Council Regulation (EC) No 15/2009 of 8 January 2009 amending Regulation (EC) No 367/2006 imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film originating in India and amending Regulation (EC) No 1292/2007 imposing a definitive anti-dumping duty on imports of polyethylene terephthalate (PET) film originating in India
Date: 2009-01-08
Institutions: Council of the European Union
Subjects: India, countervailing charge, import, originating product, plastics

10.1.2009

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Official Journal of the European Union

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is obligatory)

I

REGULATIONS

COUNCIL REGULATION (EC) No 15/2009

of 8 January 2009

amending Regulation (EC) No 367/2006 imposing a definitive countervailing duty on imports of
polyethylene terephthalate (PET)
film originating in India and amending Regulation (EC) No
1292/2007 imposing a definitive anti-dumping duty on imports of polyethylene terephthalate
(PET) film originating in India

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 2026/97 of
6 October 1997 on protection against subsidised imports
from countries not members of the European Community (1)
(the basic Regulation), and in particular Articles 19 and 24
thereof,

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

Whereas:

A. PROCEDURE

I. Previous investigation and existing countervailing

measures

(1)

1999,

Regulation

film (the product concerned)

In December
(EC) No
by
2597/1999 (2), the Council imposed a definitive counter­
vailing duty on imports of polyethylene terephthalate
(PET)
falling within CN
codes ex 3920 62 19 and ex 3920 62 90, originating in
India. The investigation which led to the adoption of that
Regulation is hereinafter referred to as the ‘original inves­
tigation’. The measures took the form of an ad valorem
countervailing duty, ranging between 3,8 % and 19,1 %
imposed on imports from individually named exporters,
with a residual duty rate of 19,1 % imposed on imports
of the product concerned from all other companies. The
investigation period of
investigation was
1 October 1997 to 30 September 1998.

the original

(1) OJ L 288, 21.10.1997, p. 1.
(2) OJ L 316, 10.12.1999, p. 1.

(2)

(3)

(4)

(5)

following

In March 2006, by Regulation (EC) No 367/2006 (3), the
Council,
to
an expiry
Article 18 of the basic Regulation, maintained the defi­
nitive countervailing duty imposed by Regulation (EC)
No 2597/1999 on imports of PET film originating in
India. The review investigation period was 1 October
2003 to 30 September 2004.

review pursuant

In August 2006, by Regulation (EC) No 1288/2006 (4),
the Council, following an interim review concerning the
subsidisation of an Indian PET film producer, Garware
Polyester Limited (Garware), amended the definitive
countervailing duty imposed on Garware by Regulation
(EC) No 367/2006.

by

2007,

September

Regulation

In
(EC) No
1124/2007 (5), the Council, following a partial
interim
review concerning the subsidisation of another Indian
PET film producer, Jindal Poly Films, Limited, formerly
known as Jindal Polyester Ltd, (Jindal), amended the defi­
nitive countervailing duty imposed on Jindal by Regu­
lation (EC) No 367/2006.

II. Existing anti-dumping measures

In August 2001, by Regulation (EC) No 1676/2001 (6),
the Council imposed a definitive anti-dumping duty on
imports of polyethylene terephthalate (PET) film originat­
ing, inter alia, in India. The measures consisted of an ad
valorem anti-dumping duty ranging between 0 % and
62,6 % imposed on imports from individually named
exporters, with a residual duty rate of 53,3 % on
imports from all other companies.

(3) OJ L 68, 8.3.2006, p. 15.
(4) OJ L 236, 31.8.2006, p. 1.
(5) OJ L 255, 29.9.2007, p. 1.
(6) OJ L 227, 23.8.2001, p. 1.

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(6)

(7)

(8)

(9)

amended the

In March 2006, by Regulation (EC) No 366/2006 (1), the
Council
level of dumping margins
calculated by Regulation (EC) No 1676/2001. The new
dumping margins range between 3,2 % and 29,3 % and
the new dumping duty range between 0 % and 18 %
taking into account the countervailing duties resulting
from export subsidies imposed on the same products
originating in India, as modified according to Regulation
(EC) No 367/2006, which was adopted following an
review of Regulation (EC) No 2579/1999
expiry
referred to in recital 1 above. In August 2006, by Regu­
following an
lation (EC) No 1288/2006, the Council,
interim review concerning the
an
Indian PET film producer, Garware Polyester Limited
(Garware), amended the definitive anti-dumping duty
imposed on Garware by Regulation (EC) No 1676/2001.

subsidisation of

2006,

request

amended

September

Regulation

Regulation

In
(EC) No
by
1424/2006 (2), the Council, following a new exporting
producer
(EC) No
1676/2001 in respect of SRF Limited. The Regulation
established a dumping margin of 15,5 % and a
dumping
company
rate of 3,5 % for
the company’s export
concerned taking into account
subsidy margin as ascertained in the anti-subsidy inves­
tigation which led to the adoption of Regulation (EC) No
367/2006 referred to above. Since the company did not
have an individual countervailing duty, the rate estab­
lished for all other companies was applied.

duty

the

(PET)

following

terephthalate
an

The Council, by Regulation (EC) No 1292/2007 (3)
imposed a definitive anti-dumping duty on imports of
polyethylene
film originating in
to
expiry
India
Article 11(2) of Council Regulation (EC) No 384/96 of
22 December 1995 on protection against dumped
imports from countries not members of the European
Community (4) (the basic anti-dumping Regulation). The
same Regulation terminated a partial
interim review of
such imports limited to one India exporter pursuant to
Article 11(3) of the basic anti-dumping Regulation.

review pursuant

(10)

(11)

sufficient

The Commission examined the evidence submitted by
the GOI and considered it
to justify the
initiation of a review in accordance with the provisions
of Article 19 of the basic Regulation. After consultation
of the Advisory Committee, the Commission initiated, by
a Notice of Initiation published in the Official Journal of
the European Union on 12 October 2007 (5), an ex officio
partial interim review limited to the level of subsidisation
of the countervailing duty in force in respect of imports
of polyethylene terephthalate (PET) film originating in
India.

The purpose of the partial interim review investigation is
to assess the need for the continuation, removal or
amendment of
in respect of
the existing measures
those companies which benefited from one or both
subsidy schemes
that had allegedly changed, where
evidence was provided in line with the
sufficient
relevant provisions of
Initiation. The
the Notice of
partial
interim review investigation would also assess
the need, depending on the review findings, to revise
the measures applicable to other companies that coop­
erated in the investigation that set
the
existing measures and/or the residual measure applicable
for all other companies.

the level of

(12)

The review was limited to the level of subsidisation of
the companies listed in the Annex to the Notice of
Initiation as well as
that were
invited to make themselves known under the conditions
and within the time limit set out
in the Notice of
Initiation.

to other exporters

IV. Investigation period

(13)

The investigation of the level of subsidisation covered the
period from 1 October 2006 to 30 September 2007
(‘review investigation period’ or ‘RIP’).

III. Initiation of a partial interim review

(14)

Passbook

Following the extension of the validity of the definitive
countervailing duty in March 2006, the Government of
India (GOI) made submissions that
the circumstances
with regard to two subsidy schemes (the Duty Enti­
tlement
Income Tax
Exemption under Section 80 HHC of the Income Tax
these changes were of a
Act) had changed and that
lasting nature. Consequently,
the
it was argued that
level of subsidisation was likely to have decreased and
thus measures that had been established partly on these
schemes should be revised.

Scheme

and

the

V. Parties concerned by the investigation

The Commission officially informed the GOI and those
Indian exporting producers who cooperated in the
previous investigation, were mentioned under Regulation
(EC) No 367/2006 and were listed in the Annex to the
Notice of Initiation of the partial
interim review, that
were found to benefit from any of the two allegedly
changed subsidy schemes, as well as Du Pont Tejin
Films, Luxembourg, Mitsubishi Polyester Film, Germany,
Italy, which
Toray Plastics Europe, France and Nurell,
the overwhelming majority of Community
represent
PET film production (hereinafter
the Community
industry), of the initiation of the partial interim review
Interested parties were given the oppor­
investigation.
tunity to make their views known in writing and to
request a hearing within the time limit set out in the
Notice of Initiation.

(1) OJ L 68, 8.3.2006, p. 6.
(2) OJ L 270, 29.9.2006, p. 1.
(3) OJ L 288, 6.11.2007, p. 1.
(4) OJ L 56, 6.3.1996, p. 1.

(5) OJ C 240, 12.10.2007, p. 6.

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(15) All interested parties, who so requested and showed that
there were particular reasons why they should be heard,
were granted a hearing.

(16)

(17)

The written and oral comments submitted by the parties
were considered and, where appropriate,
taken into
account.

the basic Regulation.

In view of the apparent number of parties involved in
this review, the use of sampling techniques for the inves­
tigation of subsidisation was envisaged in accordance
with Article 27 of
In order to
enable the Commission to decide whether sampling
to select a sample,
would be necessary and,
exporting
to
Article 27 of the basic Regulation, to make themselves
known within 15 days of the initiation of the partial
interim review and to provide the Commission with
the information requested in the Notice of Initiation.

producers were

requested,

pursuant

if so,

(24)

— Garware Polyester Limited, Mumbai,

— Polyplex Corporation Limited, Noida,

— SRF Limited, Gurgaon,

— Uflex Limited, Noida.

VI. Disclosure and comments on procedure

to

The GOI and the other interested parties were informed
of the essential facts and considerations upon which it
intended to propose to amend the duty rates
was
applicable
Indian
concerned
exporting producers and prolong existing measures for
all other companies which did not cooperate with this
partial interim review. They were also given a reasonable
time to comment. All submissions and comments were
taken duly into consideration as set out below.

cooperating

the

(18) After examination of the information submitted, given
the number of exporting producers in India indicating
their willingness
it was decided that
sampling was not necessary in this case.

to cooperate,

(19) One company, SRF Limited, not listed in the Annex to
the Notice of Initiation, made itself known and provided
evidence that it fulfilled the eligibility provisions of the
scope of the partial interim review investigation as those
set out in point 4 of the Notice of Initiation. Conse­
quently this company was included in this review inves­
tigation.

(20) One company, Flex Industries Limited, subject to a coun­
tervailing duty (Regulation (EC) No 367/2006) and an
anti-dumping duty (Regulation (EC) No 1292/2007) has
changed its name and is now known as Uflex Limited.
This change of name does not affect the findings of
previous investigations.

(21)

In order to obtain the information necessary for its inves­
tigation,
to the
the Commission sent questionnaires
exporting producers which fulfilled the conditions set
out
In addition, a ques­
Initiation.
tionnaire was sent to the GOI.

in the Notice of

(22)

Replies from the questionnaires were received from five
Indian exporting producers, and from the GOI.

(23)

The Commission sought and verified all
information it
deemed necessary for the determination of subsidisation.
Verification visits were carried out at the premises of GOI
in Delhi, the Government of Maharashtra in Mumbai, the
Reserve Bank of
India in Mumbai, and the following
companies:

B. PRODUCT CONCERNED

(25)

The product covered by this review is the same product
as the one concerned by Regulation (EC) No 367/2006,
namely polyethylene terephthalate (PET)
film falling
within CN codes ex 3920 62 19 and ex 3920 62 90
originating in India.

C. SUBSIDISATION

1. Introduction

Nationwide schemes

(26) On the basis of the information submitted by the GOI
and the cooperating Indian exporting producers and the
replies to the Commission’s questionnaire, the following
schemes, which allegedly
granting of
subsidies, were investigated:

involve

the

(a) Advance Authorisation Scheme (formerly known as

Advance Licence Scheme);

(b) Duty Entitlement Passbook Scheme;

(c) Export Promotion Capital Goods Scheme;

(d) Special Economic Zones/Export Processing Zones/

Export Oriented Units;

(e)

Income Tax Exemption Scheme;

— Ester Industries Limited, New Delhi,

(f) Export Credit Scheme;

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Regional schemes

(g) Package Scheme of Incentives (PSI).

producers have received a detailed calculation sheet
explaining how the benefits were established under
each scheme. Consequently, this claim has to be rejected.

(33)

(34)

(27)

The schemes (a) to (d) 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 are issued
by the Ministry of Commerce every five years and
and Import Policy
updated regularly. One Export
document is relevant to the RIP of this case,
i.e. the
five-year plan relating to the period 1 September 2004
to 31 March 2009 (EXIM-policy 04-09). In addition, the
GOI also sets out the procedures governing the EXIM-
‘Handbook of Procedures —
policy 04-09 in a
1 September 2004 to 31 March 2009, Volume I’ (HOP
I 04-09). The Handbook of Procedure is also updated on
a regular basis.

(28)

is
The Income Tax Scheme specified above under (e)
based on the Income Tax Act of 1961, which is
amended yearly by the Finance Act.

(29)

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

(30)

The scheme specified above under (g)
State authorities in India.

is managed by

2. Advance Authorisation Scheme (AAS)

(a) Legal basis

The detailed description of the scheme is contained in
paragraphs 4.1.1 to 4.1.14 of the EXIM-policy 04-09 and
chapters 4.1 to 4.30 of the HOP I 04-09. This scheme
was called Advance Licence Scheme during the previous
review investigation that led to the imposition by Regu­
lation (EC) No 367/2006 of the definitive countervailing
duty currently in force.

(b) Eligibility

the AAS for annual

supplying the ultimate

The AAS consists of six sub-schemes, as described in
in recital 35. Those sub-schemes differ,
more detail
in the scope of eligibility. Manufacturer-
inter alia,
exporters and merchant-exporters ‘tied to’ supporting
manufacturers are eligible for the AAS physical exports
requirement. Manufac-
and for
turer-exporters
are
supplies. Main
eligible
contractors which supply to the ‘deemed export’ cate­
gories mentioned in paragraph 8.2 of the EXIM-policy
04-09, such as suppliers of an export oriented unit
(EOU), are eligible for AAS deemed export. Eventually,
are
suppliers
intermediate
‘deemed export’ benefits under
eligible for
the sub-
schemes Advance Release Order (ARO) and back-to-
back inland letter of credit.

to manufacturer-exporters

intermediate

for AAS

exporter

for

(31)

(32)

In accordance with Article 11(10) of the basic Regu­
lation, the Commission invited the GOI for additional
to both changed and
consultations with respect
unchanged schemes with the aim of clarifying the
factual situation as regards the alleged schemes and
arriving at a mutually agreed solution. Following these
consultations, and in the absence of a mutually agreed
solution in relation to these schemes, the Commission
included all these schemes in the investigation of subsi­
disation.

General disclosure comments on subsidisation

schemes

and one

investigated confer
In addressing this claim,

Following disclosure,
exporting
the GOI
producer argued that it has not been determined that
to the
a benefit
the
it should be noted
recipient.
that for each scheme under investigation,
it was estab­
lished whether any concession is a subsidy within the
meaning of Article 2(1)(a) and Article 2(2) of the basic
Regulation, i.e. a financial contribution of the GOI which
conferred a benefit upon the investigated exporting
producers. Moreover,
it has been explained why
benefits under the various schemes are considered coun­
exporting
tervailable.

In addition,

cooperating

all

(c) Practical implementation

(35) Advance authorisations can be issued for:

(i) Physical

a

‘Physical’

exports: This is the main sub-scheme.

It
allows for duty-free import of input materials for
the production of
export
product.
in this context means that the
export product has to leave Indian territory. An
import allowance and export obligation including
the type of export product are specified in the
licence;

resulting

specific

(ii) Annual

requirement: Such an authorisation 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 manufac­
turing any of the items falling under such a product
group. It can choose to export any resulting product
falling under the product group using such duty-
exempt material;

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(36)

(37)

(iii) Intermediate supplies: This sub-scheme covers cases
where two manufacturers
intend to produce a
single export product and divide the production
process. The manufacturer-exporter who produces
can import duty-free
the
input materials and can obtain for this purpose an
AAS for intermediate supplies. The ultimate exporter
finalises the production and is obliged to export the
finished product;

intermediate 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) to (f),(g),(i) and (j)
of the EXIM policy 04-09. According to the GOI,
deemed exports refer to those transactions in which
leave the country. A
the goods supplied do not
number of categories of
regarded as
deemed exports provided the goods are manu­
factured in India, e.g. supply of goods to an EOU
or to a company situated in a special economic zone
(SEZ);

supply is

(v) ARO: The AAS holder intending to source the inputs
from indigenous sources, in lieu of direct import, has
the option to source them against AROs. In such
cases the Advance Authorisations are validated as
AROs and are endorsed to the indigenous supplier
upon delivery of
the items specified therein. The
the ARO entitles the indigenous
endorsement of
supplier to the benefits of deemed exports as set
out in paragraph 8.3 of the EXIM-policy 04-09 (i.e.
export,
AAS
supplies/deemed
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 draw­
back/refund of duties. The refund of taxes/duties is
available both for
inputs as well as
indigenous
imported inputs;

intermediate

for

(vi) Back-to-back inland letter of credit: This sub-scheme
again covers indigenous supplies to an Advance
Authorisation holder. The holder of an Advance
Authorisation can approach a bank for opening an
inland letter of credit in favour of an indigenous
supplier. The authorisation will be invalidated by
the bank for direct import only in respect of the
items being sourced indi­
value and volume of
importation. The indigenous
genously instead of
supplier will be entitled to deemed export benefits
as set out in paragraph 8.3 of the EXIM-policy 04-09
(i.e. AAS for intermediate supplies/deemed export,
deemed export drawback and refund of
terminal
excise duty).

Three of the cooperating exporting producers received
the AAS linked to the product
concessions under
concerned during the RIP. Two of
these companies
made use two of the sub-schemes, i.e. (i) AAS physical
exports and (iii) AAS for intermediate supplies. The third
company
annual
It is therefore not necessary to establish
requirement.
the countervailability of
the remaining unused sub-
schemes.

sub-scheme

(ii) AAS

used

for

is

chartered

accountant/cost

For verification purposes by the Indian authorities, an
Advance Authorisation holder
legally obliged to
maintain ‘a true and proper account of consumption
imported/domestically
of
and
duty-free
utilisation
procured goods’
(chapters 4.26,
in a specified format
4.30 and Appendix 23 HOP I 04-09),
i.e. an actual
consumption register. This register has to be verified by
and works
an external
accountant who issues a certificate stating that
the
records have been
prescribed registers and relevant
examined
under
Appendix 23 is true and correct in all respects. Never­
theless, the aforesaid provisions apply only to Advance
Authorisations issued on or after 13 May 2005. For all
issued
Advance Authorisations or Advance Licences
before that date, holders are requested to follow the
previously applicable verification provisions, i.e. to keep
a true and proper account of licence-wise consumption
and utilisation of imported goods in the specified format
of Appendix 18 (chapter 4.30 and Appendix 18 HOP I
02-07).

information

furnished

and

the

and the

exporting producers,

export obligation are

(38) With regard to the sub-schemes used during the RIP by
two cooperating
i.e. physical
exports and intermediate supplies, both the import
allowance
fixed in
volume and value by the GOI and are documented on
the authorisation. In addition, at the time of import and
of export, the corresponding transactions are to be docu­
mented by government officials on the authorisation. The
volume of imports allowed under the AAS 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
04-09. The most recent changes in the SIONs for PET
film and PET chips, an intermediate product, were revised
in September 2005.

(39) With regard to sub-scheme (ii)

requirement)

listed above (AAS for
annual
that was used by the other
exporter, only the import allowance in value is docu­
mented on the licence. The licence holder is obliged to
‘maintain the nexus between inputs and the resultant
product’ (paragraph 4.24A(c) HOP I 04-09).

(40)

(41)

(42)

(43)

(44)

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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 (24 months
with two possible extensions of six months each).

The verification showed that the actual consumption rate
for the companies concerned of key raw materials needed
to produce one kilogram of PET film was lower than the
corresponding SION. This was clearly the case with
regard to the old SION for PET film, and to a lesser
extent, to the revised SION which came into force in
September 2005.

to verify with sufficient
to enable the GOI
register
inputs were consumed in
precision what amounts of
the export production.
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 veri­
fication system (Annex II(II)(5) and Annex III(II)(3) to the
basic Regulation).

In addition,

(46)

These three sub-schemes are therefore countervailable.

(e) Calculation of the subsidy amount

the
The verification further established that none of
companies concerned had kept
the legally required
consumption register referred to in recital 37 above.
Consequently, it can only be concluded that the verifi­
cation requirements stipulated by the Indian authorities
were not honoured.

(47)

(d) Conclusion

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
investigated
which conferred a benefit upon the
exporters.

in law upon export performance,

In addition, AAS physical exports, AAS for intermediate
requirement are clearly
supply and AAS for annual
contingent
and
therefore deemed to be specific and countervailable
under Article 3(4)(a) of the basic Regulation. Without
an export
company cannot obtain
a
benefits under these schemes.

commitment

(45) 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 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. The GOI did not effectively apply
its old verification system or
neither
procedure to confirm whether and in what amounts
inputs were
the
exported product (Annex II(II)(4) of the basic Regulation
in the case of substitution drawback schemes,
and,
Annex III(II)(2) of the basic Regulation). The SIONs for
the product concerned were not sufficiently precise. The
SION’s themselves cannot be considered a verification
system of actual consumption, because none of
the
the required consumption
companies concerned kept

consumed in the production of

its new nor

the

that

systems,

In this respect,

the basic Regulation are met

In the absence of permitted duty drawback systems or
substitution drawback
countervailable
benefit is the remission of total import duties normally
due upon importation of inputs.
it is
noted that the basic Regulation does not only provide
for the countervailing of an ‘excess’ remission of duties.
According to Article 2(1)(a)(ii) and Annex I(i) of the basic
Regulation only when the conditions of Annexes II and
III of
the excess
remission of duties can be countervailed. However,
these conditions were not fulfilled in the present case.
Thus, if an adequate monitoring process is not demon­
strated, the above exception for drawback schemes is not
applicable and the normal rule of the countervailing of
the amount of unpaid duties (revenue forgone), applies,
rather than of any purported excess remission. As set out
in Annexes II(II) and III(II) of the basic Regulation the
burden is not upon the investigating authority to
calculate
contrary,
according to Article 2(1)(a)(ii) of the basic Regulation,
the investigating authority only has to establish sufficient
evidence to refute the appropriateness of an alleged veri­
fication system.

remission. To the

such excess

(48)

imported under
sub-schemes during the RIP (numerator).

The subsidy amount for the three exporters which used
the AAS was calculated on the basis of import duties
forgone (basic customs duty and special additional
the
customs duty) on the material
three
In
accordance with Article 7(1)(a) of the basic Regulation,
fees necessarily incurred to obtain the subsidy were
deducted from the subsidy amount where justified
claims were made. In accordance with Article 7(2) of
the basic Regulation, this subsidy amount was allocated
over the export turnover during the RIP 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.

(49)

Three cooperating exporting producers obtained benefits
from this scheme during the RIP ranging from 0,5 % to
2,1 %.

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3. Duty Entitlement Passbook Scheme (DEPBS)

(a) Legal Basis

(50)

The detailed description of the DEPBS is contained in
paragraph 4.3 of the EXIM-policy 04-09 and in chapter
4 of the HOP I 04-09.

(b) Eligibility

(51) Any manufacturer-exporter or merchant-exporter

is

eligible for this scheme.

(c) Practical implementation of the DEPBS

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

(55) Application for DEPBS credits are electronically filed and
can cover an unlimited amount of export transactions.
De facto no strict deadlines apply to DEPBS credits. The
electronic system used to manage DEPBS is not excluding
automatically export transactions exceeding the deadline
submission periods mentioned in chapter 4.47 HOP I
04-09. Furthermore, as clearly provided in chapter 9.3
HOP I 04-09 applications received after the expiry of
submission deadlines can always be considered with the
imposition of a minor penalty fee (i.e. 10 % on the enti­
tlement).

(d) Conclusions on the DEPBS

(56)

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

(57)

the DEPBS is contingent

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

(53)

the

authorities

Indian customs

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

issue

(54) DEPBS credits are freely transferable and valid for a
period of 12 months from the date of issue. They can
be used for payment of customs duties on subsequent
imports of any goods unrestrictedly importable, except
capital goods. Goods imported against such credits can
be sold on the domestic market (subject to sales tax) or
used otherwise.

(58)

inputs used. Moreover,

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

is sufficient

it

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Official Journal of the European Union

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(59)

(e) Calculation of the subsidy amount

In this regard,

In accordance with Articles 2(2) and 5 of the basic Regu­
lation and the calculation methodology used for this
scheme in Regulation (EC) No 367/2006, the amount
of countervailable subsidies was calculated in terms of
the benefit conferred on the recipient
found to exist
during the RIP.
it was considered that
the benefit is conferred on the recipient at the point in
transaction is made under this
time when an export
scheme. At this moment, the GOI
is liable to forego
the customs duties, which constitutes a financial contri­
bution within the meaning of Article 2(1)(a)(ii) of the
basic Regulation. Once the customs authorities issue an
export shipping bill which shows, inter alia, the amount
of DEPBS credit which is to be granted for that export
transaction, the GOI has no discretion as to whether or
not to grant the subsidy. Furthermore, the cooperating
exporting producers booked the DEPBS credits on an
accrual basis as income at the stage of the export trans­
actions.

(60) Where

justified claims were made,

fees necessarily
incurred to obtain the subsidy were deducted from the
credits so established to arrive at the subsidy amount as
numerator, pursuant to Article 7(1)(a) of the basic Regu­
lation. In accordance with Article 7(2) of the basic Regu­
lation this subsidy amount has been allocated over the
export
turnover concerned during the review investi­
gation period as appropriate denominator, because the
subsidy is contingent upon export performance and it
was not granted by reference to the quantities manu­
factured, produced, exported or transported.

(61)

Four cooperating exporting producers obtained benefits
from this scheme during the RIP ranging from 2,7 % to
5,9 %.

4. Export

Promotion

Capital Goods

Scheme

(EPCGS)

(a) Legal basis

(62)

The detailed description of the EPCGS is contained in
chapter 5 of the EXIM-policy 04-09 and in chapter 5
of the HOP I 04-09.

(b) Eligibility

(63) Manufacturer-exporters, merchant-exporters

to’
supporting manufacturers and service providers are
eligible for this scheme.

‘tied

(c) Practical implementation

(64) Under the condition of an export obligation, a company
is allowed to import capital goods (new and — since
April 2003 — second-hand capital goods up to 10
years old) at a reduced rate of duty. To this end, the

(65)

(66)

(67)

(68)

(69)

goods

imported under

GOI issues upon application and payment of a fee an
EPCGS licence. Since April 2000, the scheme provides
for a reduced import duty rate of 5 % applicable to all
capital
scheme. Until
the
an effective duty rate of 11 %
31 March 2000,
(including a 10 % surcharge) and, in case of high value
imports, a zero duty rate was applicable. In order to meet
the export obligation, the imported capital goods must
be used to produce a certain amount of export goods
during a certain period.

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

(d) Disclosure comments

Following disclosure, one exporting producer highlighted
that the capital goods imported under this scheme were
also used for the production of products not concerned
with this investigation, and that, when determining the
subsidy margin, the subsidy amount established and at­
tributable to the RIP should be divided by exports of not
only the product concerned. This claim was found to be
warranted and an appropriate adjustment was made in
calculating the amount of benefit to this company under
this scheme.

(e) Conclusion on EPCG scheme

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.

Furthermore,
in law upon
the EPCGS is contingent
export performance, since such licences can not 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.

system

scheme

can not be

system or
the

considered a
Eventually,
this
substitution
permissible duty drawback
of
within
drawback
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.

meaning

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Official Journal of the European Union

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(f) Calculation of the subsidy amount

(c) Practical implementation

(70)

the benefit over

the full value of

The subsidy amount was calculated, in accordance with
Article 7(3) of the basic Regulation, on the basis of the
unpaid customs duty on imported capital goods spread
across a period which reflects the normal depreciation
period of such capital goods in the industry concerned.
In accordance with the established practice, the amount
so calculated, which is attributable to the RIP, has been
adjusted by adding interest during this period in order to
reflect
time. The
commercial interest rate during the review investigation
period in India was considered appropriate for
this
purpose. Where justified claims were made, fees neces­
sarily incurred to obtain the subsidy were deducted in
accordance with Articles 7(1)(a) of the basic Regulation.
In accordance with Article 7(2) and 7(3) of the basic
Regulation,
subsidy amount has been allocated
over the export turnover during the RIP as appropriate
denominator, because the subsidy is contingent upon
export performance
granted by
reference to the quantities manufactured, produced,
exported or transported.

and it was not

this

(71)

Four cooperating exporting producers obtained benefits
from this scheme during the RIP ranging from 1,0 % to
1,9 %.

(72)

(73)

5. Export

Processing
Zones
Scheme
Zones
Economic
Oriented Units Scheme (EOUS)

(EPZS)/Special
(SEZS)/Export

It was found that none of the cooperating exporting
producers had the status of an EOU nor were any of
them located in an EPZS. However, one of the coop­
erating exporting producers was located in an SEZS
and received countervailable subsidies in the RIP. The
description and assessment below is therefore limited
to the SEZS.

(a) Legal basis

Chapter 7 of the EXIM-policy 04-09 and chapter 7 the
HOP I 04-09 makes reference to SEZS. The details of the
rules and provisions are no longer in the EXIM policy
book and the Handbook of procedures. The relevant
policy and implementation provisions are the Special
Economic Zones Act of 2005 (No 28 of 2005) and
the Special Economic Zones Rules of 2006 (Notification
dated 10 February 2006).

(b) Eligibility

(74) All enterprises which, in principle, undertake to export
their entire production of goods or services may be set
up under the SEZS. This also includes pure trading
companies. Unlike EOUS,
are no minimum
investment thresholds in fixed assets which companies
have to fulfil to be eligible for the SEZS.

there

(75)

The SEZS is the successor scheme of the former Export
Processing Zones Scheme (EPZS). SEZS are specifically
delineated duty-free enclaves and considered as foreign
territory for the purpose of trade operations, duties and
taxes. SEZS units have to be located within specified
zones developed for that purpose. Seventeen SEZS are
already in operation following the approval of
their
establishment by the India authorities.

(76) An application for SEZ status must include details for the
next five years of, inter alia, planned production quan­
import requirements
tities, projected value of exports,
and indigenous requirements. Upon acceptance by the
authorities of the company’s application, the terms and
conditions attached to this acceptance will be commu­
nicated to the company. The agreement to be recognised
as a company under the SEZS is valid for a five-year
period. The agreement may be renewed for
further
periods.

(77) A crucial obligation for SEZS units as set out in Chapter
VI of Special Economic Zones Rules of 2006 is to
achieve Net Foreign Exchange (NFE) earnings,
in a
reference period (five years from the commencement of
commercial production), the total value of exports has to
be higher than the total value of imported goods.

i.e.

(78)

SEZS units are entitled to the following concessions:

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

raw materials

required

capital

for

(ii) exemption from excise duty on goods procured from

indigenous sources;

(iii) exemption from central sales tax paid on goods

procured locally;

(iv) the facility to sell part of the production on the
domestic market, subject to fulfilment of positive
NFE earnings upon payment of applicable duties as
the SEZS are not considered part of
the Indian
fiscal/customs territory;

(v) 100 % Income Tax Exemption on ‘profits

from
exports’
from SEZ units under Section 10AA of
the Income Tax Act for the first five years, 50 %
for the next five years thereafter and with the possi­
bility for further benefits for the next five years; and

(vi) exemption from service tax for services consumed in

an SEZ.

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(79) Units operating under SEZS are bonded under

the
surveillance of customs officials in accordance with the
relevant provisions of the Customs Act.

(80)

These units are legally obliged to maintain proper
accounts which should indicate in value terms
the
goods imported or procured from the domestic tariff
area, consumption and utilisation of goods, production
of goods and disposal of goods by way of exports, sales
in the domestic tariff area etc. in accordance with rule
22(2) of the Special Economic Zones Rules of 2006.

(86)

(81) However, at no point in time is a SEZ unit required to
co-relate every import consignment with its exports or
transfers to other units, or with its sales in the domestic
tariff area, according to rule 35 of the Special Economic
Zones Rules of 2006.

(82)

(83)

(84)

(85)

The assessment of imports and domestic procurement of
raw materials and capital goods is based on a self-certi­
fication basis. The same applies in case of export sales.
Thus, no routine examinations of such consignments of
an SEZ unit by customs authorities take place.

In the present case, the cooperating exporting producer
utilised the scheme to import raw materials and capital
goods free of import duties, to procure goods domes­
tically free of excise duty, to procure goods domestically
without payment of central sales tax, and to be exempted
the
from service tax. The investigation showed that
exporting producer concerned did not avail of benefits
under the income tax exemption provisions of the SEZS.

(d) Disclosure comments

Following disclosure, the exporting producer located in
an SEZS made a number of comments arguing e.g. that
the sub-schemes used by the company are permissible
duty exemption schemes (duty drawback) and that the
sub-schemes used do not constitute a subsidy since they
do not confer a benefit. The arguments of the exporting
producer are addressed below.

(e) Conclusions on the SEZS

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-SEZS 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
the input materials. Thus, by granting an
duty, not

(87)

(88)

exemption from excise duty on purchases by an SEZS
unit, no additional government revenue is forgone and
consequently no additional benefit accrues to the SEZS.
In these circumstances, as no additional benefit accrues
to the SEZS it is not necessary to further analyse this
sub-scheme in this investigation.

The exemption of a SEZS unit from two types of import
duties (basic customs duty and special additional customs
duty normally due on imports of raw materials and
the exemption from payment of sales
capital goods),
tax on goods procured domestically and the exemption
from service tax 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
SEZS unit within the meaning of Article 2(2) of the basic
Regulation, because
liquidity. 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 SEZS as set out in rule 2 of the Special
Economic Zones Rules of 2006 is a conditio sine qua
non to obtain the incentives.

improves

its

it

that

only

pursuant

drawback)

the sub-schemes
The exporting producer argued that
company constitute permissible duty
used by the
exemption (duty
to
schemes
Article 2(1)(a)(ii) and Annex I of the basic Regulation
and are therefore not countervailable. The company
to the basic Regulation
submitted that Annex (i)
provide
or
exemption,
drawback of import charges in excess of those levied
on imported inputs that are consumed in the production
of the exported product constitutes an export subsidy. In
other words, as long as there is no excess remission or
the exemption from imported duties on
exemption,
inputs
the manufacture, production or
processing of the exported product cannot be considered
as a countervailable subsidy.

required for

remission

the

In reply to this argument, it should first of all be noted
that the benefits an SEZ unit enjoys are all contingent in
law upon export performance. Furthermore, the schemes
cannot be considered as permissible duty drawback
systems or substitution drawback systems within the
the basic Regulation.
meaning of Article 2(1)(a)(ii) of
They do not conform to the strict rules laid down in
Annex I (items (h) and (i)), Annex II (definition and rules
(definition and rules for
for drawback) and Annex III
In the
substitution drawback) of the basic Regulation.
circumstance that the sales tax exemption 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,

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Official Journal of the European Union

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(import duty remission).

as required by Annex I item (h) (sales tax reimbursement)
item (i)
and by Annex I
In
addition,
the GOI has no
confirmed that
it was
effective verification system or procedure in place to
confirm whether and in what amounts duty and or the
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 Regu­
lation). In fact, an SEZ unit is required to achieve Net
Foreign Exchange (NFE) earnings, but there is no verifi­
cation system in place
the
consumption of imports in relation to the production
of exported goods.

to monitor

aiming

(89) As an alternative argument,

the exporting producer
submitted that the sub-schemes used by the company
do not constitute subsidies as no benefit had been
conferred upon the company. With respect to domestic
sales, the exporting producers argued that, since a SEZ
unit is not considered to be part of the India fiscal/­
customs territory, full customs duties need to be paid
on the finished products when sold to the domestic
market.
alleged that no benefit has been
obtained since duties exempted on the inputs used in
the production of goods sold on the domestic market
are lower than the duties paid by the company when
selling on the domestic market.

It was

(90)

In addressing this claim, it should be noted that though
the purpose for setting up as a SEZ unit is to achieve Net
Foreign Exchange (NFE) earnings, the SEZ unit has the
possibility to sell part of its production on the domestic
market. Under the SEZ scheme, the goods cleared from
the zone to the domestic market will be treated as
imported goods. As such, an SEZ is not in a different
situation than other
companies operating on the
domestic market, i.e. applicable duties/taxes would have
to be paid on purchased goods. In this context, it should
be clear that, a decision of the Government to tax goods
for consumption on the domestic market, does not
mean, that the exemption of a SEZS unit from import
duties and sales taxes is not a benefit in relation to the
export sales of the product concerned. Moreover, the
sales on the domestic market have no impact on the
more general assessment of
the adequacy of whether
there is an appropriate verification system in place.

(91)

In respect of export sales, the exporting producer argued
that the exemption from import duties and taxes does
not constitute a countervailable subsidy as long as there
is no excess remission. The company further argues that
the SEZ unit is bonded under surveillance of customs
officials, and that it is not possible to sell
inputs on
the domestic market or to incorporate these inputs in
products to be sold on the domestic market without

paying the
exporting producer,
remission.

applicable duties.

there

can be

In the view of

the
thus no excess

(92)

In reply to this,
it should be recalled that there is no
system or procedure in place to confirm which inputs are
the exported
consumed in the production process of
product and whether an excess payment of
import
and taxes occurred within the meaning of
duties
Annexes I,
II and III to the basic Regulation. A SEZ
unit is already de jure and at no point in time required
to co-relate every import consignment with the desti­
nation of 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. Company internal systems would
not as such suffice since a duty drawback verification
system would need to be designed and enforced by a
government. Consequently, the investigation has estab­
lished that
the SEZ is explicitly not required by the
legal rules and provisions for SEZS to record nexus
between imported 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.

(93) 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 veri­
fication 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.

(f) Calculation of the subsidy amount

(94) Accordingly,

in the

a permitted duty
absence of
drawback system or substitution drawback system, the
the remission of customs
countervailable benefit
customs duty
duties
additional
(basic
customs duty)
the exemption from payment of sales
tax for goods procured domestically and the exemption
from service tax, during the investigation period.

and special

is

(95) As

regards

the exemption from payment of basic
customs duties, the exemption from payment of sales
tax for goods procured domestically and the exemption
from service tax, the numerator (subsidy amount) was
calculated on the basis of
the exempted amounts
during the RIP. 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.

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Official Journal of the European Union

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from payment of

(96) Unlike raw materials, capital goods are not physically
in
incorporated into the finished goods. Accordingly,
taxes on
regard to exemptions
the subsidy amount was
purchases of capital goods,
in accordance with Article 7(3) of the basic
calculated,
Regulation, on the basis of the unpaid customs duty on
imported capital goods spread across a period which
reflects the normal depreciation period of such capital
In accordance with
goods in the industry concerned.
so calculated,
the
which is attributable to the RIP, has been adjusted by
adding interest during this period in order to reflect
the full value of the benefit over time. The commercial
interest rate during the RIP in India was considered
substantiated
appropriate
fees necessarily incurred to obtain
claims were made,
the
accordance with
subsidy were
Article 7(1)(a) of the basic Regulation.

this purpose. Where

established practice,

the amount

deducted

for

in

(97)

In accordance with Article 7(2) of the basic Regulation
these subsidy amounts thus established under recital 95
and recital 96 above were allocated over the export
turnover generated during the RIP as the appropriate
denominator, because the subsidy is contingent upon
export performance
granted by
reference to the quantities manufactured, produced,
exported or
subsidy margin thus
obtained was 5,4 %.

and it was not

transported. The

(RBI), which is addressed to all commercial banks in
India.

(b) Eligibility

(101) Manufacturing exporters and merchant exporters are
eligible for this scheme. It was established that three of
the exporting producers availed of benefits under the
ECS.

(c) Practical implementation

(102) Under this scheme, the RBI mandatorily sets maximum
ceiling interest rates applicable to export credits, both in
Indian rupees or in foreign currency, which commercial
banks can charge an exporter. 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, manufac­
turing, 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.

6. Income Tax Exemption Scheme (ITES)

(98) Under this scheme exporters could avail the benefit of a
partial
income tax exemption on profits derived from
export sales. The legal basis for this exemption was set
by Section 80HHC of the ITA.

(103) As a result of the RBI Master Circulars exporters can
obtain export credits at preferential
rates as
compared with the interest rates for ordinary commercial
credits (cash credits), which are purely set under market
conditions. The difference in rates might decrease for
companies with good credit ratings. In fact, high rating
companies might be in a position to obtain export
credits and cash credits at the same conditions.

interest

(99)

This provision was abolished for the assessment year
2005-2006 (i.e.
for the financial year from 1 April
2004 to 31 March 2005) onwards and thus 80HHC of
the ITA does not confer any benefits after 31 March
2004. The cooperating exporting producers did not
avail any benefits under this scheme during the RIP.
Consequently, since the scheme has been withdrawn, it
shall therefore not be countervailed, in accordance with
Article 15(1) of the basic Regulation.

7. Export Credit Scheme (ECS)

(a) Legal basis

(100) The details of

in the Master
the scheme are set out
Circular DBOD No DIR.(Exp).BC 02/04.02.02/2007-08
(Export Credit
in Foreign Currency) and the Master
Circular DBOD No DIR.(Exp).BC 01/04.02.02/2007-08
India
(Rupee Export Credit) of

the Reserve Bank of

(d) Conclusion on the ECS

in this

case a benefit

financing is not per
it

(104) The preferential interest rates of an ECS credit set by the
RBI Master Circulars mentioned in recital 100 can
decrease the interest costs of an exporter as compared
with credit costs purely set by market conditions and
confer
in the meaning of
Article 2(2) of the basic Regulation on such exporter.
se more
Export
than
domestic financing.
is usually perceived as
being more risky and the extent of security required
for a certain credit, regardless of the finance object,
is
a purely commercial decision of a given commercial
bank. Rate differences with regard to different banks
are the result of the methodology of the RBI to set
maximum lending rates for each commercial bank indi­
In addition, commercial banks would not be
vidually.
export
obliged to pass
through to borrowers of
financing any more advantageous
for
export credits in foreign currency.

In fact,

interest

secure

rates

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L 6/13

It

reimbursement of

the basic Regulation.

(105) 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 Regulation. In this
context, it should be noted that neither Article 2(1)(a)(iv)
of the basic Regulation nor the ASCM require a charge
on the public accounts, e.g.
the
commercial banks by the GOI, to establish a subsidy,
but only government direction to carry out functions
illustrated in points (i), (ii) or (iii) of Article 2(1)(a) of
the basic Regulation. The RBI is a public body and falls
therefore under the definition of ‘government’ as set out
in Article 1(3) of
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, with regard to 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
in this case provide loans in the form of
Regulation,
preferential export
transfer of
funds in the form of
loans under certain conditions
would normally be vested in the government, and the
practice differs, in no real sense, from practices normally
followed by governments, within the meaning of
Article 2(1)(a)(iv) of the basic Regulation. This subsidy
is deemed to be specific and countervailable since the
interest rates are only available in relation
preferential
and are
to the
therefore
performance,
pursuant to Article 3(4)(a) of the basic Regulation.

financing of
contingent

transactions
export

financing. Such direct

export
upon

(e) Calculation of the subsidy amount

(106) The subsidy amount has been calculated on the basis of
the difference between the interest paid for export credits
used during the RIP and the amount that would have
been payable for ordinary commercial credits used by the
cooperating exporting producers. This subsidy amount
(numerator)
export
been allocated
turnover during the RIP as appropriate denominator in
the basic Regulation,
accordance with Article 7(2) of
because
export
upon
performance and it was not granted by reference to the
quantities manufactured, produced, exported or trans­
ported.

contingent

subsidy

over

has

the

the

is

(107) Three cooperating exporting producers obtained benefits
from this scheme during the RIP ranging from 0,3 % to
0,4 %.

(108)

8. Package Scheme of Incentives (PSI)

(a) Legal basis

to

several
granted

In previous investigations regarding PET film, including
the review investigation that led to the imposition by
Regulation (EC) No 367/2006 of the definitive counter­
Indian State
vailing duty currently in force,
schemes
local
incentives
involving
companies were investigated. The State schemes fall
under the heading ‘Package Scheme of Incentives’ (PSI),
as there can be different kind of incentives involved. The
investigation established that a company’s entitlement to
benefits under the scheme is stipulated in the ‘Eligibility
Certificate’. The investigation revealed that two of the
cooperating producers enjoyed trade tax (sales
tax)
exemption under the PSI during the RIP pursuant to
Section 4A of
the State of Uttar Pradesh Trade Tax
Act. This tax provision excuses home-market sales by a
company from payment of sales tax (both local sales tax
and central sales tax).

(b) Eligibility

(109)

In order to be eligible, companies must as a general rule
invest in less developed areas of a state 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. 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.

(c) Practical implementation

(110) Under the sales tax exemption schemes, designated units
were not required to collect any sales tax on their sales
transactions. Similarly, designated units were exempted
from the payment of sales tax on their purchases of
goods from suppliers eligible for the schemes. Whereas
the exemption in relation to sales transaction is not
considered to confer any benefit on the designated
sales units, the exemption in relation to purchase trans­
actions, however, does confer a benefit on the designated
purchasing units.

(d) Disclosure comments

(111) Following disclosure, one exporting producer noted that,
when quantifying the benefit received under this scheme,
it has been considered that the suppliers of a main raw
material used in the production of the product concerned
enjoyed exemption from sales tax. The sales invoices,
however, revealed that the suppliers in question did, in
fact, charge the tax on their sales to the company
concerned. Consequently, as the sales tax was paid by
the company, no countervailable benefit arose for the
exporting producer on these purchases,
and the
amount of subsidy was revised accordingly.

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Official Journal of the European Union

10.1.2009

(e) Conclusion

(112) The PSI provides

subsidies within the meaning of
Article 2(1)(a)(ii) and Article 2(2) of the basic Regulation.
The exemption from payment of sales taxes on purchases
constitutes a financial contribution, since this concession
decreases the government’s revenue which would be
otherwise due.
this exemption confers a
benefit upon the companies as it improves their liquidity.

In addition,

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

scheme

specific

in

is

(f) Calculation of the subsidy amount

(114) Concerning the sales tax exemption, the subsidy amount
was calculated on the basis of the amount of the sales tax
normally due during the RIP but which remained unpaid.

turnover of export and domestic sales
over the total
during the review investigation period as the appropriate
denominator, because
export-
contingent and it was not granted by reference to the
quantities manufactured, produced, exported or trans­
ported.

subsidy

is not

the

(116) The

two cooperating exporting producers obtained
subsidies from this scheme during the RIP of 0,3 %
and 1,4 % respectively.

9. Amount of countervailable subsidies

(117)

the

It is recalled that in Regulation (EC) No 367/2006 and
subsequent amendments, referred to in recitals 2, 3 and
4 above,
subsidies,
expressed ad valorem, was found to be ranging from
12 % to 19,1 % for
cooperating
the
exporting producers
that cooperated in the present
partial interim review.

countervailable

amount of

concerned

(115) Pursuant

the
amount of subsidy (numerator) has then been allocated

the basic Regulation,

to Article 7(2) of

(118) During the present partial interim review the amount of
countervailable subsidies, expressed ad valorem, was found
to be ranging from 5,4 % to 8,6 %, as listed hereunder:

AAS (*)

DEPBS (*)

EPCGS (*)

SEZS (*)

ECS (*)

Scheme→

Company↓

Ester Industries Limited

Garware Polyester
Limited

Polyplex Corporation
Limited

SRF Limited

%

0,5

1,7

%

5,8

3,9

3,2

%

1,0

1,0

1,9

PSI

%

%

%

0,4

Negligible

0,4

1,4

5,4

Total

%

7,2

5,4

8,6

5,4

6,4

Uflex Limited

2,1

2,7

1,0

0,3

0,3

(*) Subsidies marked with an asterisk are export subsidies.

10. Countervailing measures

(119)

In line with the provisions of Article 19 of the basic
Regulation and the grounds of
interim
review stated under point 3 of the Notice of Initiation,
it is established that the level of subsidisation with regard
to the concerned exporting producers has decreased and,
therefore, the rates of countervailing duties imposed to

this partial

exporting producers by Regulation (EC) No

these
367/2006 should be amended accordingly.

(120) The amended countervailing duty rates should be estab­
lished at the new rates of subsidisation found during the
present interim review, as the injury margins calculated
in the original anti-subsidy investigation remains higher.

10.1.2009

EN

Official Journal of the European Union

L 6/15

interim review,

the actual modalities of

that were not
(121) With regard to all other companies
it is
concerned by the present partial
noted that
the investigated
schemes and their countervailability have not changed
with respect to the previous investigation. Thus there is
no reason to recalculate the subsidy and duty rates of
these companies. Consequently,
the duty
applicable to all other parties except the five exporting
producers that cooperated in the current review remain
unchanged.

the rates of

(122) The

company

individual

countervailing duty

rates
specified in this Regulation reflect the situation found
interim review. Thus, they are solely
during the partial
applicable to imports of the product concerned produced
by these companies. Imports of the product concerned
manufactured by any other company not specifically
this Regulation,
mentioned in the operative part of
specifically
including
mentioned, cannot benefit
from these rates and shall
to the duty rate applicable to ‘all other
be subject
companies’.

entities

related

those

to

(123) 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 (1) forthwith with all relevant information,
in particular any modification in the company’s activities
linked to production, domestic and export sales associ­
ated 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 Regu­
lation will be amended accordingly by updating the list
of companies benefiting from individual duty rates.

11. Anti-dumping measures

(124) As provided in the last paragraph under point 3 of the
Notice of Initiation, the amendment of the countervailing
duty rate will have an impact on the definitive anti-
dumping
(EC) No
1292/2007, as the latter in previous anti-dumping inves­
tigations was adjusted in order to avoid any double
counting of
from export
subsidies (it is recalled that the definitive anti-dumping
duty was based on the dumping margin since the latter

effects of benefits

by Regulation

imposed

duty

the

(1) European Commission, Directorate General for Trade — Directorate
B, N105, 04/90, Rue de la Loi/Wetstraat 200, 1049 Brussels,
Belgium.

It was found in the original

was found to be lower than the injury elimination level).
Article 24(1) of the basic Regulation and Article 14(1) of
Regulation (EC) No 384/96 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 subsidi­
sation.
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 Regulation. As
such, these subsidies affected the export prices of the
thus leading to increased
Indian exporting producers,
pursuant
margins
to
Therefore,
Article 24(1) of
the definitive
the
anti-dumping duty rates were adjusted to reflect
actual dumping margin remaining after the imposition
of the definitive countervailing duty offsetting the effect
of
the export subsidies (see recital 59 of Regulation
(EC) No 366/2006 and recital 11 of Regulation (EC)
No 1424/2006).

the basic Regulation,

dumping.

of

(125) Consequently, the definitive anti-dumping duty rates for
the exporting producers concerned 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 to reflect
the actual dumping
margin remaining after the imposition of the adjusted
definitive countervailing duty offsetting the effect of the
export subsidies.

(126) The dumping margins previously established in respect of
Ester
Industries Limited, Garware Polyester Limited,
Polyplex Corporation Limited and Uflex Limited (at that
time known as Flex Industries Limited) (2), were estab­
lished in Regulation (EC) No 366/2006 (see recital 50)
and amounted for the four companies concerned to
29,3 %, 20,1 %, 3,7 % and 3,2 % respectively. The level
of the dumping margin for SRF Limited established in
Regulation (EC) No 1424/2006 was 15,5 %.

(127) Taking into the account

from exports
the benefits
level of
the
subsidies
found in the RIP and the
the margins
dumping margin previously established,
and duty rates applicable to the companies concerned
should therefore be calculated as indicated in the table
below:

(2) OJ L 68, 8.3.2006, p. 6.

L 6/16

EN

Official Journal of the European Union

10.1.2009

Company

Export
subsidy
margin

Total subsidy
margin

Dumping
margin
previously
established

CVD duty

AD duty

Total duty
rate

Ester Industries Limited

7,2 %

7,2 %

29,3 %

7,2 %

22,1 %

29,3 %

Garware Polyester Limited

5,4 %

5,4 %

20,1 %

5,4 %

14,7 %

20,1 %

Polyplex Corporation Limited

7,2 %

8,6 %

3,7 %

8,6 %

0,0 %

8,6 %

SRF Limited

5,4 %

5,4 %

15,5 %

5,4 %

10,1 %

15,5 %

Uflex Limited

6,1 %

6,4 %

3,2 %

6,4 %

0,0 %

6,4 %

(128)

In order to take account of the revised level of anti-dumping duty for the five exporting producers
concerned, Regulation (EC) No 1292/2007 should be amended accordingly,

HAS ADOPTED THIS REGULATION:

Article 1

Article 1(2) of Regulation (EC) No 367/2006 shall be replaced by the following:

‘2.
The rate of the definitive countervailing duty applicable to the net free-at-Community-frontier
price, before duty, of the products manufactured by the companies listed below, shall be as follows:

Company

Definitive duty (%)

TARIC
additional code

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

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

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

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

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

SRF Limited, Block C, Sector 45, Greenwood City, Gurgaon 122 003,
Haryana, India

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

All other companies

7,2

5,4

17,1

8,7

8,6

5,4

6,4

19,1

A026

A028

A030

A031

A032

A753

A027

A999’

Article 2(2) of Regulation (EC) No 1292/2007 shall be replaced by the following:

Article 2

‘2.
The rate of the definitive anti-dumping duty applicable to the net, free-at-Community-frontier
price, before duty, of the products manufactured by the companies listed below, shall be as follows:

10.1.2009

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Official Journal of the European Union

L 6/17

Company

Definitive duty (%)

TARIC additional
code

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

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

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

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

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

SRF Limited, Block C, Sector 45, Greenwood City, Gurgaon 122 003,
Haryana, India

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

All other companies

22,1

14,7

0,0

18,0

0,0

10,1

0,0

17,3

A026

A028

A030

A031

A032

A753

A027

A999’

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

Article 3

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

Done at Brussels, 8 January 2009.

For the Council
The President

K. SCHWARZENBERG