Proposition de RÈGLEMENT DU CONSEIL instituant un droit compensateur définitif et portant perception définitive du droit provisoire institué sur les importations de certains types de polyéthylène téréphtalate originaires de l'Iran, du Pakistan et des Émirats arabes unis
Date: 2010-08-31
Institutions: European Commission
Subjects: Iran, Pakistan, United Arab Emirates, countervailing charge, import, originating product, plastics

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EUROPEAN COMMISSION  

Brussels, 31.8.2010 
COM(2010) 455 final 

2010/0238 (NLE) 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive countervailing duty and collecting definitely the provisional duty 
imposed on imports of certain polyethylene terephthalate originating in Iran, Pakistan 
and the United Arab Emirates 

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EXPLANATORY MEMORANDUM 

1) CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

This proposal concerns the application of Council Regulation (EC) No 597/2009 of 11 
June 2009 on protection against subsidised imports from countries not members of the 
European Community (‘the basic Regulation’) in the proceeding concerning imports of 
certain  polyethylene  terephthalate  originating  in  Iran,  Pakistan  and  the  United  Arab 
Emirates. 

•  General context 

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

Existing provisions in the area of the proposal 

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

•  Consistency with other policies and objectives of the Union 

Not applicable. 

2) CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

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

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

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

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

3) LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

On 3 September 2009, the Commission announced by a notice (‘notice of initiation’), 
published  in  the  Official  Journal  of  the  European  Union,  the  initiation  of  an  anti-
subsidy  proceeding  concerning  imports  into  the  Union  of  certain  polyethylene 

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terephthalate originating in Iran, Pakistan and the United Arab Emirates.. 

The  anti-subsidy  proceeding  was  initiated  following  a  complaint  lodged  on  20  July 
2009  by  the  Polyethylene  Terephthalate  Committee  of  Plastics  Europe  (‘the 
complainant’)  on  behalf  of  producers  representing  a  major  proportion  of  the  total 
Union  production  of  certain  polyethylene  terephthalate  containing  evidence  of 
subsidisation and of material injury resulting there from. 

On  1  June  2010,  the  Commission  imposed,  by  Regulation  (EU)  No  473/2010,  a 
provisional  countervailing  duty  on  imports  into  the  Union  of  certain  polyethylene 
terephthalate originating in Iran, Pakistan and the United Arab Emirates ranging from 
5,1 % to 17 %.  

The  enclosed  Commission  proposal  for  a  Council  Regulation  imposing  a  definitive 
countervailing duty ranging from 5,1 % to 16,7 % contains the definitive conclusions 
regarding subsidisation, injury, causation and Union interest. 

The  findings  of  the  case  were  presented  to  Member  States  during  the  Anti-Dumping 
and Anti-Subsidy Committee of 28 July 2010. 11 Member States were in favour of the 
proposed course of action, 6 opposed and 10 abstained. 

It  is  proposed  that  the  Council  adopt  the  attached  proposal  for  a  Regulation  which 
should be published in the Official Journal of the European Union by 1 October 2010 
at the latest. 

•  Legal basis 

Council  Regulation  (EC)  No  597/2009  of  11  June  2009  on  protection  against 
subsidised  imports  from  countries  not  members  of  the  European  Community  (‘the 
basic Regulation’). 

•  Subsidiarity principle 

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

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

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

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

•  Choice of instruments 

Proposed instruments: regulation. 

Other means would not be adequate for the following reason: 

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

4) BUDGETARY IMPLICATION 

The proposal has no implication for the Union budget. 

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2010/0238 (NLE) 

Proposal for a 

COUNCIL REGULATION 

imposing a definitive countervailing duty and collecting definitely the provisional duty 
imposed on imports of certain polyethylene terephthalate originating in Iran, Pakistan 
and the United Arab Emirates 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, 

Having  regard  to  Council  Regulation  (EC)  No  597/2009  of  11  June  2009  on  protection 
against  subsidised  imports  from  countries  not  members  of  the  European  Community  (‘the 
basic Regulation’)1, and in particular Article 15 thereof, 

Having  regard  to  the  proposal  submitted  by  the  European  Commission  ('the  Commission') 
after consulting the Advisory Committee, 

Whereas: 

1.1. 

(1) 

(2) 

(3) 

1. 

PROCEDURE 

Provisional measures 

The  Commission,  by  Regulation  (EU)  No  473/20102  (‘the  provisional  Regulation’) 
imposed  a  provisional  countervailing  duty  on  imports  of  certain  polyethylene 
terephthalate originating in Iran, Pakistan and the United Arab Emirates (‘the countries 
concerned’). 

The  proceeding  was  initiated  following  a  complaint  lodged  on  20  July  2009  by  the 
Polyethylene  Terephthalate  Committee  of  Plastics  Europe  ('the  complainant')  on 
behalf of producers representing a major proportion, in this case more than 50%, of the 
total Union production of certain polyethylene terephthalate. 

As  set  out  in  recital  (15)  of  the  provisional  Regulation,  the  investigation  of 
subsidisation  and  injury  covered  the  period  from  1  July  2008  to  30 June 2009  (‘the 
investigation period’ or ‘IP’). The examination of trends relevant for the assessment of 
injury  covered  the  period  from  1  January  2006  to  the  end  of  the  IP  (‘period 
considered’).  

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OJ L 188, 18.7.2009, p. 93. 
OJ L 134, 1.6.2010, p. 25.  

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(4) 

1.2. 

(5) 

(6) 

(7) 

(8) 

1.3. 

(9) 

In  the  parallel  anti-dumping  proceeding,  the  Commission  by  Regulation  (EU) 
472/20103 
imports  of  certain 
imposed  a  provisional  anti-dumping  duty  on 
polyethylene terephthalate originating in Iran and the United Arab Emirates. 

Subsequent procedure 

Subsequent to the disclosure of the essential facts and considerations on  the basis of 
which  it  was  decided  to  impose  provisional  countervailing  measures  ('provisional 
disclosure'),  several  interested  parties  made  written  submissions  making  their  views 
known on the provisional findings. The parties who so requested were also granted the 
opportunity to be heard.  

The Commission continued to seek and verify all information it deemed necessary for 
its  definitive  findings.  The  oral  and  written  comments  submitted  by  the  interested 
parties  following  the  provisional  disclosure  were  considered  and,  where  appropriate, 
the provisional findings were modified accordingly 

All  parties  were  informed  of  the  essential  facts  and  considerations  on  the  basis  of 
which it was intended to recommend the imposition of a definitive countervailing duty 
on imports of certain polyethylene terephthalate originating in  Iran, Pakistan and the 
United Arab Emirates and the definitive collection of the amounts secured by way of 
the provisional duty ('final disclosure'). They were also granted a period within which 
they could make representations subsequent to this disclosure. 

The  oral  and  written  comments  submitted  by  the  interested  parties  were  considered 
and, where appropriate, the findings were modified accordingly. 

Parties concerned by the proceeding 

Some  interested  parties  claimed  that  the  sample  of  EU  producers  was  not 
representative and inconsistent and that therefore the injury analysis was deficient. In 
particular,  it  was  claimed  that  sampling  was  not  necessary  since  the  number  of 
producers  was  not  large.  In  addition,  it  was  claimed  that  by  "artificially"  splitting 
company groups into individual legal entities, the sample would not contain some of 
the  market  leaders  (Artenius,  M&G  Polimeri)  and  that  the  methodology  for  the 
selection  of  the  sample  is  inconsistent  since  the  sample  also  included  two  groups  of 
companies. It was also claimed that the sample was not representative since it did not 
contain any producer that is selling to a related PET processor in sufficient quantities. 
As a result, the institutions allegedly could not assess the real supply capability of the 
Union industry and did not take into account the Union industry's conflict of interest. 
Moreover,  as  one  company  did  not  provide  all  necessary  information  and  was 
excluded  from  the  sample,  the  representativity  allegedly  dropped  to  28%  of  EU 
production.  The  same  parties  claimed  that  the  selected  sample  was  not  statistically 
valid. 

(10)  With  regard  to  the  argument  that  sampling  was  not  necessary  since  the  number  of 
producers  was  not  large,  it  is  reiterated  that  in  the  sampling  exercise  14  Union 
producers  belonging  to  eight  groups  of  companies  came  forward.  Given  the 
objectively  high  number  of  EU  producers  that  cooperated,  i.e.  14,  sampling  was 

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OJ L 134, 1.6.2010, p. 4. 

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applied  in  accordance  with  Article  27(1)  of  the  basic  Regulation  on  the  basis  of  the 
largest representative volume of sales that could reasonably be investigated within the 
time  available.  The  sample  selected  consisted  of  five  individual  companies  (with  six 
producing locations).  

(11)  With regard to the first claim concerning the representativity of the sample, it should 
be  noted  that  the  institutions  can  include  individual  companies  which  are  part  of  a 
company group within the sample as long as they are representative and have separate 
financial  accounts.  Otherwise,  investigating  all  fourteen  EU  producers  belonging  to 
the  eight  groups  of  companies  would  have  prevented  the  timely  completion  of  the 
investigation.  However,  the  fact that two company groups have been included in the 
sample is not inconsistent with the sampling methodology applied in this case, i.e. the 
largest representative volumes of sales to EU clients. 

(12)  As regards Indorama, this group had two different production plants in the IP – one in 
the Netherlands and the other one in UK. Including this group in the sample is in line 
with the sampling methodology applied since those plants formed one entity from the 
legal  and  financial  perspective.  As  regards  Equipolymers,  which  had  two  separate 
entities  producing  PET  in  the  IP  (one  in  Italy  and  another  one  in  Germany),  the 
company reported consolidated figures for both locations. Given that the verification 
of  these  consolidated  figures  was  possible  during  one  visit  at  the  company's 
headquarters, it was decided to treat Equipolymers PET producing companies as one 
entity for the  purpose  of this proceeding. With regard to the claim that Artenius and 
M&G Polimeri had to be included in the sample because they were the market leaders, 
it  is  noted  that  none  of  their  individual  entities  belonged  to  the  companies  with  the 
highest volumes of sales to EU clients. 

(13)  As regards the claim that the sample was not representative because it did not include 
one producer  who  produces  mainly  for internal consumption, it should be noted  that 
the  capability  to  supply  can  be  examined  in  the  framework  of  the  Union  interest 
analysis if such a claim is made and for that purpose the captive consumption can be 
deducted from the production volume. Thus, there is no need to have such a producer 
in  the  sample  for  the  examination  of  certain  injury  factors.  Secondly,  any  double 
interest resulting from the position of a company as EU producer and processor at the 
same  time  can  also  be  assessed  in  the  Union  interest  analysis.  The  position  of  a 
company  as  EU  producer  and  processor  is  not  linked  with  the  performance  of  the 
Union  industry  where  sales  to  unrelated  customers  in  the  EU  are  taken  as  a 
benchmark. The claim is thus rejected.  

(14)  With  regard  to  the  claim  concerning  the  overall  representativity  of  the  sample,  it  is 
reiterated  that  the  reduction  of  the  sample  to  four  companies  lowered  the 
representativity from 65% to 47% of the sales by all cooperating producers. The same 
four companies accounted for 52% of the Union production. This is considered to be a 
representative sample of the EU producers in terms of sales to independent customers 
in the EU. 

(15)  As regards the claim that the sample selected was not statistically valid, it is noted that 
Article  27(1)  of  the  basic  Regulation  clearly  allows  for  a  sample  to  be  based  on  the 
largest  representative  volume  of  the  sales  that  can  reasonably  be  investigated  in  the 
time available, as an alternative for a "statistically valid" sample.  

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(16) 

In the absence of any other comments concerning the sampling, the findings in recitals 
(5) to (14) of the provisional Regulation are hereby confirmed.  

2. 

PRODUCT CONCERNED AND LIKE PRODUCT 

(17) 

It is recalled that, in recital (16) of the provisional Regulation, the product concerned 
was  defined  as  polyethylene  terephthalate  having  a  viscosity  number  of  78  ml/g  or 
higher, according to the ISO Standard 1628-5, originating in the countries concerned 
and currently falling within CN code 3907 60 20.  

(18)  Moreover,  in  recital  (18)  of  the  provisional  Regulation,  it  was  stated  that  the 
investigation showed that PET produced and sold in the Union by the Union industry, 
and the PET produced and sold on the domestic markets of the countries concerned, 
and exported to the Union were like products. 

(19)  Since the product under investigation was considered a homogeneous product, it was 

not further subdivided into different product types for calculating the injury margins. 

(20)  One exporting producer claimed that PET should be subdivided into different product 
types  according  to  their  different  viscosity  numbers  since  the  viscosity  number  is 
essential to determine the different possible applications of the PET type produced. It 
was considered that the claim should be accepted and the methodology for calculating 
injury margins was adapted accordingly.  

3. 

SUBSIDISATION 

3.1. 

IRAN  

3.1.1. 

Introduction 

(21)  The Government of Iran and the cooperating exporting producer submitted comments 

on the following schemes, countervailed in the provisional Regulation: 

(I) Measures connected to Special Economic Zones (‘SEZs’) – Petrochemical SEZ 

(II) Financing from National Petrochemical Company to the PET exporting producer 

3.1.2.  Specific Schemes 

(I) Measures connected to Special Economic Zones (SEZs) – Petrochemical SEZ 

(22)  The Government of Iran (GOI) disputed that duty-free imports in Free Trade Zones of 
raw  materials  and  capital  goods  can  be  countervailed.  Free  Trade  Zone  and  Special 
Economic Zones are by definition duty-free zones for import and export, compatible 
with  the  WTO.  Besides,  the  GOI  as  well  as  the  cooperating  exporting  producer 
asserted that the import of duty-free capital goods is not contingent in law on export 
performance  because  this  exemption  exists  also  for  the  companies  established  in  the 
rest of the Iranian territory. 

(23)  With respect to the compliance of SEZs with WTO rules, it is noted that the general 
argument submitted cannot dispute the established facts that the subsidies in question 
are countervailiable as no elaborated analysis was provided to rebut the one presented 

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in  the  provisional  Regulation.  With  regards  to  the  duty-free  importation  of  capital 
goods  in  Iran,  the  information  at  the  time  submitting  comments  on  the  provisional 
disclosure suggests that this possibility exists only for companies that are modernizing 
their  infrastructure,  i.e.  it  is  not  an  automatic  provision  applicable  to  all  parties. 
Therefore, the above claims had to be rejected. 

(24)  The  cooperating  exporting  producer  argued  that  the  Commission  disregarded  the 
principle of non-discrimination given that similar rules and regimes are also applied in 
other  countries.  The  company  also  claimed  that  the  Commission  did  not  correctly 
inform  it  of  the  scope  of  the  verification  visit  and  the  corresponding  information 
requirements before such verification. 

(25)  As regards the general allegation of violation of the principle of non-discrimination, it 
is  recalled  that  the  Commission  initiated  this  anti-subsidy  investigation  against  the 
three countries mentioned in the complaint in line with the provisions of Article 10 of 
the basic Regulation. Thus the Commission’s recommendation could only be based on 
the findings of this investigation. As to the alleged lack of advance information on the 
points  to  be  investigated,  it  is  noted  that  the  Commission  informed  the  cooperating 
exporting  producer  well  in  advance  of  the  verification  visit  that  it  would  seek 
information  during  the  verification  visit  on  the  relationship  between  the  exporting 
producer and its shareholder. Therefore, these claims had to be rejected. 

(26)  The  cooperating  exporting  producer  brought  to  the  attention  of  the  institutions  two 
clerical  mistakes  in  the  calculation  of  the  duty  exemption  on  imports  of  one  raw 
material  of  the  production  process  and  in  the  total  import  value  of  capital  goods 
exempted. Those errors are herein corrected. The revised subsidy rates are 0,14% for 
the  duty-free  import  of  input  products  and  0,72%  for  the  duty-free  import  of  capital 
goods. The revised total subsidy rate for this scheme is 0,86%.  

(27) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings in relation to this scheme as set out in recitals (20) to (44) of the provisional 
Regulation,  as  modified  by  recital  (26)  of  the  present  Regulation,  are  hereby 
confirmed.  

(II) Financing from National Petrochemical Company to the PET exporting producer 

(28)  The cooperating exporting producer (Shahid Tondguyan Petrochemical Co. or STPC) 
claimed  that  its  main  shareholder,  National  Petrochemical  Company  (NPC),  is  not  a 
public body and that the GOI neither entrusted nor directed NPC to make payments to 
STPC.  In  addition,  it  was  submitted  that  the  NPC  financing  to  the  STPC  has  to  be 
considered as repayable and thus not a subsidy.  

(29) 

In  addressing  these  claims,  it  should  be  recalled  that,  in  order  to  assess  whether  an 
entity  should  be  considered  as  a  public  body  for  purposes  of  anti-subsidy 
investigations,  the  following  factors  are  relevant:  1)  government  ownership;  2)  the 
government’s presence on the entity’s board of directors; 3) the government’s control 
over the entity’s activities and the entity’s pursuit of governmental policies or interests 
and  4)  whether  the  entity  is  created  by  statute.  All  these  requirements  have  been 
analysed  as  reported  in  recital  (52)  of  the  provisional  Regulation.  The  NPC,  as  a 
government  body,  does  not  need  entrustment  or  delegation,  concepts  that  refer  to 
private entities. In fact the investigation has established that NPC's role is to develop 

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and  operate  the  country’s  petrochemical  sector  and  that  the  company  has  received 
from  the  GOI  the  additional  task  of  managing  as  a  state  administrative  authority  the 
Petrochemical Special Economic Zone. Thus any claim disputing NPC’s public body 
role has to be rejected. 

(30)  With  regards  to  the  claim  that  the  financing  to  STPC  is  repayable,  it  is  pertinent  to 
note that the investigation has established that the repayment of this funding is only a 
hypothetical allegation as no evidence was provided at any stage of the proceeding that 
such  repayment  has  materialized.  Indeed,  as  explained  in  the  recital  (51)  of  the 
provisional Regulation, the fact that the non-repayable funds have been accumulated 
since at least 2004 confirms that this is a recurring subsidy, the purpose of which is to 
keep  in  operation  the  sole  cooperating  Iranian  exporting  producer.  Account  taken  of 
the above, the relevant claim has to be rejected. 

(31)  The  cooperating  exporting  producer  also  argued  that  the  subsidy  amount  was 
overstated. To this respect it was claimed that it is a perfectly normal business practice 
in  Iran  not  to  add  interest  between  a  parent  company  (in  this  case  NPC)  and  its 
subsidiary  (in  this  case  STPC).  It  was  also  argued  that  when  calculating  the  subsidy 
rate the amounts used on total funding provided by NPC and total turnover of STPC 
were not correct as the turnover figure was understated and that another amount should 
have  been  used  while  the  total  funding  provided  was  overstated  as  certain  amounts 
should not to be attributed to the funds provided from NPC to STPC. 

(32)  The above claims had to be rejected. With respect to the former claim concerning the 
interest  rate  calculations,  it  is  noted  that  evidence  gathered  does  not  uphold  the 
company’s claim that the normal business practice in Iran is that no interest is added 
between a parent company and its subsidiary in their funding transactions. Moreover, 
any  such  practice  is  clearly  inconsistent  with  the  usual  economic  practice  of  private 
investors.  

(33)  As regards the latter argument, it is pertinent to note that the subsidy amount has been 
calculated  by  using  the  financing  and  turnover  figures  provided  by  the  cooperating 
exporting producer and verified during the verification visit. 

(34)  With respect to the alleged new total turnover it is recalled that the figure provided at 
the  time  submitting  comments  on  the  provisional  Regulation  is  not  substantiated  by 
any verifiable evidence and does not tally with what the company has reported prior 
and during the verification visit. 

(35)  With  respect  to  the  total  funding  figure,  the  cooperating  exporting  producer  argued 
that  certain  amounts  should  not  be  considered  as  forming  part  of  NPC’s  funding  to 
STPC.  Nevertheless  the  information  provided  could  not  corroborate  this  claim  as  no 
evidence  was  provided  to  prove  that  the  amounts  in  question  were  not  relevant  to 
NPC’s funding to STPC. In fact part of the explanations given reconfirmed that NPC 
was  acting  as  a  public  body  taking  up  obligations  for  financing  the  cooperating 
exporting producer without charging any interest that should have been honoured by 
another public body. Therefore, no deduction from the total financing amount can be 
granted since no verifiable evidence was provided.  

(36)  The GOI claimed that pursuant to Article 14 of the WTO Agreement on Subsidies and 
Countervailing  Measures  (SCM  Agreement),  "government  provision  of  equity 

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capital….[and] loan by government shall not be considered as conferring a benefit…", 
so the NPC financing to SPTC should not be considered a subsidy. This claim has to 
be rejected since the same abovementioned Article 14 concludes that "the government 
provision of equity capital shall not be considered as conferring a benefit, unless the 
investment decision can be regarded as inconsistent with the usual investment practice 
of  private  investors  in  the  territory  of  that  Member."  This  practice  is  indeed 
inconsistent  with  the  usual  investment  practice  of  private  investors  since  no 
commercial organisation in any WTO Member would conceivably continue to provide 
such  non-repayable  funding.  In  any  event  it  should  be  noted  that  Iran  is  not  a  WTO 
member.  

(37) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings in relation to this scheme as set out in recitals (45) to (57) of the provisional 
Regulation are hereby confirmed.  

3.1.3.  Amount of countervailable subsidies 

(38)  Account taken of recitals (21) to (37) above, the definitive amount of countervailiable 
subsidies  in  accordance  with  the  provisions  of  the  basic  Regulation,  expressed  ad 
valorem, for the sole cooperating Iranian exporting producer is 51,88%. 

3.2. 

Pakistan 

3.2.1. 

Introduction 

(39)  The Government of Pakistan (GOP) and the cooperating exporting producer submitted 
comments on the following schemes, countervailed in the provisional Regulation: 

(I) Manufacturing Bond Scheme  

(II) Imports of plant, machinery and equipment in Manufacturing Bond  

(III) Tariff protection on purchases of PTA in the domestic market  

(IV) Final Tax Regime (FTR)  

(V) Export Long-Term Fixed Rate Financing Scheme (LTF-EOP)  

(VI) Export Finance Scheme from the State Bank of Pakistan (EFS)  

(VII) Finance under F.E. Circular No. 25 of the State Bank of Pakistan  

(40)  The GOP as a preliminary remark submitted that the Commission has failed to grasp 
or overlooked its past submissions on the subsidy schemes. The cooperating exporting 
producer  as  a  preliminary  remark  argued  that  the  past  submissions  of  the  GOP 
provided  a  reasoned  legal  analysis  demonstrating  that  the  schemes  should  not  be 
considered  as  "prohibited"  subsidies.  It  was  also  argued  by  this  party  that  the 
Commission based its findings in the provisional Regulation not only on an incorrect 
appraisal of  factual  elements  but rather on an incorrect legal analysis as well. It was 
further claimed that the correct legal analysis was the one presented by the GOP. 

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(41)  With  respect  to  submissions  prior  to  the  provisional  Regulation,  it  is  noted  that  the 
Commission  has  fully  taken  them  into  consideration  during  the  process  of  the 
investigation  as  they  formed  part,  together  with  the  relevant  questionnaire  replies  of 
the parties and subsequent data provided, of the information on the basis of which the 
provisional determination was made.  

(42)  Furthermore, it is noted that the Commission has accurately listed the legal provisions 
of  the  relevant  schemes  and  the  practical  implementations  derived  from  them.  No 
evidence  was  provided  that  the  legal  provisions  listed  were  not  accurate.  As  to  the 
Commission's  legal  analysis,  this  was  based  on  the  relevant  provisions  of  the  basic 
Regulation and reinforced by the long-standing legal analysis used by the EU in past 
anti-subsidy investigation when analysing for example duty drawback schemes, export 
credit schemes and income tax schemes4. The fact that a party does not agree with the 
presented legal analysis does not imply that this analysis is incorrect, especially when 
no evidence is provided to corroborate this claim. This is even more obvious since the 
GOP expressed with its submission to provisional Regulation its willingness to amend 
to  the  extent  possible  a  number  of  schemes.  Account  taken  of  the  above  the  claims 
presented in recital (40) had to be rejected.  

3.2.2.  Specific Schemes  

(I) Manufacturing Bond Scheme  

(43)  The  GOP  and  the  cooperating  exporting  producer  reiterated  their  views  that  the 
Manufacturing  Bond  scheme  is  properly  managed  thanks  to  the  existence  of  an 
effective  implementation  and  monitoring  system  that  records  consumption/deduction 
and controls duty-free raw materials and the company's actual consumption as per its 
total production records. It was also submitted that the input/output ratio is based on 
actual  consumption  of  the  relevant  company availing  the  benefits  of  the  scheme  and 
that  the  record  on  input  is  subject  to  verification.  According  to  these  claims  the 
input/output  ratio  was  established  with  a  verified  benchmarking  system  that  was 
regularly updated on the basis of company's actual consumption. After any change in 
the ratio, the excess remission of previous period was added back to update the stock-
in register, thus obtaining the actual stock, and it is on the basis of such actual stock 
that the company availing benefits under the scheme must demonstrate the export of 
finished  products.  Furthermore,  the  cooperating  exporting  producer  submitted  two 
letters  in  which  it  disclosed  to  the  Customs  authorities  the  materials  saved  in  the 
Manufacturing  Bond  showing  that  the  company  was  allowed  to  utilize  the  resultant 
excess input materials for the manufacturing of goods for export in the future.  

(44) 

In  regard  to  this  scheme,  as  stated  in  recital  (70)  of  the  provisional  Regulation,  the 
relevant record of input goods received, manufactured and exported was not kept on 
the  basis  of  actual  consumption.  Only  the  theoretical  consumption  was  registered, 
according to an Analysis Certificate, with input-output ratios of all the raw materials 
for  producing  1.000  kg  of  outputs.  These  input-output  norms  are  set  out  by  the 
authorities  and  periodically  reviewed  on  the  basis  of  information  derived  from  the 
cooperating  exporting  producer  but  there  are  no  clear  rules  and  no  evidence  of  how 
these reviews are performed. In addition, following the revisions made on the Analysis 

4 

See for example Council Regulation (EC) No 713/2005, OJ L 121, 13.5.2005, p.1; Council Regulation 
(EC) No 1176/2008, OJ L 319, 29.11.2008, p.1.  

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Certificate which indicated the existence of excess remission no follow-up action was 
taken by the authorities to verify the totality of the previous actual consumption and to 
request payments made for the previous years. In other words no control of any excess 
remission  on  the  duties  forgone  was  performed.  The  cooperating  exporting  producer 
alleged that the excess raw materials accounted in the previous period was added back 
to update the stock-in register, thus obtaining the actual stock. It is worthy to note that 
this  practice  relies  on  the  fact  that  it  is  the  exporting  producer  that,  by  its  own 
initiative, proceeds to show to the relevant authority the excess remission accumulated 
in the previous period. More interestingly, this practice was not in any way foreseen in 
the  legislative  provisions  disciplining  this  scheme.  All  the  above  confirms  that  no 
effective  implementation  and  monitoring  system  exist  for  this  scheme.  In  these 
circumstances, all the relevant claims had to be rejected. 

(45)  Both  parties  argued  also  that  the  customs  duty  under  the  normal  import  regime  was 
zero  during  the  IP  and  thus  no  government  revenue  is  foregone  on  imports  of  PTA 
under Manufacturing Bond.  

(46)  This claim had to be rejected. It is clear from the information submitted by parties that 
the normal customs duty on imports of PTA is 7,5%. By derogation and under certain 
conditions parties may avail a zero duty rate. The fact that the GOP has established the 
Manufacturing Bond scheme or the scheme on Tariff protection on purchases of PTA 
does not in any way imply that the customs duty rate for all imports of PTA is zero. In 
fact, the existence of the aforesaid schemes confirms that there is revenue forgone for 
the  government  and  this  is  the  reason  why  special  derogation  schemes  with  specific 
rules and eligible users have been implemented.  

(47)  The cooperating exporting producer also claimed that there was no breach of Article 
349  of  Chapter  XV  of  the  Pakistani  Customs  Rules  2001.  In  this  respect  it  was 
submitted that the Manufacturing Bond covers all the company’s factory and thus the 
premises of the warehouse fulfilled the relevant rules requesting an independent area 
having an independent entry or exit from a public area and having no other entry or 
exit  with  the  manufacturing  area  and  separate  stores  of  finished  goods,  rejects  and 
waste clearly ear-marked in the premises.  

(48)  With regards to the above comments, it has to be reiterated that the verification visit 
revealed  that  only  the  raw  materials  imported  duty-free  were  separated  from  locally 
procured  input  goods.  The  premises  of  the  warehouse,  that  is  the  bonded  warehouse 
and the manufacturing bond, were not in an independent area having an independent 
entry  or  exit  from  a  public  area  and  having  no  other  entry  or  exit,  as  prescribed  in 
Article  349  mentioned  above.  Furthermore  the party’s  claim  that  its  entire  factory  is 
under  Manufacturing  Bond  is  not  based  on  any  verifiable  evidence  (e.g.  an  explicit 
permit  on  the  surface  of  the  Manufacturing  Bond)  apart  from  an  analysis  of  the 
wording of Article 349. Thus, the relevant claims had to be rejected.  

(49)  The GOP provided very recent administrative changes in relation to this scheme. It has 
introduced a more detailed definition of the Manufacturing Bond in the legislation and 
has taken steps to enhance the relevant authority’s control on the scheme. 

(50)  With respect to the control exercised by the authority on the Manufacturing Bond, the 
changes introduced do not address the most critical flaws of the system as identified 
by the current investigation i.e.: (i) the lack of reporting of the actual consumption of 

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raw  materials  imported  and  (ii)  the  lack  of  a  verification  system  that  focuses  on  the 
actual  results  rather  than  the  historically  set  standards.  Furthermore,  as  the 
implementation of any change made with respect to this scheme needs to be properly 
verified (the problems identified refer also to the management of the scheme) a certain 
period  of  time  would  be  necessary  before  making  any  conclusive  ruling  on  the 
amendments made to the scheme and the way the authorities have implemented these 
amendments and ensured a properly managed verification system.  

(51)  The  GOP  expressed  also  its  willingness  to  provide  the  Commission  with  an 
undertaking  concerning  the  concrete  implementation  of  the  rules  applicable  to  the 
Manufacturing  Bond.  It  was  proposed  that  this  would  take  the  form  of  providing 
evidence  that  the  cooperating  exporting  producer  complies  with  the  new  rules  (e.g. 
changes in the premises, revision of input/output ratios, remission of duties), providing 
periodical reports and allowing for verifications visits by the Commission. 

(52)  As regards the above it is noted that by this undertaking proposal the GOP indirectly 
confirms  all  the  flaws  highlighted  by  the  provisional  Regulation  with  respect  to  this 
scheme. In addition, as it is stated at recital (50) above it is not possible to accept an 
undertaking  referring  to  the  management  of  a  scheme  on  the  basis  of  evidence  that 
would  materialize  only  in  the  future.  Finally,  such  an  undertaking  is  not  practical 
because the necessary monitoring would effectively require repeating important parts 
of the investigation on a regular basis. In this respect it should be highlighted that the 
GOP  and/or  the  cooperating  exporting  producer  may  request,  should  the  relevant 
provisions of Article 19 of the basic Regulation be fulfilled, an interim review of the 
measures.  

(53) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings in relation to this scheme as set out in recitals (60) to (80) of the provisional 
Regulation, as modified in recitals (44) to (52) above, are hereby confirmed.  

(II) Imports of plant, machinery and equipment in Manufacturing Bond  

(54)  Concerning this scheme both parties claimed that the interest rate used to calculate the 
subsidy  margin  has  to  be  the  interest  rate  available  to  the  concerned  exporter  during 
the  IP.  Further,  the  parties  argued  that  as  the  plant,  machinery  and  equipment  were 
used  for  the  production  of  PET  meant  for  exports  as  well  as  domestic  sales,  the 
subsidy margin should be determined on the basis of the total turnover of the exporting 
producer. 

(55) 

In  replying  to  these  claims  it  should  be  noted  that  the  interest  rate  used  in  the 
calculation is the commercial interest rate applied during the IP in Pakistan, as sourced 
from the website of the State Bank of Pakistan. This rate represents the normal credit 
rate  prevailing  in  the  market.  With  regards  to  the  denominator  in  the  subsidy 
calculation, it has to be recalled that the precondition to avail the scheme is to install 
the  imported  machinery  in  the  Manufacturing  Bond  which  is  a  system  of  duty-free 
import of raw materials used  only  for  subsequent export of  the  production under the 
Manufacturing Bond. Thus, the subsidy amount (nominator) has to be allocated over 
the total export turnover during the IP because the subsidy is contingent upon export 
performance. Consequently, all the above claims had to be rejected. 

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(56) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings in relation to this scheme as set out in recitals (81) to (92) of the provisional 
Regulation are hereby confirmed.  

(III) Tariff protection on purchases of PTA in the domestic market  

(57)  The GOP argued that the price of locally produced PTA is not reduced by 7,5% over 
the international price and that the refund is not only given for domestically-produced 
PTA but also for imported PTA. The cooperating exporting producer argued that the 
scheme allows refund of customs duties for both locally-procured as well as imported 
PTA  and  thus  the  scheme  does  not  favour  procurement  of  domestically-produced 
PTA. It was also argued that the legislation does not limit access to this scheme. 

(58)  The  above  arguments  had  to  be  rejected.  In  this  regard  it  is  noted  that  this  scheme 
provides a financial contribution in the form of a direct transfer of funds that confers a 
clear benefit upon the recipient company. By analyzing the information submitted by 
the GOP, it is clear that an eligible company may: (i) buy in the domestic market PTA 
and  receive  a  compensatory  support  of  a  portion  equal  to  7,5%  of  the  price  paid  for 
PTA  purchases  manufactured  locally  or  (ii)  import  PTA  and  receive  a  refund  of  the 
applicable  customs  duty  (7,5%)  paid  on  imports  of  PTA.  Nevertheless,  the  latter 
option  is  not  permitted  if  the  eligible  company  uses  a  duty  drawback  scheme  (e.g. 
Manufacture Bond) on imports of PTA. It is clear form the above that the cooperating 
exporting  producer  was  de  jure  forced  to  use  this  scheme  only  for  its  purchases  of 
domestically-procured  PTA  as  it  was  using  in  parallel  the  Manufacturing  Bond 
scheme for its imported PTA. Furthermore it is obvious that even in cases where one 
eligible  company  makes  use  of  both  available  options  of  the  scheme  (i.e.  by 
denouncing the possibility to use the drawback scheme of Manufacturing Bond) it is 
clear that the refunds that one would expect to receive would have been different as in 
one case the rate is calculated on a full domestic invoice price while on the other case 
it is calculated on the declared value at customs that is not necessarily the full invoice 
price.  No  verifiable  evidence  was  provided  that  could  undermine  the  aforesaid 
conclusions. Finally, with respect to the argument that there are no restrictions in the 
access  of  the  scheme,  the  investigation  has  established  that  the  relevant  legislation 
clearly listed by name the eligible parties. In any event, domestically-produced PTA is 
not subject to any duty and therefore the 7,5% "refund" is a direct transfer of funds, or 
a pure grant. The only way for a producer of PET to obtain this subsidy, i.e. the grant, 
is  to  purchase  domestically-produced  PTA.  On  the  other  hand,  any  "refund"  of 
customs  duty  on  imported  PTA  is  an  exemption  of  a  payment  normally  due,  not  a 
direct transfer of funds; therefore, there is no equivalence between the two situations.  

(59)  Consequently,  the  scheme  confers  a  clear  benefit  to  the  domestic  buyer  i.e.  the 
producer  of  PET  by  means  of  a  direct  transfer of  funds  and  it  is  specific,  within  the 
meaning of Article 4(4)(b) of the basic Regulation, given that the subsidy is contingent 
upon the use of domestic over imported goods, since only domestic goods are eligible 
for  the  direct  grant.  Furthermore,  this  subsidy can also be considered specific within 
the meaning of Article 4(4)(a) of the basic Regulation, given that the legislation itself 
explicitly limits access to this scheme to certain enterprises belonging to the polyester 
industry.  

(60)  With relation to this scheme, the GOP provided with its comments on the provisional 
Regulation  a  Government  Order  issued  on  28  June  2010  stating  that  the  SRO  No. 

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1045(I)/2008 has been repealed with effect from 1 July 2010. The GOP submitted that 
this  development  will  ensure  that  no  refund  on  domestically  procured  or  imported 
PTA is allowed or will be allowed anymore to the users of PTA. 

(61)  Furthermore,  a  press  clipping  submitted  on  the  same  matter  from  the  cooperating 
exporting  producer  appears  to  suggest  that  the  GOP  decided  to  withdraw  the 
regulation relevant to this scheme in order for Pakistan to meet international standards 
in  this  regard.  The  cooperating  exporting  producer  corroborated  the  information 
provided by GOP by data confirming that starting from 1 July 2010 it is not possible 
anymore to receive the relevant grant when purchasing domestically-produced PTA. In 
this respect it is recalled that in line with Article 15 of the basic Regulation no measure 
shall  be  imposed  if  the  subsidy  is  withdrawn  or  it  has  been  demonstrated  that  the 
subsidy no longer confers any benefit on the exporters involved. It is obvious from the 
above information that Pakistan in substance accepts that the points highlighted by the 
provisional Regulation with respect to this scheme called for corrective action from its 
side,  that  the  GOP  has  terminated  the  scheme  and  that  the  cooperating  exporting 
producer  is  not  receiving  any  benefits  related  to  this  scheme.  Under  these 
circumstances  it  is  considered  that  the  conditions  set  out  by  Article  15  of  the  basic 
Regulation are met and thus this scheme should not be countervailed. 

(62) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings in relation to this scheme as set out in recitals (93) to (105) of the provisional 
Regulation, as modified in recitals (58) to (61) above, are hereby confirmed.  

(IV) Final Tax Regime (FTR)  

(63)  Both  parties  claimed  that  this  scheme  constitutes  a  different  taxation  system  and 
should not be countervailed given that Pakistan has sovereignty of taxation and is free 
to apply the taxation system it wishes. It was also argued that the FTR does not imply 
any  financial  contribution  to  any  company  and  it  is  a  generalized  rule  of  taxation  in 
Pakistan  (a  withholding  tax  of  1%  at  the  time  of  the  realization  of  foreign  exchange 
proceeds) that operates under a different concept and on different basis as compared to 
the Normal Tax Regime (NTR) which provides for a taxation at 35% on the domestic 
income.  According  to  these  parties  it  is  not  possible  to  determine  which  of  the  two 
systems is more favourable and thus the FTR does not result in revenue foregone or 
not collecting government revenue that is otherwise due. 

(64)  With respect to these claims, it should be noted that it is not Pakistan's sovereignty that 
is  questioned,  but  the  alleged  subsidies  granted  to  certain  exporting  producers. 
Moreover, it should be recalled that profits from exports are taxed in a different way 
from  those  earned  on  domestic  sales.  To  the  extent  that  this  tax  regime  results  in 
profits from exports being taxed at a lower rate than those earned on domestic sales, 
this scheme is considered to be a subsidy within the meaning of Article 3(1)(a)(ii) and 
Article  3(2)  of  the  basic  Regulation  in  the  form  of  forgone  government  revenue  that 
confers  a  benefit  upon  the  recipient  company.  It  is  also  a  specific  subsidy  Article 
4(4)(a) given that it is contingent upon export performance under.  

(65) 

In addition, the cooperating exporting producer provided a set of calculations made in 
excel format for the year 2008 and 2009 and a notice of tax demand and assessment 
order  issued  by  the  Deputy  Commissioner  of  Income  Tax  which  revised  a  set  of 
figures of the company's 2008 income tax return statement. The GOP corroborated the 

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claims of the cooperating exporting producer by arguing that the provided calculations 
show that the cooperating exporting producer has paid more tax under the FTR regime 
compared to what it would have paid in case of application of the NTR regime.  

(66)  These arguments had to be rejected. Firstly, the calculations provided do not form part 
of  the  company's  income  tax  return  statement  or  any  other  official  tax  authority 
document. Thus there in no verifiable evidence that they accurately picture the income 
tax obligations of the cooperating exporting producer.  

(67)  Secondly,  an  analysis  of  the  submitted  official  tax  documents  (notice  of  tax  demand 
and assessment order) does not in any way confirm the claims made by parties on the 
levels of tax due under the different tax regimes.  

(68)  With respect to the submitted documentation referring to 2008, the parties have failed 
to  show  how  the  amounts  presented  can  accurately  tally  with  the  company's  2008 
income  tax  return  statement  and  the  two  documents  issued  subsequently  by  the 
relevant  tax  authorities.  With  respect  to  the  latter  documents  they  appear  to  confirm 
that the company is requested to pay an income tax amount on its domestic income. 
Nevertheless, it is not at all clear from the submitted information that this tax amount 
(or any other tax amount) was actually paid or if the company has appealed the above-
mentioned  tax  notice.  It  is  also  not  clear  how  the  amounts  submitted  in  the  excel 
calculations could tally either with the company's income tax return statement or with 
the  tax  authority's  assessment  order.  In  any  event  even  if  one  was  to  accept  that  the 
amount set in the notice of tax demand was paid, this would not alter the conclusion 
that  the  cooperating  exporting  producer  paid  less  tax  than  it  would  have  paid  if  the 
35% rate was applied to export income.  

(69)  With  respect  to  the  submitted  documentation  relating  to  2009  it  is  noted  that  the 
parties have not provided the cooperating exporting producer's 2009 income tax return 
statement. Instead of providing the official tax declarations and return statements, an 
excel  calculation  was  provided  as  evidence.  Such  kind  of  information  is  clearly  non 
verifiable  and  cannot  corroborate  any  claim  made  for  post  IP  income  tax 
developments.  To  this  respect  it  should  be  highlighted  that  the  GOP  and/or  the 
cooperating exporting producer may request, should the relevant provisions of Article 
19 of the basic Regulation be fulfilled, an interim review of the measures.  

(70)  However,  when  calculating  the  subsidy  amount  under  the  FTR,  a  clerical  error 
referring  to  the  cooperating  exporting  producer's  export  income  as  stated  in  the 
company's  2008  income  tax  return  statement  was  discovered.  This  was  corrected 
accordingly. The subsidy rate established with regards to this scheme during the IP for 
the exporting producer amounts to 1,97% (instead of 1,95%). 

(71) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings  in  relation  to  this  scheme  as  set  out  in  recitals  (106)  to  (116)  of  the 
provisional Regulation, as modified in recital (70) above, are hereby confirmed.  

(V) Export Long-Term Fixed Rate Financing Scheme (LTF-EOP)  

(72)  Both parties claimed that the interest rate used to calculate the subsidy margin of this 
financing  scheme  has  to  be  the  interest  rate  available  at  the  time  the  exporting 
producer  was  negotiating  the  fixed  rate  financing,  namely  the  rate  in  the  year  2004-
2005. Furthermore, the denominator used to calculate the provisional subsidy margin 

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should be the total company turnover rather than the total export turnover, given that 
the same manufacturing facilities which are financed under the LTF-EOP are used to 
produce both domestic and exported goods. 

(73)  These claims had to be rejected. First of all, it should be clarified that the rate used in 
the  calculation  is  the  commercial  interest  rate  which  prevailed  during  the  IP  in 
Pakistan,  as  sourced  from  the  website  of  the  State  Bank  of  Pakistan.  The  financing 
negotiated  in  2004/2005  was  drawn  down  in  tranches  by  the  exporter  concerned. 
When calculating the subsidy amount the amount of credit drawn down for the IP, as 
reported  by  the  cooperating  exporting  producer,  was  used.  When  examining  the 
benefit received by a party during a specific IP the applicable commercial credit rate 
prevailing  in  the  market  during  the  IP  is  normally  compared  to  the  rate  paid  on  the 
loan received during the IP, and this was done here. With regards to the denominator 
in the subsidy calculation, it has to be recalled that a precondition to benefit from the 
scheme  is  that  the  company  has  to  export  directly  or  indirectly  at  least  50%  of  its 
annual production. Thus, the subsidy amount (nominator) has to be allocated over the 
export  turnover  of  the  product  concerned  during  the  IP  because  the  subsidy  is 
contingent upon export performance.  

(74) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings  in  relation  to  this  scheme  as  set  out  in  recitals  (117)  to  (133)  of  the 
provisional Regulation are hereby confirmed.  

(VI) Export Finance Scheme from the State Bank of Pakistan (EFS)  

(75)  The  Government  of  Pakistan  submitted  that  the  PET  sector  was  excluded  from  this 
scheme by a decision taken by the State Bank of Pakistan on 28 June 2010. It was thus 
argued  that  this  scheme  is  in  line  with  the  provisions  of  Article  15  of  the  basic 
Regulation  and  that  the  Commission  should  not  countervail  since  it  is  demonstrated 
that  the  subsidy  is  withdrawn.  To  this  matter  the  cooperating  exporting  producer 
argued  that  pursuant  to  the  State  Bank  of  Pakistan  ('SBP')  Circular  No  09  of  2010, 
dated 28 June 2010 the company has repaid the entire amounts of EFS financing and 
there is no amount outstanding on 30 June 2010 with respect to the EFS.  

(76)  With respect to this claim it is recalled that Article 15 of the basic Regulation states 
that  no  measures  shall  be  imposed  if  the  subsidy  is  withdrawn  or  it  is  demonstrated 
that the subsidy no longer confers a benefit on the exporter involved. With respect to 
the  submitted  documentation  relevant  to  the  EFS  facility  it  is  noted  that  indeed  the 
decision  of  the  State  Bank  of  Pakistan  states  that  banks  may  not  allow  financing 
facilities for PET under this scheme. The relevant text also states that existing facilities 
granted to exporters will remain valid up to the maturity date of the respective loans 
while  the  export  performance  of  companies  will  be  taken  into  account  for  the 
companies' borrowing during 2009-2010 and for entitlements up to 2011. As regards 
these  points  the  GOP  clarified,  by  providing  the  necessary  documentation,  that 
companies which do not hold short-term loans under this scheme within the Pakistani 
Financial Year 2009-2010 (i.e. up to 30 June 2010) are not entitled to any benefit in 
the  transitional  period  up  to  2011.  As  to  the  claim  that  the  cooperating  exporting 
producer  has  no  outstanding  financing  under  the  EFS  it  is  noted  that  this  claim  has 
been  substantiated  with  a  set  of  evidence  provided  by  the  relevant  banks  and 
complemented by the company's chartered accountant. Account taken of the above, it 
is concluded that the parties were in a position to demonstrate that the EFS scheme no 

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longer confers any benefit on the exporter involved. Thus the conditions lay down in 
Article 15 of the basic Regulation are fulfilled and the claims made were considered 
warranted. It was therefore concluded that this scheme should not be countervailed.  

(77)  The cooperating exporting producer also claimed that the interest rate used to calculate 
the  subsidy  margin  has  to  be  the  short-term  interest  rate  available  to  the  company 
during the IP. It was also argued that the finance obtained is used to meet the overall 
financing needs of the company's current assets for both domestic and export sales and 
thus the denominator in the subsidy margin calculation should be the total company's 
turnover.  

(78)  These claims had to be rejected. It is recalled that the rate used in the calculation is the 
commercial interest rate applied during the IP in Pakistan, as sourced from the website 
of the State Bank of Pakistan. This rate represents the normal credit rate prevailing in 
the market. With regards to the denominator in the subsidy calculation, it is noted that 
the  precondition  to  avail  the  scheme  is  either  the  fulfilment  of  specific  export 
transactions or the overall export performance. Thus, the subsidy amount (nominator) 
has to be allocated over the total export turnover during the IP because the subsidy is 
contingent upon export performance.  

(79) 

In  the  light  of  the  above  and  in  the  absence  of  any  other  relevant  comments,  the 
findings in relation to this scheme as set out in recital (134) to (148) of the provisional 
Regulation, as modified in recitals (75) to (78) above, are hereby confirmed.  

(VII) Finance under F.E. Circular No. 25 of the State Bank of Pakistan  

(80)  Both  parties  submitted  that  there  is  no  intervention  of  the  State  Bank  of  Pakistan  in 
this  scheme,  that  commercial  banks  provide  financing  in  foreign  currency  without 
preferential  interest  rates  and  that  the  scheme  is  not  contingent  upon  export 
performance since both exporters and importers may use it.  

(81)  The arguments provided were analyzed in the light of the relevant legal provisions and 
practical  implementation  of  the  scheme  and  they  were  found  warranted.  It  was 
therefore  concluded  that  this  scheme  should  not  be  countervailed.  Since  the  scheme 
under F.E. Circular No. 25 of the State Bank of Pakistan will not be countervailed, it is 
not necessary to respond to the corresponding disclosure comments.  

3.2.3.  Amount of countervailable subsidies 

(82)  Account  taken  the  above,  the  definitive  amount  of  countervailable  subsidies  in 
accordance with the provisions of the basic Regulation, expressed ad valorem, for the 
sole cooperating Pakistani exporting producer is 5,15%. 

3.3. 

United Arab Emirates (UAE) 

3.3.1. 

Introduction 

(83)  The  Government  of  the  UAE  (GUAE)  and  the  cooperating  exporting  producer 
submitted  comments  on  the  following  schemes,  countervailed  in  the  provisional 
Regulation: 

(I) Federal Law No. 1 of 1979  

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(II) Free Trade Zone (FTZ)  

3.3.2.  Specific Schemes  

(I) Federal Law No. 1 of 1979  

(84)  The GUAE submitted that the scheme under Federal Law No. 1 of 1979 is broadly and 
horizontally  available  to  all  industrial  sectors  and  enterprises  in  the  UAE  and  is 
granted without any exemption. The cooperating exporting producer submitted that the 
licence  issued  under  the  Federal  Law  No.  1  of  1979  constitutes  the  precondition  to 
exist and operate in the UAE.  

(85)  With  respect  to  the above it is noted that the investigation established that industrial 
undertakings in the UAE could operate under various types of licences. Indeed, apart 
from the licence granted under Federal Law No. 1 of 1979, an industrial undertaking 
may operate under a licence issued by the regional authorities in the specific emirate 
where it is established. This was the case for the cooperating exporting producer who 
holds  a  licence  issued  by  the  Government  of  the  Ras  al  Khaimah  Emirate. 
Furthermore, an industrial undertaking could operate under a Free Trade Zone where 
no licence is required under the aforementioned law. Thus, it is not correct to say that 
all industrial undertakings in the UAE operate under Federal Law No. 1 of 1979. Thus 
it is not proved that the allocation of the scheme is automatic and the relevant claim 
has to be rejected.  

(86)  Both  parties  argued  that  the  requirements  provided  in  the  law  are  just  the  necessary 
preconditions for any industrial project to operate in the country and not to obtain the 
exemptions from payment of customs duties and thus the Commission's analysis in the 
provisional  Regulation  of  Articles  12,  13  and  21  of  the  Federal  Law  No.  1  is 
erroneous.  The  GUAE  also  submitted  that  with  respect  to  Article  13  the  term 
‘considered’ has no mandatory meaning in the Arabic version of the law. The GUAE 
also argued that Articles 11 and 12 of the aforesaid law were never applied in practice 
as  the  Technical  Committee  responsible  for  recommending  to  the  Minister  on  the 
applications  has  never  been  established.  It  was  also  submitted  that  the  role  of  the 
Industrial  Development  Department  is  set  out  in  the  User  Manual  of  the  Electronic 
Industrial  System  issued  by  the  Ministry  as  mentioned  in  recital  (173)  of  the 
provisional Regulation. 

(87)  These claims had to be rejected. It is noted that Articles 13 and 21 of the law form part 
of  the  step  by  step  process  foreseen  in  the  analysis  for  the  Industrial  Licence  under 
Federal Law No. 1 of 1979. With respect to Articles 11 and 12 it is noted that these 
articles set out the role and responsibilities of the various bodies of the state authority 
issuing the Industrial Licence under Federal Law No. 1 of 1979. The fact that a body 
has never been established although it is foreseen by the law and it is responsible for: 
(i)  assessing  the  input  provided  by  the  Industrial  Development  Department  and  (ii) 
recommending to the Minister the approval or rejection of applications, confirms that 
the  legislation  pursuant  to  which  the  granting  authority  operates  is  in  practice  not 
followed  and  thus  there  is  no  legal  certainty  on  the  way  the  subsidy  is  granted. 
Moreover, in fact the claim of the GUAE with respect to the Technical Committee is 
contradictory  to  previous  claims  according  to  which  the  Minister  requested  this 
committee to provide comments on a possible revision of the law. With respect to the 
definition of the word ‘considered’ in Article 13 of the Federal Law it is noted that the 

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English  version  was  the  only  text  provided  by  the  GUAE  during  the  investigation. 
Moreover, it only submitted subsequent to the provisional disclosure that there may be 
differences  in  definitions  between  English  and  Arabic  texts.  The  fact  that  the  two 
versions  of  the  text  raise  doubts  on  certain  parts  of  the  eligibility  criteria  is  again  a 
clear indication that there is no legal clarity on the criteria and conditions  governing 
the  eligibility  of  the  subsidy.  With  respect  to  the  role  of  the  Industrial  Development 
Department  it  is  noted  that  no  new  information  was  submitted  that  could  undermine 
the findings of the investigation.  

(88)  The GUAE submitted that its industrial statistics prove that there are more than 4.000 
industrial firms registered under Federal Law No. 1 of 1979. Both parties argued that 
the  Commission  failed  to  provide  positive  evidence  that  the  UAE  authorities  have 
exercised discretion in granting or rejecting applications to the scheme.  

(89)  These claims had to be rejected. It is noted that the investigation has established that 
the granting of Industrial Licence under Federal Law No. 1 of 1979 is not automatic 
and  that  the  rules  governing  the  granting  process  for  choosing  recipients  are  not 
objective. Account taken of the fact that the scheme was found to be specific in line 
with the provisions of Article 4(2)(a) and 4(2)(b) of the basic Regulation, it was up to 
the  GUAE  to  prove,  in  line  with  the  provisions  of  Article  4(2)(c)  of  the  basic 
Regulation, its claim that the requests from all parties that have submitted applications 
for Industrial Licence under Federal Law No. 1 of 1979 since the enactment of the law 
have been approved. No such verifiable information was ever provided.  

(90)  Both parties claimed that all industrial undertakings in the UAE obtain customs duty 
exemptions for their production. The cooperating exporting producer also claimed that 
the  WTO  Trade  Policy  Review  on  the  UAE  published  in  2006  has  analyzed  the 
Federal Law No. 1 of 1979 and found that custom duties exemptions are granted to all 
industrial  concerns.  It  was  also  argued  that  there  are  controls  of  the  system  as 
Industrial  Licences  are  renewed  every  year,  companies  under  the  scheme  report  the 
imported duty-free materials and authorities reject duty-free imports if inputs are not 
related to production.  

the 

(91)  These claims had to be rejected. It is pertinent to note that customs duty exemptions 
are granted to companies availing the scheme under Federal Law No. 1 of 1979 and 
the  normal  customs  duty  rate  for  the  raw  materials  is  not  zero.  The  cooperating 
exporting  producer  has  failed  to  demonstrate  how  a  general  statement  in  the  WTO 
Trade Policy Review document is more accurate than the detailed analysis, based on 
the  verification  visit,  provided  in  the  provisional  Regulation  explicitly  on  the 
eligibility and practical implementations of the Federal Law No. 1 of 1979. Even more 
importantly, 
in  a 
discriminatory  way  when  managing  the  importation  of  duty-free  materials  under  the 
scheme. Indeed since there are no rules on the way requests to duty-free imports are 
accepted or rejected and in view of the absence of an effective verification system on 
the management of the scheme, it is unclear why one party at a certain time may be 
allowed to import duty-free while at some other date it may be refused to import duty-
free.  In  fact  this  was  the  case  for  the  cooperating  exporting  producer  who  was 
requested  from  time  to  time  to  pay  duties  without  any  justification  provided  by  the 
granting  authority.  Therefore  the  two  parties  have  failed  to  provide  any  evidence  to 
corroborate their claims on the management of the scheme and allocation of duty-free 
imports.  

investigation  has  established 

the  authorities  act 

that 

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(92) 

It  was  also  submitted  that  the  scheme  is  governed  by  objective  criteria,  namely  the 
requirement  that  the  duty  exemption  can  only  concern  imported  goods  used  for  the 
industrial  undertaking's  production.  This  claim  had  to  be  rejected  since,  as  it  is 
explained  under  recitals  (89)  and  (91)  above,  no  such  objective  criteria  have  been 
demonstrated to exist.  

(93)  The GUAE submitted that the Federal Law No. 1 of 1979 is under revision and that 
this  information  was  provided  to  the  Commission.  It  was  also  argued  that  the 
Commission has disregarded the information and documents submitted by GUAE and 
did not provide arguments and positive evidence on the facts and law which led to its 
conclusions.  

(94)  With  respect  to  the  above  it  is  noted  that  the  Commission  has  closely  evaluated  and 
analyzed  all  information  provided  by  the  parties.  With  respect  to  the  revision  of  the 
Federal Law No. 1 of 1979 it is pertinent to note that the text provided by GUAE is an 
internal  draft  document  of  the  Ministry  of  Finance  and  Industry.  As  such  it  has  no 
legal value. The investigating authority is bound to analyze the actual legal provisions 
and  the  way  these  are  implemented  and  not  a  non-binding  draft  that  has  not  been 
approved by the administrative and legislative branches of the UAE and has not been 
enacted.  Even  more  importantly,  the  fact  that  the  GUAE  is  currently  working  on  a 
possible revision of the Federal Law No. 1 of 1979 confirms that the authorities have 
realized that there is a need, as the GUAE has stated, to remove any inconsistency with 
the WTO Agreement on Subsidy and Countervailing Measures.  

(95) 

In  the  light  of  the  above,  the  findings  in  relation  to  this  scheme  as  set  out  in  recital 
(166) to (183) of the provisional Regulation are hereby confirmed.  

(II) Free Trade Zone (FTZ)  

(96)  Both parties submitted that all enterprises in the UAE are granted duty-free imports of 

capital goods.  

(97)  To  this  respect  it  is  noted  that  the  investigation  has  established  that  companies 
established  in  the  FTZ  receive  duty-free  imports  of  capital  goods.  The  fact  that  one 
party  may  avail  the  same  benefit  by  using  another  scheme  (namely  the  Federal  Law 
No.  1  of  1979)  does  not  imply  that  the  subsidy  in  question  is  not  considered 
countervailable. Furthermore, the parties were not in a position to provide any factual 
evidence  to  rebut  the  findings  of  the  investigation  with  respect  to  the  FTZ.  Account 
taken of the above, the submitted claim had to be rejected.  

(98) 

In  the  light  of  the  above,  the  findings  in  relation  to  this  scheme  as  set  out  in  recital 
(184) to (199) of the provisional Regulation are hereby confirmed.  

3.3.3.  Amount of countervailable subsidies 

(99)  Account  taken  the  above,  the  definitive  amount  of  countervailable  subsidies  in 
accordance with the provisions of the basic Regulation expressed ad valorem, for the 
sole cooperating United Arab Emirates exporting producer is 5,13%. 

3.4. 

Comments on final disclosure 

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   EN 

(100)  It  is  recalled  that  all  interested  parties  were  given  an  opportunity  to  comment  and 
make representations subsequent to final disclosure. Their comments were considered 
and taken into account where appropriate but they were not of a nature as to change 
the above findings.  

(101)  The Iranian cooperating exporting producer presented again its analysis of the facts of 
the case but did not provide any new conclusive evidence which would undermine the 
findings of the investigation.  

(102)  The  Government  of  Pakistan  expressed  dissatisfaction  with  the  rejection  of  its 
undertaking with respect to the Manufacturing Bond scheme and repeated comments 
on  the  LTF-EOP  scheme  and  FTR.  It  also  submitted  a  new  decision  of  the  Federal 
Board of Revenue issued on 27 July 2010 setting the customs duty on imports of PTA 
(raw  material  used  for  PET)  at  the  rate  of  3%  and  argued  that  the  institutions  were 
bound  by  law  to  recalculate  the  subsidy  margin  established  for  the  Manufacturing 
Bond scheme. This had to be rejected because there is no indication that the subsidy 
does  not  continue  to  exist. The  Government  of  Pakistan  claims  it  is  reduced. 
Nevertheless, as per Manufacturing Bond scheme rules, input material may be used at 
least up to two years after importation. In other words something that was imported up 
to  July  2010  (when  the  duty  rate  was  7,5%)  may  be  used  up  to  July  2012.  The 
institutions have made a determination of the amount of subsidy on the basis of data 
pertaining  to  the  IP  and  in  accordance  with  the  scheme  rules  there  may  still  be  an 
impact of the previous customs rate up to 2012. Thus, subsidisation is clearly present 
at the time of the definitive duty imposition Furthermore, the customs duty is just one 
element of the data set and, as demonstrated under recitals (43) to (53) above, if the 
duty rate had been lower, import volumes may have been higher.  

(103)  The Pakistani cooperating exporting producer disagreed with the analysis concerning 
FTR but the elements provided could not alter the findings of the investigation. It also 
submitted  that  there  is  verifiable  evidence  picturing  accurately  its  income  tax 
obligations  and  provided  a  set  of  documents  to  prove  that  the  findings  of  the 
Commission are not accurate. To this respect it is noted that the information provided 
is inconclusive and non-verifiable and thus it cannot be taken into consideration.  

(104)  The Government of the United Arab Emirates presented again its analysis of the facts 
of  the  case  and  argued  that  the  institutions  based  their  findings  on  an  unclear 
interpretation  of  the  Federal  Law  1  of  1979  and  failed  to  provide  any  positive 
evidence.  In  this  respect  it  is  recalled  that  specificity  has  been  established  in 
accordance  with  Articles  4(2)(a)  and  4(2)(b)  of  the  basic  Regulation,  that  the 
interpretation  of  the  Federal  Law  1  of  1979  by  the  institutions  was  based  on  the 
submitted information, evidence and data and no conclusive evidence was found that 
could  alter  the  findings  of  the  investigation.  GUAE  clarified  that  the  amendment 
process  of  the  Federal  Law  1  of  1979  has  been  advanced  and  it  is  reaching  its  final 
steps for promulgation. To this respect it is noted that the Commission welcomes the 
efforts  made  by  UAE  to  amend  its  relevant  legal  provisions  but  the  aforesaid 
developments bear no impact on the findings of the investigation, as there is no clear 
timetable for the conclusion of the amendment process and the enactment of the new 
law.  

(105)  The UAE cooperating exporting producer repeated its claims on the Federal Law 1 of 
1979. It also submitted that there are errors in the calculation of the subsidy margin. It 

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that 

the  company  realized  following  definitive  disclosure 

was  argued 
that 
procurements of raw material made from Saudi Arabia bear no customs duty because 
UAE  and  Saudi  Arabia  form  part  of  the  customs  union  of  the  Gulf  Cooperation 
Council and provided a set of documentation related to its claims. In this respect it is 
noted that these representations form part of totally new set of information that should 
already have been presented in the questionnaire reply or in the verification visit at the 
latest  so  that  the  Commission  would  have  been  able  to  verify  the  veracity  of  these 
claims. Thus the data provided cannot be verified at this late stage of the investigation. 
Moreover,  there  is  also  no  conclusive  evidence  to  corroborate  these  claims. 
Furthermore  it  was  argued  that  the  benefit  should  be  calculated  on  the  basis  of  raw 
materials consumed during the IP and not on the basis of raw materials purchased. In 
this respect it is noted that the split between raw materials consumed and purchased is 
irrelevant  as  the  amount  countervailed  is  the  total  amount  attributable  to  the  IP  as 
explained in recitals (84) to (95) above. 

4. 

INJURY 

4.1. 

Union production, Union industry and Union consumption 

(106)  No  comments  have  been  received  with  regard  to  Union  production,  Union  industry 
and  Union  consumption.  Consequently,  recitals  (201)  to  (206)  of  the  provisional 
Regulation are hereby confirmed. 

4.2. 

Imports from the countries concerned 

(107)  No  comments  have  been  received  with  regard  to  the  cumulative  assessment  of  the 
effects of the imports concerned, volume of imports from the countries concerned and 
their respective market share. Consequently, recitals (207) to (213) of the provisional 
Regulation are hereby confirmed. 

(a)  Prices and price undercutting  

(108)  Given  that,  as  mentioned  above  at  recital  (20),  it  was  decided  to  divide  the  product 
under  investigation  into  several  product  types  a  new  undercutting  calculation 
reflecting that change was performed. 

(109)  For the purpose of analysing price undercutting, the weighted average sales prices of 
the  Union  industry  to  unrelated  customers  on  the  Union  market  per  product  type, 
adjusted to an ex-works level, were compared to the corresponding weighted average 
prices  of  the  imports  from  the  countries  concerned  to  the  first  independent  customer 
on the Union market, established on a CIF basis with appropriate adjustments for post-
importation costs and differences in the level of trade. 

(110)  The  comparison  showed  that  during  the  IP,  the  subsidised  imports  originating  in  the 
UAE sold in the Union undercut the Union industry's prices by 3,2%. The subsidised 
imports originating in Iran sold in the Union undercut the prices of the Union industry 
by 3,0%. The subsidised imports originating in Pakistan sold in the Union undercut the 
prices  of  the  Union  industry  by  0,5%.  The  weighted  average  undercutting  margin  of 
the countries concerned during the IP is 2,5%. 

(111)  The  Iranian  exporter  commented  that  its  injury  margin  was  overstated  since  the 
weighted  average  unit  sales  price  established  was  understated  due  to  an  incorrect 

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calculation of the amount of level of trade adjustment. As regards this claim it must be 
noted that the amount for the level of trade used in the provisional calculation was a 
fixed amount per tonne which is the commission charged by the cooperating importing 
agent  and  which  represents  around  1%  of  the  average  CIF  price.  However,  since  no 
alternative quantification of the level of trade adjustment was proposed and no other 
information is available for such an adjustment, the claim is thus rejected.  

(112)  The same party also claimed that the 2% rate taken for post-importation costs appeared 

to be understated.  

(113)  It  is  reiterated  in  this  regard  that  no  importer  cooperated  in  this  investigation  and  it 
was  not  possible  to  verify  the  actual  post-importation  cost.  Thus,  in  absence  of  any 
other information available, the rate used in previous proceedings was applied. 

4.3. 

Situation of the Union industry 

(114)  Some interested parties claimed that injury did not exist since the sample was wrongly 
chosen and as a result no results could be extrapolated for the total Union industry. It 
was claimed that since one company (not in the sample) had indicated that it was using 
over 100% of its capacity, this would be a clear sign of no injury. It is noted that the 
information  submitted  is  an  extract  of  this  company's  submission  to  the  stock 
exchange authorities in a third country and is not verified. This information also does 
not square with the information on the file. Moreover, and in any event, the capacity 
utilisation of one EU producer alone cannot alter the findings of injury for the sampled 
EU producers and the other EU producers. 

(115)  In  the  absence  of  any  other  claims  or  comments,  recitals  (218)  to  (237)  of  the 

provisional Regulation are hereby confirmed.  

4.4. 

Conclusion on injury 

(116)  In the absence of any specific comments, the conclusion on injury laid down in recitals 

(238) to (240) of the provisional Regulation is hereby confirmed. 

5.1. 

Effect of the subsidised imports 

5. 

CAUSATION 

(117)  In  the  absence  of  any  specific  comments,  recitals  (241)  to  (245)  of  the  provisional 

Regulation are hereby confirmed. 

5.2. 

Effect of other factors 

(118)  Some  interested  parties  claimed  that  any  injury  found  would  not  be  due  to  the 
subsidised  imports,  but  that  the  low  prices  for  PET  in  the  EU  reflect  the  worldwide 
cycle of the industry and that from September 2008 until June 2009 the PET prices in 
the  EU  followed  the  low  prices  of  crude  oil.  As  regards  this  argument,  it  is 
acknowledged that the prices of PET depend to some extent on the prices of crude oil, 
its derivatives being the main raw material to produce PET. However, prices for crude 
oil were not low during the whole IP but very volatile, starting with a huge decrease 
and followed by a recovery. This volatility of world prices of crude oil cannot explain 
why  imports  of  PET  were  subsidised  and  therefore  undercut  the  Union  producers' 

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prices. Exactly this undercutting, possible due to the subsidies received, depressed the 
prices of the Union industry, forcing EU producers to sell at a loss in order not to loose 
their clients. 

(119)  The  Iranian  exporter  claimed  that  financial  and  technical  problems  of  some  EU 
producers were not properly separated from the injury analysis and wrongly attributed 
to Iranian imports since it only entered the market after 2006. In this respect it is noted 
that imports from Iran were present already in 2006 and 2007 in quantities below 1% 
of the market share. Since 2008, they were above 1% and contributed with their low 
prices  to  the  price  suppression  in  the  EU.  Moreover,  the  conditions  for  cumulative 
assessment  were  fulfilled  in  this  case  and  the  effects  of  subsidised  imports  from  all 
countries  concerned  could  be  assessed  cumulatively.  In  addition,  only  one  of  the 
companies  mentioned  by  the  Iranian  exporter  was  in  the  sample  and  the  technical 
problems of this EU producer, limited from September to mid-October 2008, did not 
significantly influence the overall injury picture.  

(120)  The same party reiterated that any injury found would be linked to the contraction in 
demand,  especially  during  the  IP  which  was  marked  by  the  global  financial  and 
economic crisis. However this party did not rebut the arguments given in recitals (254) 
to (256) of the provisional Regulation: that the economic downturn starting in the last 
quarter  of  2008  cannot  in  any  way  diminish  the  damaging  injurious  effects  of  low 
priced subsidised imports in the EU market over the whole period considered and that, 
even though the shrinking demand was a factor contributing to the injury suffered, it 
did  not  break  the  causal  link.  It  is  further  noted  that  those  subsidised  imports  even 
increased their market share when demand contracted, i.e. from 7,6% to 10,2%, to the 
detriment of the EU producers.  

(121)  Some interested parties claimed that any injury was due to lack of investment by the 

EU PET producers and their consequent cost disadvantage vis-à-vis the exporters.  

(122)  It  is  recognised  that  PET  is  a  capital  intensive  industry  and  that  a  certain  level  of 
investment is necessary to remain competitive in the mid-to-long term perspective. It 
is  recalled  that,  as  mentioned  in  recital (237)  of  the  provisional  Regulation,  some  of 
the sampled companies made important investments in 2006 and 2007, but there was 
only a minimal level of investment in 2008 and in the IP.  

(123)  It is noted in this regard that given the decreasing production and capacity utilisation 
rates  in  2008  and  in  the  IP  combined  with  the  sharply  dropping  market  share  of  the 
Union  producers,  it  would  be  unreasonable  to  expect  any  major  investment  in  new 
capacities in the same period.  

(124)  It  is  also  reiterated  that,  as  mentioned  in  recitals  (233)  and  (234)  of  the  provisional 
Regulation,  the  financial  situation  of  the  sampled  Union  producers  was  very  bad 
during  the  whole  period  considered  and  that  they  experienced  significant  losses 
between  2006  and  the  IP.  Again,  in  such  a  situation,  it  would  be  unreasonable  to 
expect any major investment by the Union producers. 

(125)  Consequently,  it  is  concluded  that  the  limited  investment  in  2008  and  the  IP  did  not 
materially  contribute  to  the  injury  suffered  by  the  Union  industry  but  was  rather  a 
result thereof.  

5.3. 

Conclusion on causation 

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(126)  In  the  absence  of  any  further  comments  on  causation,  recitals  (246)  to  (264)  of  the 

provisional Regulation are hereby confirmed. 

6. 

UNION INTEREST 

(127)  Following  the  provisional  disclosure  a  significant  number  of  EU  converters  and/or 
bottlers came forward and claimed that the Union interest analysis would not correctly 
reflect  the  arguments  of  the  great  number  of  cooperating  users  and  that  the  findings 
contradicted  the  current  economic  environment.  There  was,  however,  no  further 
substantiation  or  explanation.  The  companies  all  requested  a  hearing,  but  only  two 
companies of this group of users and one association of Italian bottlers actually came 
to  the  hearing.  More  substantive  comments  were  received  from  one  cooperating  EU 
converter  (ALPLA),  a  group  of  processors  (Caiba  SA,  Coca-Cola  group,  Danone 
Waters,  Logoplaste,  MFS  Commodities,  PepsiCO,  Novara  International  and  Silico 
Polymers),  the  cooperating  import  agent  (GSI)  and  the  association  of  plastic 
converters (EuPC). All these parties strongly opposed the imposition of any measures. 

6.1. 

Interest of the Union industry and other Union producers 

(128)  Some interested parties claimed that the EU producers would (mis-) use trade defence 
instruments  to  shield  the  Union  market  and  to  set  artificially  high  prices  in  the  EU. 
These  parties  point  to  the  existing  anti-dumping  and/or  countervailing  measures  in 
place  against  India,  Indonesia,  South  Korea,  Malaysia,  Taiwan,  Thailand  and  the 
People's Republic of China. However, it is noted that any company producing in the 
EU  has  a  right  to  complain  and  to  seek  remedies  in  case  it  can  demonstrate  the 
existence of injurious subsidisation practices. The fact that subsidisation and dumping 
practices  have  been  found  concerning  numerous  countries  can  possibly  be  explained 
by  the  fact  that  demand  for  this  product  increased  tremendously  since  the  '90s  with 
usually  double  digit  annual  growth  rates.  This  attracted  significant  investments 
worldwide, leading to a structural worldwide oversupply for PET. It is also noted that 
some  third  countries  have  also  measures  in  place  against  several  of  the  above-
mentioned countries, underlining the existing structural problem.  

(129)  Several  interested  parties  reiterated  that  the  Union  producers  would  not  be  able  to 
improve  their  performance  in  the  long  term  since  new  investments  in  other  third 
countries would come  on-stream soon and decrease the artificially high prices in the 
EU.  

(130)  The investigation showed that a new investment that only recently came on-stream in 
Oman  has  increased  its  import  volumes  considerably  in  2009  and  it  cannot  be 
excluded that it might cause problems to the Union industry in the future. However, as 
already indicated in recital (270) of the provisional Regulation, new investments that 
might  come  on-stream  and  might  cause  injury  to  the  Union  industry  are  no  valid 
reason to deny legitimate protection in this proceeding. 

(131)  One interested party claimed that that the increase in the PET prices in the EU would 
allow  only  the  EU  producers  with  investment  in  third  countries  not  subject  to 
measures  (Thailand,  US,  Russia)  or  other  PET  producers  in  third  countries  (South 
Korea) to improve their performance. Thus, the party argued, the short-term benefit for 
the EU producers would clearly be outweighed by the transfer of wealth to producers 
outside the EU.  

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(132)  In this respect it is noted that there is no evidence on file supporting the statement that 
any financial benefit that might be shifted to producers in third countries not subject to 
trade defence measures or to companies with a zero duty would outweigh the benefits 
to the Union industry. 

(133)  It was also claimed that Union producers only employ some 2000 people whereas PET 
processors and bottlers that would be highly affected by any duty employ around 20 
000 and 60 000 people respectively.  

(134)  It  is  noted  that  the  employment  created  by  PET  producers  is  not  marginal  and  the 
question whether the imposition of measures is against the Union interest as a whole 
cannot be reduced to a simple question of number of people employed. In this regard it 
is  also  particularly  relevant  that  the  relevant  users  would  likely  not  significantly  be 
affected  by  the  measures,  taking  into  account  the  level  of  the  duty  as  well  as 
alternative sources of supply, as set out below in recitals (141) to (156). 

6.2. 

Interest of unrelated importers in the Union 

(135)  It is reiterated that no unrelated importer cooperated in this investigation. 

(136)  The cooperating agent strongly contested that the imposition of duties would not have 
a considerable impact on its business. The company claimed that while it was indeed 
working on a commission basis, the impact would be important since an important part 
of  its  business  was  linked  to  the  countries  concerned.  Should  definitive  measures  be 
imposed,  the  commission  obtained  from  the  producers  in  the  countries  concerned 
would  be  affected  given  that  the  PET  from  the  countries  concerned  could  no  longer 
compete with PET produced by other producers. 

(137)  In  view  of  the  overall  moderate  duty  level,  it  is  not  likely  that  PET  sales  from  the 
countries  concerned  will  be  affected  substantially.  Moreover,  the  agent  can  in  the 
medium term most probably switch to other sources of supply, namely to imports from 
Oman, US,  Brazil, Mexico and the companies with a zero anti-dumping duty rate in 
South Korea. Sales of these exporting producers should put the agent in a position to 
compensate  for  any  loss  that  may  be  incurred  due  to  the  imposition  of  measures. 
Consequently, the claim is rejected. 

6.3. 

Interest of the raw material suppliers in the Union 

(138)  One  interested  party  claimed  that  it  is  not  legitimate  to  protect  the  raw  material 
suppliers  of  the  EU  PET  producers  at  the  expense  of  the  packaging  industry,  the 
bottlers and the final consumers.  

(139)  It is noted that the analysis of the impact of measures on the supplying industry is in 
conformity  with  Article  31  of  the  basic  Regulation.  It  is  a  standard  practice  to  carry 
out  such  an  analysis,  in  particular  when  there  is  a  strong  dependency  between  raw 
material suppliers and Union producers. 

(140)  In  the  absence  of  any  other  comments  in  this  regard,  recitals  (265)  to  (279)  of  the 

provisional Regulation are hereby definitively confirmed.  

6.4. 

Interest of users 

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(141)  It is reiterated that PET used in the production of bottle pre-forms amounts to between 
70%  and  80%  of  the  total  cost  of  production  for  converters.  It  is  therefore  a  critical 
cost component for these companies. 

(142)  Some  interested  parties  indicated  that  the  EU  packaging  industry  is  constantly 
challenged  by  the  requirements  of  the  bottle  fillers  for  new  designs  and  more 
environmental friendly packaging. To that end, some of the converters appear to invest 
constantly in R&D to invent new products and design in order to remain competitive 
and to add more value in the chain. 

(143)  Some interested parties claimed that the impact on the EU converting industry will be 
very  heavy  and  will  lead  to  the  erosion  of  their  resources  to  invest  in  new, 
environmental  friendly  packaging  and  possibly  even  to  the  closure  of  hundreds  of 
smaller  companies  as  their  margins  are  even  narrower  due  to  the  small  volumes 
processed and limited negotiation power.  

(144)  Indeed, should the converters absorb the whole price increase due to the measures, the 
impact on them could be sizeable, depending on their sources of supply, given that the 
cost  of  PET  constitutes  the  majority  of  their  costs  and  that  many  of  the  small  and 
medium sized companies operate on low margins.  

(145)  In this regard, a verification visit was carried out to a small plastic converter in Italy in 
order  to  gain  a  better  insight  about  the  impact  of  duties  on  this  user  group.  The 
investigation showed that, although limited, processors normally have some ability to 
pass on their price increase, especially if the price increase is not marginal and can be 
anticipated. Moreover, some PET processors have adaptation clauses in their contracts 
for  raw  material  prices  and  this  might  help  EU  converters  to  pass  on  some  price 
increase to bottlers. 

(146)  Consequently,  and  against  the  background  of  the  rather  moderate  duty  level,  it  is 
concluded  that  the  imposition  of  countervailing  duties  would  likely  not  have  a 
devastating effect on converters.  

(147)  Some interested parties reiterated the argument that the risk of delocalisation of PET 
processors/converters  would  increase  if  definitive  measures  were  imposed.  These 
parties also claimed that due to the delocalisation of EU processors there would be no 
long-term benefit to EU producers. One of the cooperating PET converters stated that 
the  process  of  delocalisation  is  already  ongoing  and  that  any  imposition  of 
countervailing  duties  would  further  accelerate  this  development.  This  party  claimed 
that a substantial part of EU converters would be located in areas which are close to 
EU  borders  (Switzerland,  Croatia,  Bosnia,  Serbia,  Turkey,  Russia  and  Ukraine)  and 
that some converters would be much more flexible to move their production to these 
areas than suggested in the provisional Regulation. 

(148)  Based  on  the  information  on  file,  the  delocalisation  is  indeed  already  an  ongoing 
process and it is thus considered that the imposition of countervailing duties might be 
one  factor  out  of  many  other considerations influencing such a company decision. It 
was not found that, without the imposition of measures in this case, those companies 
would be ready to stay within the EU given that such a decision is normally a result of 
an analysis taking into account a number of aspects other than trade defence measures, 

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such  as  being  close  to  the  client,  having  access  to  skilled  workers  for  R&D,  general 
cost structure, etc. 

(149)  It is also noted that the information on the file shows that the EU converter industry is 
facing a number of important challenges due to inherent structural deficiencies that are 
becoming more and more apparent in the fast changing and increasingly competitive 
environment. It is evident that size matters in that business and that the consolidation 
of the market is already ongoing, including closures and delocalisation. Consequently, 
it is considered that any price increase for PET due to countervailing measures is not 
the reason for the feared closures of the smaller converters. 

(150)  Consequently, it is concluded that the imposition of countervailing duties is not going 
to  be  a  determinative  factor  in  the  eventual  decision  about  delocalising  for  the 
companies in the PET processing industry.  

(151)  Several  interested  parties  stated  that  any  measures  would  have  a  sizeable  effect  on 
many  bottlers  as  due  to  contractual  arrangements  any  increase  in  PET  resin  prices 
would  be  (at  least  partially)  passed  on  to  them.  It  was  also  claimed  that  some  bottle 
fillers might not be in a position to pass on price increases to their clients, being the 
supermarket/retail chains, and that they might not survive any increased cost.  

(152)  These  parties  claimed  that  the  range  of  products  that  will  be  affected  by  duties  was 
underestimated as they will not only affect bottled water, soft drinks and edible oil, but 
also beer, milk and dairy products, juice producers, ketchup and spices, cosmetic and 
personal care products, drugs, vitamins and supplements, household cleaning products 
and oil and lubricants for cars.  

(153)  It  is  acknowledged  that  PET  packaging  is  manifold.  It  is  noted,  however  that  the 
provisional  Regulation  focused  on  the  impact  on  bottlers,  as  it  based  on  the  data 
submitted  by  the  companies  cooperating  in  this  investigation,  being  mainly  water, 
soft-drink  or  juice  producers.  No  other  detailed  data  was  available  showing  an  even 
higher impact on the other applications mentioned above.  

(154)  Consequently, it is considered that the provisional findings described in recital (291) 
of  the  provisional  Regulation  can  be  definitively  confirmed.  In  addition,  given  the 
moderate  level  of  the  proposed  measures,  they  may  result  in  a  cost  increase  of  not 
more than 1% (in the worst case scenario – i.e. full impact of the measures to be born 
by  the  bottling  companies)  and  thus  will  only  have  a  limited  impact  on  the  overall 
situation of the bottling companies, even if, as claimed, they would not be in a position 
to pass on the increased cost to their customers. 

(155)  Several interested parties claimed that any trade defence measures will exacerbate the 
shortage of supply in the Union market which will be particularly problematic in the 
summer months given the higher demand for water/drinks. It was claimed that up to 
900 000 tonnes of imports would be needed in 2010. This problem would be notably 
reinforced by the fact that some EU producers are also PET processors and would only 
sell to the free market once their internal demand is satisfied and at premium prices.  

(156)  In  this  regard  no  new  information  was  submitted  and  the  arguments  provided  in 
recitals (294) and (295) of the provisional Regulation were not refuted. It is also noted 
that given the moderate level of duties imposed on imports from UAE and Pakistan, 
the impact on trade volumes from those countries might not be significantly affected. 

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Consequently,  the  findings  set  out  in  recitals  (294)  and  (295)  are  definitively 
confirmed. 

6.5. 

Impact on consumers 

(157)  Several  interested  parties  claimed  that  the  provisional  Regulation  failed  to  properly 
address  the  impact  on  consumers  which  would  buy,  on  a  daily  basis,  products 
containing PET resins. These claims were not substantiated further than stating that an 
increase  of  50€/t  applied  to  a  consumpti on  of  3  million  tonnes  would  lead  to  150 
million € to be borne by the final consumer per year.  

(158)  It is noted that the proposed estimate is unrealistic given that most parties agreed that 
some impact will be borne by the PET processors, the bottlers and supermarkets/retail 
chains, i.e. that some of the increased costs will be diluted in the sales chain.  

(159)  The  impact  on  the  final  consumer,  in  the  worst  case  scenario  (i.e.  the  unrealistic 
scenario where the customer would bear all the impact of the price increase), given the 
moderate  level  of  measures  proposed,  would  not  exceed  0,5  eurocent  per  bottle 
consumed, and is highly likely to be much less. 

6.6. 

Conclusion on Union interest 

(160)  Given the above and after analysing in detail all the interests at stake, it is definitively 
concluded that on balance, no compelling reasons exist for not imposing measures in 
the present case. In the absence of any other comments in this regard, recitals (280) to 
(298) of the provisional Regulation are hereby definitively confirmed.  

6.7. 

Comments on final disclosure 

(161)  Following disclosure of the essential facts and considerations on the basis of which the 
Commission  has  proposed  the  imposition  of  definitive  countervailing  duty  some 
interested parties submitted further comments. Considering that the majority of these 
comments were a repetition of the observations already submitted and addressed, they 
did not change the above findings.  

(162)  With  regard  to  the  reiterated  argument  that  the  recent  change  in  the  exchange  rate 
between USD and EUR led to a significant increase in the price of the imported PET 
and consequently the Union industry allegedly does not need to be granted protection 
by  trade  defence  measures,  it  is  noted  that  any  anti-subsidy  investigation  normally 
does  not  take  into  account  the  post  IP  developments;  unless,  in  extraordinary 
situations,  it  can  be  shown,  inter  alia,  that  they  are  of  a  lasting  nature  and  would 
significantly alter the findings of the case. Any changes in the exchange rate between 
USD and EUR cannot be considered to be of such nature. 

7. 

DEFINITIVE MEASURES 

7.1. 

Injury elimination level 

(163)  One interested party claimed that a target profit of 5% was overstated for the second 
quarter of the IP given that in this quarter (4th quarter of 2008) not only the demand 
was  lower  (winter  season),  but  the  global  economic  crisis  also  affected  the  PET 
producers  heavily.  Thus,  it  is  claimed  that  a  correct  application  of  the  principle 

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31 

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developed  in  court  case  T-210/955  must  lead  to  a  0%  margin  in  the  absence  of 
subsidised  imports.  Moreover,  the  party  claimed,  since  all  quarters  of  the  IP  were 
affected by the crisis, also in the other quarters, a 5% profit margin would appear as 
unrealistic  given  that  even  without  economic  crisis,  i.e.  in  2006/2007,  the  Union 
industry did not come close to the 5% profit.  

(164)  It  is  acknowledged  that  in  line  with  the  jurisprudence,  the  target  profit  to  be  used 
should be the profit which the Union industry could reasonably achieve under normal 
conditions  of  competition,  in  the  absence  of  subsidised  imports.  It  is  recalled  that  in 
previous investigations for the same product a target profit of 7% and above was used 
instead of the 5% provisionally used in the current investigation. The 5% target profit 
is  considered  to  be  the  profit  that  the  Union  industry  could  expect  in  the  absence  of 
subsidised imports. Consequently, the claim for reducing the target profit is rejected. 

(165)  Given the adjusted undercutting calculation mentioned in recitals (108) to (110) above, 

the corresponding injury elimination levels are as follows:  

Country 

Iran 

Pakistan 

UAE 

Injury elimination level 

16,7% 

14,1% 

17,5% 

7.2. 

Definitive measures 

(166)  In  view  of  the  definitive  conclusions  reached  with  regard  to  subsidisation,  injury, 
causation  and  Union  interest,  and  in  accordance  with  Article  15(1)  of  the  basic 
Regulation, it is considered that a definitive countervailing duty should be imposed on 
imports  of  the  product  concerned  originating  in  Iran,  Pakistan  and  the  United  Arab 
Emirates  at  the  level  of  the  lowest  of  the  subsidisation  and  injury  elimination  level 
found, in accordance with the lesser duty rule. 

(167)  In  the  light  of  the  foregoing,  and  in  accordance  with  Article  12(1)  of  the  basic 
Regulation,  it  is  considered  that  the  definitive  countervailing  duty  rate  should  be 
imposed  on  imports  originating  in  Iran  at the level of the injury margin found while 
for  imports  originating  in  Pakistan  and  the  United  Arab  Emirates,  the  definitive 
countervailing duty rate should be imposed at the level of the subsidy margin found. 

(168)  It  is  recalled  that  costs  and  prices  of  PET  are  subject  to  considerable  fluctuations  in 
relative short periods of time. It was therefore considered appropriate to impose duties 
in the form of a specific amount per tonne. This amount results from the application of 
the countervailing rate to the CIF export prices used for the calculations in the parallel 
anti-dumping proceeding.  

5 

Case  T-210/95  European  Fertilizer  Manufacturers'  Association  (EFMA)  v  Council  of  the  European 
Union, ECR 1999, p. II-3291. 

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(169)  On the basis of the above, the proposed countervailing duty amounts, expressed on the 

CIF Union border price, customs duty unpaid, are as follows: 

Country 

Total subsidy 
margin 

Injury margin  

Definitive countervailing duty 
rate 

Iran 

Pakistan 

UAE 

51,8% 

5,1% 

5,1% 

16,7% 

14,1% 

17,5% 

% 

16,7% 

5,1% 

5,1% 

Amount 

(EUR/t) 

139,70 

44,02 

42,34 

(170)  Any  claim  requesting  the  application  of  an  individual  company  countervailing  duty 
rate (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  Commission6  forthwith 
with  all  relevant  information,  in  particular  any  modification  in  the  company’s 
activities linked to production, domestic and export sales associated with, for example, 
that name change or that change in the production and sales entities. If appropriate, the 
Regulation  will  then  be  amended  accordingly  by  updating  the  list  of  companies 
benefiting from individual duty rates. 

7.3. 

Undertakings 

(171)  Following the disclosure of the essential facts and considerations on the basis of which 
it was intended to recommend the imposition of definitive anti-subsidy measures, the 
Iranian  exporting  producer  offered  a  price  undertaking  in  accordance  with  Article 
13(1) of the basic Regulation. 

(172)  The  offer  was  examined  and  in  view  of  the  fact  that  the  prices  for  the  individual 
product  types  differ  significantly,  it  was  found  that  the  sole  minimum  import  price 
(MIP) offered would not guarantee the elimination of the injurious subsidisation for all 
products. Furthermore, the level of the MIP offered was found to be too low.  

(173)  It  was  also  established  that  the  Iranian  cooperating  exporting  producer  sells  the 
product concerned and other products to the EU exclusively through a related trading 
company which exports a multitude of products manufactured by various companies. 
This sales structure bears a very high risk of cross-compensation as PET subject to an 
undertaking  could  be  sold  together  with  other  products  to  the  same  customers  and 
prices  set  for  a  variety  of  products  sold  to  the  same  client  could  be  very  easily 
compensated  or  off-set.  Finally,  it  also  appears  from  publicly  available  sources  that 
there  is  at  least  one  additional  producer  of  PET  in  Iran.  In  view  of  the  above  sales 
structure,  this  situation  casts  serious  doubts  on  whether  the  institutions  and  customs 
authorities can ensure that only PET from the cooperating exporting producer is sold 
according to the provisions of the undertaking as the product is a commodity product 
and easily interchangeable in the sense that in such commodity products it is not at all 
clear to physically recognise the producer. 

6 

European  Commission,  Directorate-General  for  Trade,  Directorate  H,  Office  N105  04/092,  1049 
Brussels, BELGIUM. 

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(174)  On the basis of the above, it was concluded that such undertaking was impractical and 
therefore  it  cannot  be  accepted.  The  party  was  informed  accordingly  and  given  an 
opportunity  to  comment.  However,  its  comments  have  not  altered  the  above 
conclusion. 

8. 

DEFINITIVE COLLECTION OF THE PROVISIONAL DUTY 

(175)  In view of the magnitude of the countervailable subsidies found and in the light of the 
level  of  the  injury  caused  to  the  Union  industry,  it  is  considered  necessary  that  the 
amounts secured by way of provisional duty imposed by the provisional Regulation be 
definitively collected to the extent of the amount of definitive duties imposed,  

HAS ADOPTED THIS REGULATION: 

Article 1 

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

The  rate  of  the  definitive  countervailing  duty  applicable  to  the  net,  free-at-Union-

2. 
frontier price, before duty, of the products described in paragraph 1 shall be as follows:  

Country 

Countervailing duty rate 
(EUR/tonne) 

Iran: all companies 

Pakistan: all companies  

United Arab Emirates: all companies 

139,70 

44,02 

42,34 

3. 
In  cases  where  goods  have  been  damaged  before  entry  into  free  circulation  and, 
therefore,  the  price  actually  paid  or  payable  is  apportioned  for  the  determination  of  the 
customs value pursuant to Article 145 of Commission Regulation (EEC) No 2454/93 of 2 July 
1993  laying  down  provisions  for  the  implementation  of  Council  Regulation  (EEC)  No 
2913/92 establishing the Community Customs Code7, the amount of definitive countervailing 
duty,  calculated  on  the  amounts  set  above,  shall  be  reduced  by  a  percentage  which 
corresponds to the apportioning of the price actually paid or payable.  

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

4. 
apply. 

7 

OJ L 253, 11.10.1993, p. 1. 

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Article 2 

The  amounts  secured  by  way  of  provisional  countervailing  duty  pursuant  to  Commission 
Regulation  (EU)  No  473/2010  on  imports  of  polyethylene  terephthalate  having  a  viscosity 
number of 78 ml/g or higher, according to the ISO Standard 1628-5, currently falling within 
CN code 3907 60 20 and originating in Iran, Pakistan and the United Arab Emirates shall be 
definitively  collected  at  the  rate  of  the  definitive  duty  imposed  pursuant  to  Article  1.  The 
amounts secured in excess of the rate of the definitive countervailing duty shall be released.  

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

Article 3 

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

Done at Brussels, […] 

For the Council 
The President 
[ 

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