.  This  deferral  confers  a  benefit  upon  the  company  as  it  improves  the  company's 
liquidity. 

(54)  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 

EN 

13 

   EN 

 
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. 

3.7.5.  Calculation of the subsidy amount 

(55)  The  deferred  amount  of  State  sales  taxes,  under  the  deferral  element  of  the  scheme, 
collected  in  the  RIP  is  considered  equivalent  to  an  interest–free  loan  of  the  same 
amount granted by the GOM. Thus, the benefit to the cooperating exporting producer 
has  been  calculated  on  the  basis  of  the  interest  that  was  paid  on  a  comparable 
commercial loan by the company during the RIP.  

(56)  Pursuant  to  Article  7(2)  of  the  basic  Regulation,  the  amount  of  subsidy  (numerator) 
was then allocated over the total company turnover during the RIP 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.  

(57)  On the basis of the above, the amount of subsidy that the company has obtained under 

this scheme is 0,6%. 

3.8. 

 Export Credit Scheme (‘ECS’)  

3.8.1.  Legal basis 

(58)  The  details  of  the  scheme  are  set  out  in  the  Master  Circular  IECD  No 
02/04.02.02/2006-07  (Export  Credit  in  Foreign  Currency)  and  the  Master  Circular 
IECD  No  01/04.02.02/2006-07  (Rupee  Export  Credit)  of  the  Reserve  Bank  of  India 
(‘RBI’), which is addressed to all commercial banks in India. 

3.8.2.  Eligibility 

(59)  Manufacturing  exporters  and  merchant  exporters  are  eligible  for  this  scheme.  It  was 
found that the cooperating exporting producer availed of benefits under the ECS. 

3.8.3.  Practical implementation 

(60)  Under  this  scheme,  the  RBI  sets  compulsory  maximum  ceilings  on  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. 

(61)  As  a  result  of  the  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.  

3.8.4.  Conclusion on the ECS 

EN 

14 

   EN 

 
(62)  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 set purely in 
accordance with 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  where 
such  interest  rate  difference  was  found  to  exist,  was  it  concluded  that  a  benefit  was 
conferred.  The  differences  in  rates  between  the  credits  given  pursuant  to  the  RBI 
Master  Circulars  and  commercial  'cash  credit'  rates  cannot  be  explained  by  pure 
market behaviour of the commercial bank.  

(63)  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)(a)(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,  within  the  meaning  of  the  second  indent  of  Article  2(1)(a)(iv)  of  the 
basic Regulation, since the commercial banks are bound by the conditions it imposes, 
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  in  the  sense  of  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.  

3.8.5.  Calculation of the subsidy amount 

(64)  The subsidy amount was calculated on the basis of the difference between the interest 
paid for export credits used during the RIP and the interest rate that would have been 
payable for ordinary commercial credits used by the particular company. This subsidy 
amount  (numerator)  was  allocated  over  the  total  export  turnover  during  the  RIP  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  cooperating 
exporting producer availed of benefits under the ECS and obtained a subsidy of 0,9%. 

3.9. 

 Amount of countervailable subsidies 

(65)  The  amount  of  countervailable  subsidies  found  in  the  RIP  in  accordance  with  the 
provisions  of  the  basic  Regulation,  expressed  ad  valorem,  for  the  investigated 
exporting producer is 4.7 %. 

(66)  On  the  basis  of  the  available  information,  the  cooperating  exporting  producer 
accounted  for  100%  of  exports  of  sulphanilic  acid  from  India  to  the  Community 
during the RIP. No information was available showing that the level of subsidisation 
of other exporting producers that might exist would be at a lower level.  

EN 

15 

   EN 

 
SCHEME→ 

COMPANY↓ 

EOU (*)  DEPBS  EPCGS 

ITES  ALS 

Maharashtra 
State 
Scheme 

ECS 
(*) 

Total 

% 

% 

% 

% 

% 

% 

% 

% 

Kokan  Synthetics  and  Chemicals 
Private Limited 

3,2 

nil 

nil 

nil 

nil 

0,6 

0,9 

4,7 

(*) Subsidies marked with an asterisk are export subsidies 

3.10. 

 Conclusions regarding the continuation or recurrence of subsidisation 

(67) 

(68) 

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. 

It  was  established  that  though  the  subsidy  margin  found  during  the  expiry  review 
investigation  is  lower  than  the  one  established  during  the  original  investigation,  the 
cooperating  Indian  exporter  of  the  product  concerned  continued  to  benefit  from 
countervailable  subsidisation  by  the  Indian  authorities.  As  regards  the  main  scheme 
investigated  during  the  RIP,  i.e.  the  EOUS,  the  status  of  an  Export  Oriented  Unit 
pursuant  to  the  EXIM-policy  gives  recurring  benefits  and  there  is  no  indication  that 
these programmes will be phased out in the foreseeable future. Under these conditions, 
it  is  clear  that  the  exporter  of  the  product  concerned  will  also  continue  to  receive 
countervailable subsidies in the future. 

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

3.11. 

 Lasting nature of changed circumstances 

(70) 

(71) 

In  accordance  with  Article  19(2)  of  the  basic  Regulation,  it  was  also  examined 
whether the changed circumstances with respect to the original investigation regarding 
subsidisation could reasonably be considered to be of a lasting nature. 

It is recalled that the scope of the interim review is, in the absence of co-operation by 
any other exporters in India, limited to the level of subsidisation of Kokan Synthetics 
& Chemicals Pvt. Ltd. 

(72)  With regard to the lasting nature of the changed circumstances, in light of the findings 
set out in recital (68) above, it was concluded that there were no reasons to consider 
that the changed level of subsidisation was not of a lasting nature. 

4. 

DEFINITION OF THE COMMUNITY INDUSTRY 

(73)  Within  the  Community,  the  like  product  is  manufactured  by  two  producers  whose 
output  is  deemed  to  constitute  the  total  Community  production  of  the  like  product 
within the meaning of Article 9(1) of the basic Regulation. 

(74) 

It  should  be  noted  that,  as  compared  to  the  original  investigation,  the  ‘Sorochimie 
Chimie  Fine’  and  'Quimigal  SA'  companies  have  been  renamed,  the  former  to 
‘Ardenity’ and the latter to 'CUF Quimicos Industrials'.  

EN 

16 

   EN 

 
(75)  These  two  producers  cooperated  in  the  investigation  and  supported  the  request  for  a 
review.  They  therefore  constitute  the  Community  industry  within  the  meaning  of 
Article 9(1) and 10(8) of the basic Regulation. 

5. 

SITUATION ON THE COMMUNITY MARKET 

5.1. 

 Consumption in the Community market 

(76)  The apparent Community consumption was established on the basis of: 

–  imports  of  the  product  concerned  into  the  Community  market  derived  from 

Eurostat, 

–  total sales of the Community industry on the Community market derived from the 

questionnaires' replies. 

(77)  Community  consumption  of  sulphanilic  acid  in  the  RIP  was  around  10  000  tonnes. 

Over the period considered a decrease in consumption of 6% was observed.  

Table 1: Consumption on the Community market 

2003 

2004 

2005 

2006 

RIP 

Consumption (tonnes)

10 684 

10 443 

10 899 

9 939 

9 997 

Index  

100 

98 

102 

93 

94 

5.1.1. 

 Current imports from the country concerned 

(78) 

In  order  to  respect  confidential  business  information,  in  view  of  the  fact  that  Kokan 
represents  100%  of  imports  originating  in  India  and  that  the  Community  industry 
consists  of  only  two  producers,  it  has  been  necessary  to  present  the  information  in 
Tables 2 to 5 below in an indexed form. 

5.1.2. 

 Import volume and market share of the imports concerned in the RIP 

(79)  The volumes and market shares of the imports from India developed as set out in the 

tables below. 

Table 2: Imports from the country concerned 

Imports () 

Index 

2003 

100 

2004 

54 

2005 

59 

2006 

56 

RIP 

60 

Source: Eurostat 

Table 3: Market share of the country concerned 

Market share 

Index 

2003 

100 

2004 

55 

2005 

58 

2006 

60 

RIP 

64 

EN 

17 

   EN 

 
 
 
(80) 

Imports from the country concerned decreased by 40% between 2003 and the RIP and 
market share of Indian imports decreased by 36%. 

5.2. 

 Price evolution and price behaviour of the imports of the product concerned 

Table 4: Prices of the imports concerned 

Unit prices 

Index  

2003 

100 

2004 

85 

2005 

96 

2006 

110 

RIP 

111 

Source: Eurostat 

(81)  The average price of the imports concerned originating in India increased by 11% over 

the period considered.  

(82)  For  the  purpose  of  calculating  the  level  of  price  undercutting  during  the  RIP, 
Community industry’s ex-works prices to unrelated customers were compared with the 
CIF  Community-frontier  import  prices  of  the  country  concerned,  duly  adjusted  in 
order to reflect a landed price. This adjustment was made by increasing the prices by 
the normal custom duty and post importation costs. The comparison showed that the 
adjusted  Indian  prices  were  not  undercutting  the  prices  of  the  Community  industry. 
The  price  increase  observed  and  the  absence  of  undercutting  should  be  seen  in  the 
light  of  the  various  price  undertakings  offered  by  the  Indian  exporter  since  the 
imposition of measures in 2002.  

5.3. 

 Imports from other third countries 

Table 5: Imports from other third countries 

Rest of the world 

2003 

2004 

Imports (Index)  
Market share 
(Index) 
Average prices (€/tonne) 
Index 
Source: Eurostat 

100 

100 

855 
100 

93 

95 

930 
109 

2005 

114 

112 

1 077 
126 

2006 

91 

98 

1 059 
124 

RIP 

91 

97 

1 018 
119 

(83)  The  volume  of  imports  from  other  third  countries  decreased  by  9%  over  the  period 
considered.  Their  market  share  slightly  decreased  by  3%.  The  main  exporting 
countries,  namely  the  United  States  of  America  (US)  and  the  PRC,  accounted  for 
almost 100% of these imports during the period considered. 

(84)  Prices of sulphanilic acid from other third countries were on average lower than those 
of  the  Community  industry  and  also  below  the  Indian  prices.  It  is  recalled  that  the 
imports  of  sulphanilic  acid  originating  in  the  PRC  were  subject  to  an  anti-dumping 
duty  of  21%  in  2002,  increased  to  33,7%  in  2004  following  an  anti-absorption 
investigation. 

5.4. 

 Economic situation of the Community industry 

5.4.1.  Preliminary remarks 

EN 

18 

   EN 

 
(85) 

In order to respect confidential business information, it has been necessary to present 
information  concerning  the  two  companies  forming  the  Community  industry  in  an 
indexed form. 

(86) 

In accordance with Article 8(5) of the basic Regulation, all relevant economic factors 
and indices pertaining to the Community industry were examined. 

5.4.2.  Data relating to the Community industry 

(a) 

Production, installed production capacity and capacity utilization rate 

Table 6: Production, installed production capacity, capacity utilization 

2003 

Capacity tonnes (index)

100 

Production tonnes 

(index) 

Capacity utilization 

(index) 

100 

100 

2004 

100 

119 

119 

2005 

100 

115 

115 

2006 

105 

115 

109 

RIP 

112 

117 

105 

Source: Questionnaire replies of the Community industry 

(87)  The  Community  industry's  level  of  production  in  the  RIP  was  17%  higher  than  the 
level  recorded  at  the  start  of  the  period  considered.  The  Community  industry's 
production  capacity  also  increased  over  the  period  considered  by  12%  as  one 
Community  producer  increased  its  capacity  by  investments  in  equipment  in  order  to 
produce  pure  grade  sulphanilic  acid.  The  combination  of  these  two  factors  led  to  an 
overall increase in the capacity utilisation rate of the Community industry during the 
period  considered.  It  should  be  also  noted  that  the  Community  industry  achieved  a 
satisfactory level of capacity utilisation (in the range of 75-80%) in the RIP. 

(b) 

Inventories 

(88)  The Community industry's year-end stock levels decreased over the period considered 
by  22%.  The  levels  of  stock  fell  significantly  in  2004  and  2005  but  progressively 
increased in 2006 and in the RIP. 

Table 7: Closing stock in volume 

2003 

Stocks tonnes (index) 

100 

2004 

35 

2005 

38 

2006 

64 

RIP 

78 

Source: Questionnaire replies of the Community industry 

(c) 

Sales volume, market share and growth 

(89)  The  sales  volumes  of  the  Community  industry  in  the  RIP  were  5%  higher  than  the 
beginning  of  the  period  considered.  As  Community  consumption  decreased  by  6% 
over  the  period  considered  (see  recital  (77)  above),  the  market  share  held  by  the 
Community  industry  increased  by  12%  over  the  same  period.  Specifically,  the 
Community  industry  gained  around  7  percentage  points  of  market  share  over  the 

EN 

19 

   EN 

 
 
 
period  considered.  The  Community  industry  market  share  was  kept  above  50% 
throughout the period considered. 

Table 8: Sales volume and market share 

2003 

2004 

2005 

2006 

RIP 

Sales volume - tonnes 

(index) 

100 

Market share % (index) 

100 

114 

116 

107 

105 

105 

113 

105 

112 

Source: Questionnaire replies of the Community industry 

(90) 

It should be noted that the decrease in the Community consumption in 2006 and in the 
RIP somewhat affected the growth of the Community industry. The increase in market 
share  is  explained  almost  equally  by  an  increase  in  the  sales  volumes  and  by  the 
weaker consumption towards the end of the period considered. 

(d) 

Factors affecting Community prices 

(91)  Average sales prices of the Community industry increased substantially by 26% over 
the period considered. The developments observed as of from 2005 appear to reflect in 
particular the effects of the anti-absorption measures taken against Chinese imports in 
2004.  The  Community  industry's  average  selling  prices  increased  significantly 
between 2004 and 2005 and remained rather stable thereafter. However, this increase 
was  at  a  lower  rate  than  the  increase  in  the  price  of  aniline,  which  is  the  most 
significant raw material for the production of sulphanilic acid. Indeed, aniline, which 
is a benzene derivative, represented around 50% of the total manufacturing cost during 
the RIP, marked a price increase of around 45% between 2003 and the RIP. 

Table 9: Sales prices 

2003 

2004 

2005 

2006 

RIP 

Average sales price 

(index) 

100 

104 

124 

125 

126 

Source: Questionnaire replies of the Community industry 

(e) 

Employment and productivity 

(92)  The level of employment declined by 9% between 2003 and the RIP, while production 
increased,  thus  reflecting  an  increase  in  the  Community  industry  productivity  and 
competitiveness.  The  average  cost  per  employee,  however,  rose  during  the  same 
period by 15 %.  

Table 10: Employment and productivity 

2003 

2004 

2005 

2006 

Employment (index) 

Productivity (index) 

Average labour cost 

100 

100 

100 

96 

120 

94 

98 

117 

106 

96 

125 

82 

20 

RIP 

91 

129 

115 

   EN 

EN 

 
 
 
 
(index) 

Source: Questionnaire replies of the Community industry 

(f) 

Profitability 

Table 11: Profitability 

Index 

2003 

100 

2004 

2005 

-1 286 

1 519 

2006 

335 

RIP 

191 

Source: Questionnaire replies of the Community industry 

(93)  The  Community  industry's  profitability,  with  the  exception  of  the  year  2005,  was 
around or below 1% of its turnover. Important losses were recorded in 2004, whereas 
the  Community  industry  recorded  profits  in  2005,  2006  and  the  RIP.  Given  that  the 
profitability  of  the  Community  industry  was  remarkably  low  in  2003,  the  apparent 
increase shown in the period considered led to a level of profitability still far below the 
level which could be acceptable in this type of industry. 

(94) 

It  is  also  noted  that  the  Community  industry's  profitability  was  influenced  by  the 
evolution  of  raw  material  prices.  The  average  production  cost  increased  by  25% 
between 2003 and the RIP. As mentioned in recital (91) above, aniline is the key input 
in  sulphanilic  acid  production  and  it  accounts  for  approximately  half  of  the 
manufacturing  cost.  Given  the  fact  that  aniline  prices  significantly  rose  in  2004,  the 
Community  industry  was  not  able  to  pass  this  price  increase  to  its  customers  and 
incurred  losses.  The  situation  for  the  Community  industry  improved  in  2005  as  the 
prices of aniline stabilised and the Community industry was able to increase its prices 
of sulphanilic acid to the extend necessary to cover the raise in raw material costs. In 
2006  and  the  RIP,  confronted  with  new  rise  of  prices  of  the  aniline  the  Community 
industry's profitability declined to levels below 1% in relation to turnover. 

(g) 

Investments, return on investments and ability to raise capital 

Table 12: Investments, return on investment 

Investments 
(index) 
Return on investments 
(index) 

2003 

100 

100 

2004 

39 

2005 

57 

-1 779 

2 498 

2006 

255 

420 

RIP 

305 

224 

Source: Questionnaire replies of the Community industry 

(95)  The  Community  industry  continued  to  make  investments  in  its  sulphanilic  acid 
activities throughout the period considered. In 2006 and the RIP, besides investments 
primarily  related  to  the  maintenance  of  existing  capital  assets,  one  Community 
producer made investments in order to increase its capacity concerning the production 
of  pure  grade  sulphanilic  acid.  It  should  be  however  noted  that  this  new  capacity  is 
expected to be fully operational only from 2008. 

(96)  As the Community industry realised low profits throughout the period considered, the 
figure for the return on investments, which expresses the pre-tax result as a percentage 
of  the  average  opening  and  closing  net  book  value  of  assets  employed  in  the 

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production of sulphanilic acid, has also remained very low, namely around 2% during 
the RIP. 

(97)  The  investigation  showed  that  the  capital  requirements  of  the  Community  industry 
have been adversely affected by the difficult financial situation. Although, one of the 
Community producers is part of a large group, capital requirements are not always met 
to the desired level, as financial resources are generally allocated within this group to 
the most profitable entities. 

(h) 

Cash flow 

(98)  The  cash  flow  significantly  decreased,  by  85%  between  2003  and  the  RIP,  but  still 
remained positive. The cash flow is not following the trend of profitability as it was 
influenced by non–cash items such as depreciation and inventory movements. 

Table 13: Cash flow 

Cash flow 

Index 

2003 

100 

2004 

41 

2005 

64 

2006 

32 

RIP 

15 

Source: Questionnaire replies of the Community industry 

5.5. 

Conclusion  

(99)  Between  2003  and  the  RIP,  most  of  the  indicators  pertaining  to  the  Community 
industry developed positively: sales volumes, capacity utilisation, production volume, 
closing  stocks,  productivity,  investments  and  return  on  investment.  However,  its 
profitability remained below 1% of turnover during the RIP.  

(100)  The Community industry has benefited from a rise in its unit price of sulphanilic acid 
notably  from  2004  to  the  end  of  the  RIP.  However,  the  increase  in  the  selling  price 
could  not  fully  compensate  the  rise  in  the  cost  of  production  and  profit  margins 
therefore decreased. 

(101)  In  addition,  the  decrease  in  the  Community  consumption  in  2006  and  in  the  RIP 

somewhat hindered the recovery of the Community industry. 

(102)  Overall,  it  is  clear  that  the  introduction  of  the  anti-subsidy  measures  enabled  the 
Community industry to stabilize its situation, but not to fully recover from its injurious 
situation because of the increase in raw material costs which the Community industry 
was unable to pass on to its customers. Nevertheless, the investigation showed that the 
Community industry started to invest in new equipment during the period considered. 

(103)  In  the  light  of  the  above  analysis,  it  emerged,  on  the  one  hand,  that  the  volume 
indicators  developed  positively  during  the  period  considered.  On  the  other  hand,  the 
financial  indicators  pertaining  to  the  Community  industry  such  as  profitability  and 
cash  flow  showed  that  the  Community  industry  is  still  in  a  vulnerable  economic 
situation. It is therefore concluded that it had not fully recovered  from  the  effects  of 
injurious subsidisation. 

6. 

LIKELIHOOD OF RECURRENCE OF INJURY 

6.1. 

 General 

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(104)  Pursuant  to  Article  18(2)  of  the  basic  Regulation,  the  analysis  of  the  likelihood  of 
recurrence of injury should the existing measures be repealed was carried out. In this 
respect,  the  likely  development  of  export  volumes  and  prices  from  the  country 
concerned was examined in particular, as well as their likely effects on the situation of 
the Community industry in the absence of measures. 

6.2. 

 Development of import volumes and prices from the country concerned should 
measures be repealed 

(105)  It  is  recalled  that  even  with  anti-subsidy  measures  in  place,  the  imports  from  the 

country concerned had a market share of 9,7% in the RIP. 

(106)  The  investigation  showed  that  the  cooperating  Indian  exporting  producer  has 
significant  spare  capacity,  above  30%  of  Community  consumption.  This  unused 
capacity  indicates  that  the  said  exporting  producer  has  the  possibility  to  increase  its 
current  production  and  thus  also  to  increase  its  exports  of  sulphanilic  acid  to  the 
Community. 

(107)  It  is  also  noted  that  Community  consumption  slightly  decreased  over  the  period 
considered and it is not expected that the demand in the next years would be such as to 
absorb the potential increase in imports from India should the measures be terminated. 
In  this  scenario,  exports  from  India  of  sulphanilic  acid  would  very  likely  replace  a 
large share of the sales made by the Community industry, as the prices of imports are 
likely to be lower than those of the Community industry. 

(108)  The  investigation  established  that  the  Community  market  remains  attractive  for  the 
Indian  exporting  producer.  Indeed,  it  was  found  that  the  average  export  price  of  its 
sales  to  other  third  countries  was  significantly  below  the  average  export  price  to  the 
Community.  The  fact  that  no  price  undercutting  was  found  to  exist  for  the  Indian 
export prices is explained by the price undertaking, and thus the measures, in place for 
India. However, even then, the Indian CIF export prices were found, on average, to be 
lower than the average price of the Community industry (around 7%).  

(109)  Therefore,  it  is  likely  that  without  any  measures  in  place,  the  Indian  exporting 
producer would have an incentive to use significant quantities of unused capacity and 
to  re-direct  its  exports  to  other  third  countries  to  the  more  attractive  Community 
market, at price levels significantly below the current price levels in the Community 
industry.  

6.3. 

 Conclusion on likelihood of recurrence of injury 

(110)  On the basis of the foregoing, it can be concluded that, should measures lapse, imports 
into  the  Community  market  from  the  country  concerned  would  very  likely  occur  in 
significant  volumes  and  at  subsidised  prices  which  would  be  below  the  Community 
industry’s prices. This would in all likelihood have the effect of introducing a price-
depressive trend on the Community market, with an expected negative impact on the 
economic situation of the Community industry. This would, in particular, reverse the 
recovery  that  was  partly  achieved  over  the  period  considered,  leading  to  a  likely 
recurrence of injury. 

7. 

COMMUNITY INTEREST 

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23 

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7.1. 

 Introduction 

(111)  According to Article 31 of the basic Regulation, it was examined whether 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 various interests involved. 

(112)  The fact that the present investigation is a review, thus analysing a situation in which 
anti- subsidy measures have already been in place, should allow the assessment of any 
undue negative impact on the parties concerned by the current anti-subsidy measures. 

(113)  On this basis, it was examined  whether, despite the conclusions on the likelihood of 
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. 

7.2. 

 Interest of the Community industry 

(114)  It  can  reasonably  be  expected  that  the  Community  industry  will  continue  to  benefit 
from  the  measures  currently  imposed  and  further  recover  by  regaining  market  share 
and improving its profitability. Should the measures not be maintained, it is likely that 
the  Community  industry  will  start  again  to  suffer  injury  from  increased  imports  at 
subsidised  prices  from  the  country  concerned  and  that  its  currently  fragile  financial 
situation will deteriorate.  

(115)  On this basis, it can be concluded that the continuation of measures would be in the 

interest of the Community industry. 

7.3. 

 Interest of importers 

(116)  It  is  recalled  that  in  the  original  investigation  it  was  found  that  the  imposition  of 
measures would not have had a serious impact on Community importers of sulphanilic 
acid.  This  seems  to  be  confirmed  by  the  lack  of  cooperation  in  this  investigation. 
Therefore,  no  compelling  reasons  were  presented  that  the  imposition  of  measures 
would be against the interest of the importers.  

7.4. 

 Interest of users 

(117)  The  Commission  sent  questionnaires  to  all  31  known  users,  of  which  only  four 
submitted  a  questionnaire  reply.  Three  questionnaire  replies  were  received  from 
Community  companies  producing  optical  brighteners  and  one  questionnaire  reply 
from a company producing dyes. However, the information provided by all these users 
regarding  the  effect  of  the  measures  and  the  proportion  that  sulphanilic  acid 
represented in their manufacturing costs was not meaningful. 

(118)  The volumes of the product concerned imported by these four users represented 47,3% 
of  the  total  imports  in  the  Community.  Moreover,  as  these  four  users  purchase 
significant volumes of sulphanilic acid from the Community industry, they accounted 
overall for around 40% of Community consumption in the RIP. 

(119)  Three users have made the same points opposing the continuation of measures on the 
grounds that the production capacity of the Community industry is insufficient to meet 
domestic demand and on the grounds that measures are harming their competitiveness 

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on  the  downstream  products.  The  fourth  user  remained  silent  on  whether  it  was  in 
favour or against the maintenance of the measures. 

(120)  Regarding  the  supply  situation  on  the  Community  market,  it  is  to  be  noted  that  the 
current  production  capacity  of  the  Community  industry  could  satisfy  around  80%  of 
Community consumption. It should also be stressed that the Community industry has 
invested in new facilities in order to increase its output of pure grade sulphanilic acid. 
In any event, the purpose of the measures is not to prevent imports from the country 
concerned  entering  the  Community  market  but  to  ensure  that  they  are  made  at  non-
subsidised  and  non-injurious  prices.  It  is  therefore  expected  that  imports  from  the 
country concerned will continue to enter the market as it has been the case following 
the imposition of measures in 2002.  

(121)  It should be also noted that sulphanilic acid production outside the Community is now 
restricted  to  few  countries  in  the  world,  such  as  India,  the  PRC  and  the  US.  It  is 
therefore important that the Community industry is allowed to operate under effective 
competition  conditions  so  that  domestic  supplies  of  the  product  continue  to  be 
available to all users in the Community.  

(122)  Regarding the competitiveness of the users, it should be noted that despite the lack of 
information  obtained  from  the  users  in  the  framework  of  this  investigation,  it  was 
shown in the original investigation that anti-subsidy measures would increase the full 
costs of optical brighteners and of dyes to containing sulphanilic acid by less than 1%.  

(123)  On  the  basis  of  the  above,  similarly  to  the  conclusion  drawn  in  the  original 
investigation, it is considered also in the framework of the expiry review investigation 
that  the  maintenance  of  measures  would  not  have  a  major  adverse  impact  on  the 
situation of users. 

7.5. 

 Conclusion on Community interest 

(124)  Given  the  above,  it  is  concluded  that  there  are  no  compelling  reasons  against  the 

maintenance of the current anti-subsidy measures. 

8. 

COUNTERVAILING MEASURES 

(125)  All  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  and 
amended. They were also granted a period to make representations and to comment. 
No comments which were of a nature to change the above conclusions were received. 

(126)  In view of the conclusions reached in the context of the expiry review with regard to 
the likelihood of continuation of subsidisation, likelihood of recurrence of injury and 
Community  interest,  the  countervailing  measures  on  imports  of  sulphanilic  acid 
originating  in  India  should  be  maintained  in  order  to  prevent  a  recurrence  of  injury 
being caused to the Community industry by the subsidised imports. 

(127)  With  regard  to  the  findings  of  the  partial  interim  review  limited  to  the  level  of 
subsidisation concerning the cooperating exporting producer in India, it is considered 
appropriate to amend the countervailing duty rate applicable from 7,1 % to 4,7 %. As 
the cooperating exporting producer accounted for 100% of the exports of sulphanilic 
acid from India to the Community in the RIP, it is considered appropriate that this rate 
of duty should also apply to imports manufactured by other Indian producers. The duty 

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rate  will  not  be  applicable  for  imports  of  the  product  concerned  which  are 
manufactured  and  sold  for  export  to  the  Community  by  the  co-operating  exporting 
producer  from  which  an  undertaking  has  been  accepted  by  Commission  Decision 
2006/37/EC.  In  this  regard,  it  is  noted  that  the  minimum  import  prices  of  the 
undertaking accepted from the Indian company have been amended in order to reflect 
the  decrease  in  the  combined  overall  duty  rate  (anti-dumping  and  countervailing) 
applicable to this company. 

(128)  The amendment of the countervailing duty rate will have an impact on the definitive 
anti-dumping  duty  of  18,3%  imposed  on  imports  of  sulphanilic  acid  from  India  by 
Regulation  (EC)  No  [INSERT],  as  the  latter  was  adjusted  in  order  to  avoid  any 
double-counting of the effects of benefits from export subsidies (it is recalled that the 
definitive  anti-dumping  duty  was  based  on  the  dumping  margin  since  the  latter  was 
found  to  be  lower  than  the  injury  elimination  level).  Article  24(1)  of  the  basic 
Regulation  and  Article  14(1)  of  the  basic  anti-dumping  Regulation  provide  that  no 
product  shall  be  subject  to  both  anti-dumping  and  countervailing  measures  for  the 
purpose  of  dealing  with  one  and  the  same  situation  arising  from  dumping  or  export 
subsidisation.  It  was  found  in  the  original  investigation  that  certain  of  the  subsidy 
schemes investigated which were countervailable, constituted export subsidies within 
the  meaning  of  Article  3(4)(a)  of  the  basic  anti-subsidy  Regulation.  As  such,  these 
subsidies affected the export price of the Indian exporting producer, thus leading to an 
increased  margin  of  dumping.  Therefore,  pursuant  to  Article  24(1)  of  the  basic 
Regulation,  the  definitive  anti-dumping  duty  was  adjusted  to  reflect  the  actual 
dumping  margin  remaining  after  the  imposition  of  the  definitive  countervailing  duty 
offsetting  the  effect  of  the  export  subsidies  (see  recital  (46)  of  Regulation  (EC)  No 
1339/2002).  

(129)  Consequently, the definitive anti-dumping duty rate for India must now be adjusted to 
take account of the revised level of benefit received from export subsidies in the RIP 
of  the  current  anti-subsidy  investigation.  As  the  benefits  from  export  subsidies 
amounted  to  4.1%  in  that  RIP  and  the  level  of  the  dumping  margin  originally 
established in Council Regulation (EC) No 1339/2002 was 24.6%, the revised level of 
anti-dumping  duty  should  be  20.5%.  Regulation  (EC)  No  [INSERT]  should  be 
amended accordingly. 

HAS ADOPTED THIS REGULATION: 

Article 1 

1. 

2. 

3. 

4. 

A  definitive  countervailing  duty  is  hereby  imposed  on  imports  of  sulphanilic  acid 
falling within CN code ex 2921 42 10 (TARIC code 2921 42 10 60) and originating 
in India. 

The  rate  of  the  definitive  countervailing  duty  applicable  to  the  net,  free-at-
Community-frontier price, before duty, shall be 4,7%. 

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

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

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1. 

2. 

3. 

Article 2 

Imports  declared  for  release  into  free  circulation  which  are  invoiced  by  companies 
from  which  undertakings  are  accepted  by  the  Commission  and  whose  names  are 
listed in the Commission Decision 2006/37/EC, as from time to time amended, shall 
be exempt from the countervailing duty imposed by Article 1, on condition that: 

– 

– 

– 

they are manufactured, shipped and invoiced directly by the said companies to 
the first independent customer in the Community; and 

such  imports  are  accompanied  by  an  undertaking  invoice  which  is  a 
commercial  invoice  containing  at  least  the  elements  and  the  declaration 
stipulated in the Annex of this Regulation; and 

the  goods  declared  and  presented  to  customs  correspond  precisely  to  the 
description on the undertaking invoice. 

A  customs  debt  shall  be  incurred  at  the  time  of  acceptance  of  the  declaration  for 
release into free circulation whenever it is established, in respect of goods described 
in Article 1 and exempted from the duties under the conditions listed in paragraph 1, 
that  one  or  more  of  such  conditions  is  not  fulfilled.  The  condition  set  out  in  the 
second  indent  of  paragraph  1  shall  be  considered  as  not  being  fulfilled  where  the 
undertaking  invoice  is  found  not  to  comply  with  the  provisions  of  the  Annex  or 
found not to be authentic or where the Commission has withdrawn the acceptance of 
the  undertaking  pursuant  to  Article  8(9)  of  Regulation  (EC)  No  384/96  or  Article 
13(9) of the basic anti-subsidy Regulation in a Regulation or Decision which refers 
to  (a)  particular  transaction(s)  and  declares  the  relevant  undertaking  invoice(s)  as 
invalid. 

Importers shall accept as a normal trade risk, the fact that the non-fulfilment, by any 
party, of one or more of the conditions listed in paragraph 1 and further defined in 
paragraph 2 may give rise to a customs debt incurred under Article 201 of Council 
Regulation  (EEC)  No  2913/92  of  12  October  1992  establishing  the  Community 
Customs  Code  (14).  The  customs  debt  incurred  shall  be  recovered  upon  withdrawal 
by the Commission of the acceptance of the undertaking. 

Article 3 

Article 1(2) of Regulation (EC) No [INSERT] is replaced by the following: 

"2. 
The rate of the definitive anti-dumping duty applicable, before duty, to 
the net free-at-Community frontier price of the products described in paragraph 
1, shall be as follows: 

Country 

Definitive duty (%) 

The People's Republic of China 

India 

33,7 

20,5 

" 

14 

OJ L 302, 19.10.1992, p. 1. Regulation as last amended by Council Regulation (EC) No 1791/2006 (OJ 
L 363, 20.12.2006, p. 1). 

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

Article 4 

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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The  following  elements  shall  be  indicated  in  the  commercial  invoice  accompanying  the 
company's sales of sulphanilic acid to the Community which are subject to an undertaking: 

ANNEX  

1. 

2. 

3. 

4. 

5. 

6. 

The  heading  "COMMERCIAL  INVOICE  ACCOMPANYING  GOODS  SUBJECT 
TO AN UNDERTAKING". 

The  name  of  the  company,  mentioned  in  Article  1  of  Commission  Decision 
2006/37/EC accepting the undertaking, issuing the commercial invoice. 

The commercial invoice number. 

The date of issue of the commercial invoice. 

The TARIC additional code under which the goods on the invoice are to be customs-
cleared at the Community frontier. 

The exact description of the goods, including: 

– 

– 

– 

– 

– 

the product code number (PCN) used for the purpose of the undertaking (e.g. 
"PA99", "PS85" or "TA98", 

the  technical/physical  specifications  of  the  PCN,  i.e.  for  “PA99”  and  “PS85” 
white free flowing powder, and for “TA98” grey free-flowing powder,  

the company product code number (CPC) (if applicable), 

CN code, 

quantity (to be given in tonnes). 

7. 

The description of the terms of the sale, including: 

– 

– 

– 

– 

price per tonne, 

the applicable payment terms, 

the applicable delivery terms, 

total discounts and rebates. 

8. 

9. 

Name  of  the  company  acting  as  an  importer  in  the  Community  to  which  the 
commercial invoice accompanying goods subject to an undertaking is issued directly 
by the company.  

The name of the official of the company that has issued the commercial 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 2006/37/EC. I declare that the information provided in this invoice is complete and 
correct.” 

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