Proposition de RÈGLEMENT DU CONSEIL modifiant le règlement (CE) n° 367/2006 instituant un droit compensateur définitif sur les importations de feuilles en polyéthylène téréphtalate (PET) originaires de l’Inde
Date: 2011-02-04
Institutions: European Commission
Subjects: India, countervailing charge, import, originating product, plastics

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EUROPEAN COMMISSION 

Brussels, 4.2.2011 
COM(2011) 39 final 

2011/0018 (NLE) 

Proposal for a 

COUNCIL REGULATION 

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

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EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

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 anti-subsidy proceeding concerning 
imports of polyethylene terephthalate (PET) film originating in India. 

General context 

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

Existing measures in the area of the proposal 

Council  Regulation  (EC)  No  367/2006  imposing  a  definitive  countervailing  duty  on 
imports of polyethylene terephthalate (PET) film originating in India as last amended by 
Council Implementing Regulation (EU) No 806/2010.  

Consistency with the other policies and objectives of the Union 

Not applicable. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

Consultation of interested parties 

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

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

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

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

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

On 14 January 2010, the Commission initiated a partial interim review limited to subsidy 
aspects of the countervailing measures applicable to imports of polyethylene terephthalate 

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(PET)  film  originating  in  India.  The  review  was  initiated  because  the  applicant,  an 
exporting  producer  in  India,  provided  sufficient  prima  facie  evidence  that  the 
circumstances  with  regard  to  subsidisation  on  the  basis  of  which  measures  were 
established have changed and that these changes are of a lasting nature. 

The partial interim review investigation confirmed that (i) the level of subsidisation with 
regard  to  the  concerned  Indian  producer  has  decreased;  (ii)  the  actual  modalities  of  the 
investigated  schemes  and  their  countervailiability  have  not  changed.  Since  it  was 
demonstrated  that  the  applicant  will  continue  to  receive  subsidies  in  the  future  of  an 
amount  which  is  well  below  the  duty  rate  currently  applicable  to  it,  the  level  of  the 
measures  should  be  amended  to  reflect  the  new  findings.  The  changed  circumstances 
were found to be of a lasting nature.  

Therefore, it is proposed that the Council adopts the attached proposal for a Regulation so 
as  to  amend  the  duty  rate  applicable  to  the  Indian  producer  concerned  to  11%.  This 
Regulation should be published in the Official Journal of the European Union not later 
than 14 April 2011. 

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  and  in  particular 
Articles 19 and Article 22 thereof.  

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

An 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: Council Regulation. 

Other  means  would  not  be  adequate  because  the  basic  Regulation  does  not  provide  for 
alternative options. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Union budget. 

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2011/0018 (NLE) 

Proposal for a 

COUNCIL REGULATION 

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

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  Community1  (‘the 
basic Regulation’), and in particular Article 19 and Article 22 thereof, 

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

Whereas: 

A. PROCEDURE 

1. 

(1) 

(2) 

Previous investigation and existing countervailing measures  

In  December  1999,  by  Regulation  (EC)  No  2597/19992,  the  Council  imposed  a 
definitive  countervailing  duty  on  imports  of  polyethylene  terephthalate  (PET)  film 
('the product concerned') currently falling within CN codes ex 3920 62 19 and ex 3920 
62  90,  originating  in  India.  The  measures  took  the  form  of  an  ad  valorem 
countervailing  duty,  ranging  between  3,8  %  and  19,1  %  imposed  on  imports  from 
individually named exporters, with a residual duty rate of 19,1 % imposed on imports 
of  the  product  concerned  from  all  other  companies.  The  investigation  period  of  the 
original investigation was 1 October 1997 to 30 September 1998. 

In  March  2006,  by  Regulation  (EC)  No  367/20063  ('Regulation  (EC)  No  367/2006'), 
the Council, following an expiry review pursuant to Article 18 of the basic Regulation, 
maintained  the  definitive  countervailing  duty  imposed  by  Regulation  (EC)  No 
2597/1999  on  imports  of  PET  film  originating  in  India.  The  review  investigation 
period was 1 October 2003 to 30 September 2004. 

(3) 

In August 2006, by Regulation (EC) No 1288/20064, the Council, following an interim 
review  concerning  the  subsidisation  of  an  Indian  PET  film  producer,  amended  the 

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OJ L 188, 18.7.2009, p. 93. 
OJ L 316, 10.12.1999, p. 1. 
OJ L 68, 8.3.2006, p. 15. 
OJ L 236, 31.8.2006, p. 1. 

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(4) 

(5) 

(6) 

(7) 

2. 

(8) 

3. 

(9) 

definitive  countervailing  duty  imposed  on  this  company  by  Regulation  (EC)  No 
367/2006. 

In  September  2007,  by  Regulation  (EC)  No  1124/20075,  the  Council,  following  a 
partial  interim  review  concerning  the  subsidisation  of  another  Indian  PET  film 
producer,  amended  the  definitive  countervailing  duty  imposed  on  this  company  by 
Regulation (EC) No 367/2006. 

In  January  2009,  by  Regulation  (EC)  No  15/20096,  the  Council,  following  a  partial 
interim  review  initiated  by  the  Commission  on  its  own  initiative  concerning  the 
subsidisation of five Indian PET film producers, amended the definitive countervailing 
duty imposed on these companies by Regulation (EC) No 367/2006 and the definitive 
anti-dumping duties imposed by Regulation (EC) No 1292/20077.  

In  June  2010,  by  Regulation  (EU)  No  579/20108,  the  Council,  following  a  partial 
interim review concerning the subsidisation of an Indian PET film producer, amended 
the  definitive  countervailing  duty  imposed  on  this  company  by  Regulation  (EC) 
367/2006.  

It should be noted that Vacmet India Limited is currently subject to a countervailing 
duty of 19.1% on the basis of Regulation (EC) 367/2006, as amended.  

Existing anti-dumping measures 

It should be noted that Vacmet India Limited is subject to a residual anti-dumping duty 
of 17.3% on the basis of Regulation (EC) 1292/2007, as amended.  

Initiation of a partial interim review  

On  7  August  2009,  the  Commission  received  a  request  for  a  partial  interim  review 
pursuant  to  Article  19  of  the  basic  Regulation.  The  request,  limited  in  scope  to  the 
examination  of  subsidisation,  was  lodged  by  Vacmet  India  Limited,  an  exporting 
producer  from  India  ('the  applicant').  In  its  request,  the  applicant  claimed  that  the 
circumstances  on  the  basis  of  which  measures  were  imposed  have  changed  and  that 
these changes are of a lasting nature. The applicant provided prima facie evidence that 
the continued imposition of the measure at its current level is no longer necessary to 
offset subsidisation. 

(10)  Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed to justify the initiation of a partial interim review, the Commission announced 
on  14  January  2010,  by  a  notice  published  in  the  Official  Journal  of  the  European 
Union9 ('Notice of Initiation'), the initiation of a partial interim review, in accordance 
with  Article  19  of  the  basic  Regulation,  limited  in  scope  to  the  examination  of 
subsidisation in respect of the applicant. 

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OJ L 255, 29.9.2007, p. 1. 
OJ L 6, 10.1.2009, p. 1. 
OJ L 288, 6.11.2007, p. 1. 
OJ L 168, 2.7.2010, p. 1. 
OJ C 8, 14.1.2010, p. 29. 

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(11)  The partial interim review investigation was also to assess the need, depending on the 
review  findings,  to  amend  the  rate  of  duty  currently  applicable  to  imports  of  the 
product concerned from exporting producers in the country concerned not individually 
mentioned  in  Article  1(2)  of  Regulation  (EC)  No  367/2006,  i.e.  the  duty  rate  as 
applying to 'all other companies' in India.  

(12)  The  Commission  also  announced  on  14  January  2010,  by  a  notice  of  initiation 
published  in  the  Official  Journal  of  the  European  Union10,  the  initiation  of  a  partial 
interim  review  of  the  anti-dumping  measures  limited  in  scope  to  the  examination  of 
dumping as far as the applicant is concerned. 

4. 

Investigation 

(13)  The investigation of the level of subsidisation covered the period from 1 January 2009 

to 31 December 2009 ('review investigation period' or 'RIP'). 

(14)  The  Commission  officially  informed  the  applicant,  the  Government  of  India  ('GOI') 
and the Union industry of the initiation of the partial interim investigation. Interested 
parties  were  given  the  opportunity  to  make  their  views  known  in  writing  and  to  be 
heard. 

(15) 

In order to obtain the information necessary for its investigation, the Commission sent 
a questionnaire to the applicant. In addition, a questionnaire was sent to the GOI. 

(16)  While the applicant fully cooperated in the investigation, the relevant authorities of the 
Government  of  India  did  not  submit  a  questionnaire  reply  within  the  deadline.  The 
Commission  sought  and  verified  all  information  it  deemed  necessary  for  the 
determination of subsidisation. A verification visit was carried out at the premises of 
the applicant.  

B. PRODUCT CONCERNED AND LIKE PRODUCT 

1. 

Product concerned 

(17)  The  product  confirmed  by  this  review  is  the  same  as  that  defined  in  the  Regulation 
imposing  the  measures  in  force  (Regulation  (EC)  No  367/2006  as  last  amended), 
namely  polyethylene  terephthalate  (PET)  film,  originating  in  India,  currently  falling 
within CN codes ex 3920 62 19 and ex 3920 62 90. 

2. 

Like product 

(18)  As in previous investigations, this investigation has shown that PET film produced in 
India and exported to the Union and the PET film produced and sold domestically on 
the Indian market, as well as the PET film produced and sold in the EU by the Union 
producers  have  the  same  basic  physical  and  chemical  characteristics  and  the  same 
basic uses.  

(19)  These products are therefore considered to be alike within the meaning of Article 2(c) 

of the basic Regulation. 

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OJ C 8, 14.11.2010, p. 27. 

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C. SUBSIDISATION 

1. 

Introduction 

Nationwide Schemes 

(20)  On the basis of the information submitted by the applicant and the Union industry, the 
following  schemes,  which  allegedly  involve  the  granting  of  subsidies,  were 
investigated:  

(a)  Duty Entitlement Passbook Scheme; 

(b)  Export Promotion Capital Goods Scheme; 

(c)  Advance  Authorisation  Scheme  (formerly  known  as  Advance  Licence 

Scheme); 

(d)  Capital Subsidies  

(21)  The schemes (a) to (c) specified above are based on the Foreign Trade (Development 
and Regulation) Act 1992 (No 22 of 1992) which entered into force on 7 August 1992 
('Foreign Trade Act'). The Foreign Trade Act authorises the GOI to issue notifications 
regarding  the  export  and  import  policy.  These  are  summarised  in  'Foreign  Trade 
Policy'  documents,  which  are  issued  by  the  Ministry  of  Commerce  every  five  years 
and updated regularly. Two Foreign Trade Policy documents are relevant to the RIP of 
this case, i.e. FT-policy 04-09 and FT-policy 09-14. In addition, the GOI also sets out 
the procedures governing the FT-policy 04-09 and FT-policy 09-14. In a 'Handbook of 
Procedures, Volume I' ('HOP I 04-09' and 'HOP I 09-14' respectively). The Handbook 
of Procedures is also updated on a regular basis 

(22)  The  scheme  specified  above  under  (d)  is  managed  by  the  authorities  of  the  State  of 

Uttar Pradesh.  

2. 

Duty Entitlement Passbook Scheme (‘DEPBS’) 

(a) 

Legal Basis 

(23)  The detailed description of the DEPBS is contained in paragraphs 4.3 of the FT-policy 
04-09 and FT-policy 09-14 as well as in chapter 4 of the HOP I 04-09 and of the HOP 
I 09-14.  

(b) 

Eligibility 

(24)  Any manufacturer-exporter or merchant-exporter is eligible for this scheme.  

(c) 

Practical implementation of the DEPBS 

(25)  An exporter can apply for DEPBS credits which are calculated as a percentage of the 
value  of  products  exported  under  this  scheme.  Such  DEPBS  rates  have  been 
established  by  the  Indian  authorities  for  most  products,  including  the  product 
concerned.  They  are  determined  on  the  basis  of  Standard  Input  Output  Norms 
('SIONs')  taking  into  account  a  presumed  import  content  of  inputs  in  the  export 

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product  and  the  customs  duty  incidence  on  such  presumed  imports,  regardless  of 
whether import duties have actually been paid or not.  

(26)  To be eligible for benefits under this scheme, a company must export. At the time of 
the  export  transaction,  a  declaration  must  be  made  by  the  exporter  to  the  Indian 
authorities indicating that the export is taking place under the DEPBS. In order for the 
goods  to  be  exported,  the  Indian  customs  authorities  issue  an  export  shipping  bill 
during the dispatch procedure. This document shows, inter alia, the amount of DEPBS 
credit  which  is  to  be  granted  for  that  export  transaction.  At  this  point  in  time,  the 
exporter knows the benefit it will receive. Once the customs authorities issue an export 
shipping bill, the GOI has no discretion over the granting of a DEPBS credit.  

(27) 

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

(28)  Application  for  DEPBS  credits  are  electronically  filed  and  can  cover  an  unlimited 
amount  of  export  transactions.  De  facto  no  strict  deadlines  apply  to  DEPBS  credits. 
The electronic system used to manage DEPBS does not automatically exclude export 
transactions exceeding the submission deadline mentioned in chapter 4.47 of the HOP 
I 04-09 and 09-14. Furthermore, as clearly provided in chapter 9.3 of the HOP I 04-09 
and 09-14, applications received after the expiry of submission deadlines can always 
be  considered  subject  to  the  imposition  of  a  minor  penalty  fee  (i.e.  10  %  of  the 
entitlement). 

(29) 

It was found that the applicant used this scheme during the RIP. 

(d) 

Conclusions on the DEPBS 

(30)  The  DEPBS  provides  subsidies  within  the  meaning  of  Article  3(1)(a)(ii)  and  Article 
3(2) of the basic Regulation. A DEPBS credit is a financial contribution by the GOI 
since  the  credit  will  eventually  be  used  to  offset  import  duties,  thus  decreasing  the 
GOI’s  duty  revenue  which  would  otherwise  be  due.  In  addition,  the  DEPBS  credit 
confers a benefit upon the exporter because it improves its liquidity. 

(31)  Furthermore, the DEPBS is contingent in law upon export performance, and therefore 
deemed to be specific and countervailable under Article 4(4), first subparagraph, point 
(a) of the basic Regulation. 

(32)  This scheme cannot be considered a permissible duty drawback system or substitution 
drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. It 
does not conform to the rules laid down in Annex I item (i), Annex II (definition and 
rules for drawback) and Annex III (definition and rules for substitution drawback) of 
the  basic  Regulation.  In  particular,  an  exporter  is  under  no  obligation  to  actually 
consume the goods imported free of duty in the production process and the amount of 
credit is not calculated in relation to actual inputs used. Moreover, there is no system 
or procedure in place to confirm which inputs are consumed in the production process 
of  the  exported  product  or  whether  an  excess  payment  of  import  duties  occurred 

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within  the  meaning  of  item  (i)  of  Annex  I,  and  Annexes  II  and  III  of  the  basic 
Regulation.  Lastly,  an  exporter  is  eligible  for  the  DEPBS  benefits  regardless  of 
whether it imports any inputs at all. In order to obtain the benefit, it is sufficient for an 
exporter  to  simply  export  goods  without  demonstrating  that  any  input  material  was 
imported.  Thus,  even  exporters  which  procure  all  of  their  inputs  locally  and  do  not 
import  any  goods  which  can  be  used  as  inputs  are  still  entitled  to  benefit  from  the 
DEPBS.  

(e) 

Calculation of the subsidy amount 

(33) 

In  accordance  with  Articles  3(2)  and  5  of  the  basic  Regulation  and  the  calculation 
methodology  used  for  this  scheme  in  Council  Regulation  (EC)  No  367/2006,  the 
amount  of  countervailable  subsidies  was  calculated  in  terms  of  the  benefit  conferred 
on the recipient found to exist during the RIP. In this regard, it was considered that the 
benefit is conferred on the recipient at the point in time when an export transaction is 
made  under  this  scheme.  At  that  moment,  the  GOI  is  liable  to  forego  the  customs 
duties,  which  constitutes  a  financial  contribution  within  the  meaning  of  Article 
3(1)(a)(ii)  of  the  basic  Regulation.  Once  the  customs  authorities  issue  an  export 
shipping  bill  which  shows,  inter  alia,  the  amount  of  DEPBS  credit  which  is  to  be 
granted for that export transaction, the GOI has no discretion as to whether or not to 
grant the subsidy. In the light of the above, it is considered appropriate to assess the 
benefit  under  the  DEPBS  as  being  the  sums  of  the  credits  earned  on  export 
transactions made under this scheme during the RIP. 

(34)  Where justified claims were made, fees necessarily incurred to obtain the subsidy were 
deducted from the credits so established to arrive at the subsidy amount as numerator, 
pursuant to Article 7(1)(a) of the basic Regulation. In accordance with Article 7(2) of 
the  basic  Regulation  this  subsidy  amount  has  been  allocated  over  the  total  export 
turnover  during  the  review  investigation  period  as  appropriate  denominator,  because 
the subsidy is contingent upon export performance and it was not granted by reference 
to the quantities manufactured, produced, exported or transported. 

(35)  The subsidy rate established in respect of this scheme for the applicant during the RIP 

amounts to 7.9 %. 

3. 

Export Promotion Capital Goods Scheme (‘EPCGS’)  

(a) 

Legal basis 

(36)  The detailed description of the EPCGS is contained in chapter 5 of the FT-policy 04-
09 and of the FT-policy 09-14 as well as in chapter 5 of the HOP I 04-09 and of the 
HOP I 09-14.  

(b) 

Eligibility 

(37)  Manufacturer-exporters,  merchant-exporters  "tied  to"  supporting  manufacturers  and 

service providers are eligible for this scheme.  

(c) 

Practical implementation 

(38)  Under  the  condition  of  an  export  obligation,  a  company  is  allowed  to  import  capital 
goods (new and -since April 2003- second-hand capital goods up to 10 years old) at a 

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reduced  rate  of  customs  duty.  To  this  end,  the  GOI  issues  an  EPCGS  licence  upon 
application and payment of a fee. Since April 2000, the scheme provides for a reduced 
import duty rate of 5 % applicable to all capital goods imported under the scheme. 

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

(40) 

It was found that the applicant used this scheme during the RIP. 

(d) 

Conclusion on EPCG Scheme 

(41)  The  EPCGS  provides  subsidies  within  the  meaning  of  Article  3(1)(a)(ii)  and  Article 
3(2) of the basic Regulation. The duty reduction constitutes a financial contribution by 
the  GOI  since  this  concession  decreases  the  GOI’s  duty  revenue,  which  would 
otherwise be due. In addition, the duty reduction confers a benefit upon the exporter 
because the duties saved upon importation improve its liquidity. 

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

(43)  This scheme cannot be considered a permissible duty drawback system or substitution 
drawback  system  within  the  meaning  of  Article  3(1)(a)(ii)  of  the  basic  Regulation. 
Capital goods are not covered by the scope of such permissible systems, as set out in 
Annex  I,  item  (i),  of  the  basic  Regulation  because  they  are  not  consumed  in  the 
production of the exported products. 

(e) 

Calculation of the subsidy amount 

(44)  The  subsidy  amount  was  calculated,  in  accordance  with  Article  7(3)  of  the  basic 
Regulation, on the basis of the unpaid customs duty on imported capital goods spread 
across a period which reflects the normal depreciation period of such capital goods in 
the  industry  concerned.  In  accordance  with  the  established  practice,  the  amount  so 
calculated,  which  is  attributable  to  the  RIP,  has  been  adjusted  by  adding  interest 
during  this  period  in  order  to  reflect  the  full  value  of  the  benefit  over  time.  The 
commercial  interest  rate  during  the  review  investigation  period  in  India  was 
considered  appropriate  for  this  purpose.  Where  justified  claims  were  made,  fees 
necessarily  incurred  to  obtain  the  subsidy  were  deducted  in  accordance  with  Article 
7(1)(a) of the basic Regulation.  

(45) 

In accordance with Articles 7(2) and 7(3) of the basic Regulation, this subsidy amount 
has  been  allocated  over  the  export  turnover  during  the  RIP  as  the  appropriate 
denominator because the subsidy is contingent upon export performance and was not 
granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported. 

(46)  As regards imports made under this scheme, the investigation revealed that there were 
a number of items which could be used for both production of the product concerned 

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as well as for the production of other products. However, it was noted that some items 
were  used  in  a  factory  unit  which  is  solely  used  for  the  production  of  PET  film. 
Therefore, in terms of calculation of the benefit to the applicant, the denominator to be 
used for these items would be the export turnover of the product concerned and not the 
total export turnover.  

(47)  The  subsidy  rate  established  in  respect  of  this  scheme  for  the  applicant  for  the  RIP 

amounts to 2,4 %. 

4. 

Advance Authorisation Scheme ('AAS') 

(a) 

Legal basis 

(48)  The detailed description of the scheme is contained in paragraphs 4.1.1 to 4.1.14 of the 
FT-policy 04-09 and FT-policy 09-14 and chapters 4.1 to 4.30 of the HOP I 04-09 and 
of  the  HOP  I  09-14.  This  scheme  was  called  Advance  Licence  Scheme  during  the 
previous  investigation  that  led  to  the  imposition  by  Council  Regulation  (EC)  No 
367/2006 of the definitive countervailing duty currently in force. 

(b) 

Eligibility 

(49)  The AAS consists of six sub-schemes, as described in more detail in recital (50)below. 
Those sub-schemes differ inter alia in the scope of eligibility. Manufacturer-exporters 
and  merchant-exporters  "tied  to"  supporting  manufacturers  are  eligible  for  the  AAS 
physical exports and for the AAS for annual requirement sub-schemes. Manufacturer–
exporters  supplying  the  ultimate  exporter  are  eligible  for  AAS  for  intermediate 
supplies. Main contractors which supply to the "deemed export" categories mentioned 
in paragraph 8.2 of the FT-policy 04-09, such as suppliers of an export oriented unit 
('EOU'), are eligible for the AAS deemed export sub-scheme. Eventually, intermediate 
suppliers to manufacturer-exporters are eligible for "deemed export" benefits under the 
sub-schemes Advance Release Order ('ARO') and back to back inland letter of credit.  

(c) 

Practical implementation 

(50)  Advance authorisations can be issued for: 

(i)  Physical  exports: This is the main sub-scheme. It allows for duty-free import 
of  input  materials  for  the  production  of  a  specific  resulting  export  product. 
"Physical"  in  this  context  means  that  the  export  product  has  to  leave  Indian 
territory.  An  import  allowance  and  export  obligation  including  the  type  of 
export product are specified in the licence; 

(ii)  Annual  requirement:  Such  an  authorisation  is  not  linked  to  a  specific  export 
product, but to a wider product group (e.g. chemical and allied products). The 
licence  holder  can  –  up  to  a  certain  value  threshold  set  by  its  past  export 
performance – import duty-free any input to be used in manufacturing any of 
the  items  falling  under  such  a  product  group.  It  can  choose  to  export  any 
resulting  product  falling  under  the  product  group  using  such  duty-exempt 
material; 

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

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

(iv)  Deemed  exports:  This  sub-scheme  allows  a  main  contractor  to  import  inputs 
free of duty which are required in manufacturing goods to be sold as “deemed 
exports”  to  the  categories  of  customers  mentioned  in  paragraph  8.2(b)  to  (f), 
(g),  (i)  and  (j)  of  the  FT-policy  04-09.  Deemed  exports  refer  to  those 
transactions in which the goods supplied do not leave the country. A number of 
categories  of  supply  is  regarded  as  deemed  exports  provided  the  goods  are 
manufactured in India, e.g. supply of goods to an export-oriented unit ('EOU') 
or to a company situated in a special economic zone ('SEZ'); 

(v)  Advance  Release  Order  ('ARO'):  The  AAS  holder  intending  to  source  the 
inputs  from  indigenous  sources,  in  lieu  of  direct  import,  has  the  option  to 
source  them  against  AROs.  In  such  cases  the  Advance  Authorisations  are 
validated as AROs and are endorsed to the indigenous supplier upon delivery 
of  the  items  specified  therein.  The  endorsement  of  the  ARO  entitles  the 
indigenous  supplier  to  the  benefits  of  deemed  exports as  set  out  in  paragraph 
8.3 of the FT-policy 04-09 (i.e. AAS for intermediate supplies/deemed export, 
deemed  export  drawback  and  refund  of  terminal  excise  duty).  The  ARO 
mechanism  refunds  taxes  and  duties  to  the  supplier  instead  of  refunding  the 
same  to  the  ultimate  exporter  in  the  form  of  drawback/refund  of  duties.  The 
refund  of  taxes/duties  is  available  both  for  indigenous  inputs  as  well  as 
imported inputs;  

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

(51)  The  applicant  received  concessions  under  the  AAS  linked  to  the  product  concerned 
during the RIP. The applicant made use of one of the sub-schemes, i.e. AAS physical 
exports.  It  is  therefore  not  necessary  to  establish  the  countervailability  of  the 
remaining unused sub-schemes. 

(52)  For verification purposes by the Indian authorities, an Advance Authorisation holder is 
legally obliged to maintain "a true and proper account of consumption and utilisation 
of  duty-free  imported/domestically  procured  goods"  in  a  specified  format  (chapters 
4.26,  4.30  and  Appendix  23  HOP  I  04-09  and  HOP  I  09-14),  i.e.  an  actual 
consumption  register.  This  register  has  to  be  verified  by  an  external  chartered 
accountant/cost  and  works  accountant  who  issues  a  certificate  stating  that  the 
prescribed  registers  and  relevant  records  have  been  examined  and  the  information 
furnished under Appendix 23 is true and correct in all respects.  

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(53)  With  regard  to  the  sub-scheme  used  during  the  RIP  by  the  applicant,  i.e.  physical 
exports, the import allowance and the export obligation are fixed in volume and value 
by  the  GOI  and  are  documented  on  the  Authorisation.  In  addition,  at  the  time  of 
import  and  of  export,  the  corresponding  transactions  are  to  be  documented  by 
Government officials on the Authorisation. The volume of imports allowed under the 
AAS is determined by the GOI on the basis of Standard Input Output Norms ('SIONs') 
which  exist  for  most  products  including  the  product  concerned.  Imported  input 
materials  are  not  transferable  and  have  to  be  used  to  produce  the  resultant  export 
product. The export obligation must be fulfilled within a prescribed time frame after 
issuance of the licence (24 months with two possible extensions of 6 months each). 

(54)  The current interim review investigation established that the verification requirements 
stipulated by the Indian authorities were not honoured and not yet tested in practice. 
The  applicant  did  not  maintain  a  system  whereby  it  could  be  verified  which  inputs 
were  consumed  in  the  production  of  the  exported  product  and  in  what  amounts,  as 
stipulated by the FT-policy (Appendix 23) and in accordance with Annex II(II)(4) of 
the basic Regulation. In fact, there were no records of actual consumption.  

(55)  Changes in the administration of the FT-policy 2004 to 2009, which became effective 
in  autumn  of  2005  (mandatory  sending  of  the  consumption  register  to  the  Indian 
authorities in the context of the redemption procedure) has not yet been applied in the 
case of the applicant. Thus, the de facto implementation of this provision could not be 
verified at this stage.  

(d) 

Conclusion on the AAS 

(56)  The  exemption  from  import  duties  is  a  subsidy  within  the  meaning  of  Article 
3(1)(a)(ii) and Article 3(2) of the basic Regulation, i.e. a financial contribution of the 
GOI which conferred a benefit upon the investigated exporter.  

(57) 

In  addition,  AAS  physical  exports  is  clearly  contingent  in  law  upon  export 
performance,  and  therefore  deemed  to  be  specific  and  countervailable  under  Article 
4(4),  first  subparagraph,  point  (a)  of  the  basic  Regulation.  Without  an  export 
commitment a company cannot obtain benefits under this scheme. 

(58)  The  sub-scheme  used  in  the  present  case  cannot  be  considered  permissible  duty 
drawback  system  or  substitution  drawback  system  within  the  meaning  of  Article 
3(1)(a)(ii) of the basic Regulation. It does not conform to the rules laid down in Annex 
I item (i), Annex II (definition and rules for drawback) and Annex III (definition and 
rules for substitution drawback) of the basic Regulation. The GOI did not effectively 
apply either its new or its old verification system or procedure to confirm whether and 
in  what  amounts  inputs  were  consumed  in  the  production  of  the  exported  product 
(Annex  II(II)(4)  of  the  basic  Regulation  and,  in  the  case  of  substitution  drawback 
schemes,  Annex  III(II)(2)  of  the  basic  Regulation).  The  SIONs  for  the  product 
concerned were not sufficiently precise. The SIONs themselves cannot be considered a 
verification system of actual consumption because the design of those standard norms 
does  not  enable  the  GOI  to  verify  with  sufficient  precision  what  amounts  of  inputs 
were  consumed  in  the  export  production.  In  addition,  the  GOI  did  not  carry  out  a 
further  examination  based  on  actual  inputs  involved,  although  this  would  normally 
need  to  be  carried  out  in  the  absence  of  an  effectively  applied  verification  system 
(Annex II(II)(5) and Annex III(II)(3) to the basic Regulation).  

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(59)  The sub-scheme is therefore countervailable. 

(e) 

Calculation of the subsidy amount 

(60) 

In the absence of permitted duty drawback systems or substitution drawback systems, 
the countervailable benefit is the remission of total import duties normally due upon 
importation of inputs. In this respect, it is noted that the basic Regulation does not only 
provide for the countervailing of an "excess" remission of duties. According to Article 
3(1)(a)(ii) and Annex I(i) of the basic Regulation only when the conditions of Annexes 
II  and  III  of  the  basic  Regulation  are  met  that  the  excess  remission  of  duties  can  be 
countervailed. However, these conditions were not fulfilled in the present case. Thus, 
if  an  adequate  monitoring  process  is  not  demonstrated,  the  above  exception  for 
drawback  schemes  is  not  applicable  and  the  normal  rule  of  the  countervailing  of  the 
amount  of  unpaid  duties  (revenue  forgone),  applies,  rather  than  of  any  purported 
excess remission. As set out in Annexes II(II) and III(II) of the basic Regulation the 
burden is not upon the investigating authority to calculate such excess remission. To 
the contrary, according to Article 3(1)(a)(ii) of the basic Regulation, the investigating 
authority only has to establish sufficient evidence to refute the appropriateness of an 
alleged verification system. 

(61)  The subsidy amount for the applicant which used the AAS was calculated on the basis 
of import duties forgone (basic customs duty and special additional customs duty) on 
the material imported under the sub-scheme during the RIP (numerator). In accordance 
with  Article  7(1)(a)  of  the  basic  Regulation,  fees  necessarily  incurred  to  obtain  the 
subsidy were deducted from the subsidy amount where justified claims were made. In 
accordance  with  Article  7(2)  of  the  basic  Regulation,  this  subsidy  amount  was 
allocated  over  the  export  turnover  of  the  product  concerned  during  the  RIP  as 
appropriate  denominator  because  the  subsidy  is  contingent  upon  export  performance 
and was not granted by reference to the quantities manufactured, produced, exported 
or transported. 

(62)  The  subsidy  rate  established  in  respect  of  this  scheme  for  the  applicant  for  the  RIP 

amounts to 0,2%. 

5. 

Capital Subsidies (CS) 

(a) Legal basis 

(63) 

In previous investigations regarding PET film, including  the  investigation that  led to 
the imposition by Regulation (EC) No 367/2006 of the definitive countervailing duty 
currently in force, several Indian State schemes involving incentives granted to local 
companies  were  investigated.  The  State  schemes  fall  under  the  heading  'Package 
Scheme  of  Incentives'  as  there  can  be  different  kinds  of  incentives  involved.  The 
previous  investigation  established  that  a  company's  entitlement  to  benefits  could  be 
stipulated in the 'Eligibility Certificate' or 'Entitlement Certificate'. However, as in the 
present investigation, there could also be ad-hoc subsidies such as capital subsidies.  

(b) Eligibility 

(64) 

In order to be eligible, companies must as a general rule invest in less developed areas 
of a state either by setting up a new industrial establishment or by making a large scale 
capital investment or diversification of an existing industrial establishment. 

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(c) Practical implementation 

(65)  According  to  the  response  to  the  questionnaire,  the  applicant  received  in  2009  a 
significant  amount  as  capital  subsidy  for  setting  up  new  production  facilities  by  the 
Government  of  Uttar  Pradesh  ('GUP').  It  was  explained  that  this  capital  subsidy 
received is linked to the setting up of new production facilities, i.e. to cover expenses 
for  investments  made  by  the  applicant.  According  to  the  applicant,  it  was  a  pure 
subsidy in the form of a grant to improve equity.  

(66)  The  investigation  also  revealed  that  the  applicant  is  eligible  for  refunds  of  VAT  and 
Central  Sales  Tax  (CST)  from  the  Commercial  Tax  Department  of  Uttar  Pradesh 
because of investments earlier made. In the 'Eligibility Certificate' there is a cap which 
the company is able to claim. The scheme was used by the company over four years. 
On a monthly basis, refunds of paid VAT and CST charged on intra-State and inter-
State sales respectively were requested, including during the RIP. 

(d) Conclusion 

(67)  The  capital  subsidy  is  a  direct  transfer  of  funds  i.e.  grant  to  the  applicant.  It  is  a 
subsidy within the meaning Article 3(1)(a)(i) and Article 3(2) of the basic Regulation. 
It is financial contribution by the State Government of Uttar Pradesh which confers a 
direct benefit upon the applicant.  

(68)  The  refund  of  VAT  and  CST  provides  subsidies  within  the  meaning  of  Article 
3(1)(a)(ii) and Article 3(2) of the basic Regulation. The refund constitutes a financial 
contribution by the State Government of Uttar Pradesh since this concession decreases 
the State Government's tax revenue which would be otherwise due. In addition, the tax 
refund  confers  a  benefit  upon  the  applicant  because  the  tax  saved  improves  its 
liquidity. 

(69)  The subsidies are not contingent in law upon export performance. However, due to the 
lack  of  cooperation  of  the  authorities  of  the  State  Government  of  Uttar  Pradesh,  the 
Commission  was  unable  to  make  a  firm  conclusion  on  this  scheme  as  regards  the 
specificity and practical application of this law and the level of discretion the granting 
authority  enjoys  when  deciding  on  the  applications.  Indeed,  it  cannot  be  determined 
with certainty whether Article 4(2), first subparagraph, point (b) is fulfilled, given that 
it  could  not  be  established  that  the  State  Government  of  Uttar  Pradesh  applied 
objective criteria or conditions for granting the subsidy. Therefore, even if the scheme 
was shown not to be specific in law, it is still not clear that it is not specific de facto. 
As  a  result  it  is  deemed  to  be  specific  and  countervailable  under  Article  4(2),  first 
subparagraph, point (c) and Article 4(2), fourth subparagraph of the basic Regulation.  

(e) 

Calculation of the subsidy amount 

(70)  As  regards  the  capital  subsidy  received  for  setting  up  new  production  facilities,  the 
subsidy  amount  was  calculated,  in  accordance  with  Article  7(3)  of  the  basic 
Regulation,  on  the  basis  of  the  capital  subsidy  spread  across  a  period  which  reflects 
the normal depreciation period/useful life of capital goods in this industry because the 
subsidy  can  be  linked  to  the  acquisition  of  fixed  assets.  Interests  were  added  to  this 
amount  in  order  to  reflect  the  full  value  of  the  benefit  over  time.  The  commercial 
interest rate during the review investigation period in India was considered appropriate 
for  this  purpose.  Pursuant  to  Article  7(2)  of  the  basic  Regulation,  the  amount  of 

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subsidy  has  then  been  allocated  over  the  total  turnover  of  export  and  domestic  sales 
during  the  RIP  as  the  appropriate  denominator  because  the  subsidy  is  not  export-
contingent and was not granted by reference to the quantities manufactured, produced, 
exported or transported. 

(71)  Regarding  the  refunds  of  VAT  and  Central  Sales  Tax,  the  subsidy  amount  was 
calculated  on  the  basis  of  the  amount  of  refunds  during  the  RIP.  Pursuant  to  Article 
7(2)  of  the  basic  Regulation,  the  amount  of  subsidy  (numerator)  has  then  been 
allocated  over  the  total  turnover  of  export  and  domestic  sales  during  the  RIP  as  the 
appropriate  denominator  because  the  subsidy  is  not  export-contingent  and  it  was  not 
granted  by  reference  to  the  quantities  manufactured,  produced,  exported  or 
transported. 

(72)  Based  on  the  above,  the  subsidy  rate  established  for  applicant  in  respect  of  these 

capital subsidies during the RIP amounts to 0,5%. 

6. 

AMOUNT OF COUNTERVAILABLE SUBSIDIES 

(73)  The applicant is currently subject to a countervailing duty of 19,1%  

(74)  During the present partial interim review, the amount of countervailable subsidies for 
the applicant, expressed ad valorem, was found to be 11,0%, as listed hereunder: 

SCHEME→ 

DEPBS(*) EPCGS(*) AAS(*) CS Total 

COMPANY↓ 

 % 

Vacmet 
Limited 

India 

7,9 

%  

2,4 

%  

%   %  

0,2 

0,5 

11,0 

(*) Subsidies marked with an asterisk are export subsidies 

(75)  Account taken of the above it is concluded that the level of subsidisation with regard 

to the exporting producer concerned has decreased. 

7. 

COUNTERVAILING MEASURES 

(76) 

It was also examined whether the changed circumstances with regard to the examined 
schemes could be considered to be of a lasting nature.  

(77)  The  investigation  confirmed that  the  subsidy  amount  for  the  applicant  has  decreased 
well  below  the  duty  rate  currently  applicable  to  it.  This  reduction  in  the  overall 
subsidy level is mainly due to a significant drop of benefits which are available under 
the DEPBS. On the basis of the above there seems to be indications that the applicant 
will continue to receive subsidies in the future of an amount which is less than the one 
it is currently subject to. 

(78)  Since  it  has  been  demonstrated  that  the  applicant  is  in  receipt  of  much  lesser 
subsidisation  than  before  and  that  it  is  likely  to  continue  to  receive  subsidies  of  an 
amount  which  is  less  than  determined  in  the  original  investigation,  the  level  of  the 
measure should therefore be amended to reflect the new findings. 

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(79) 

In  view  of  the  above,  the  amended  countervailing  duty  rate  should  be  established  at 
the  new  rate  of  subsidisation  found  during  the  present  partial  interim  review,  as  the 
injury margin calculated in the original anti-subsidy investigation remains higher. 

(80)  Pursuant  to  Article  24(1),  second  subparagraph  of  the  of  Regulation  (EC)  No 
597/200911, no product shall be subject to both anti-dumping and countervailing duties 
for  the  purpose  of  dealing  with  one  and  the  same  situation  arising  from  dumping  or 
from  export  subsidisation.  However,  since  the  anti-dumping  duty  established  for  the 
applicant as a result of the parallel anti-dumping interim review is 0% with regard to 
the product concerned, this situation does not arise in the present case.  

(81)  With  regard  to  the  rate  of  duty  currently  applicable  to  imports  of  the  product 
concerned  from  exporting  producers  not  individually  mentioned  in  Article  1(2)  of 
Regulation  (EC)  No  367/2006,  i.e.  the  duty  specified  as  applying  to  'all  other 
companies' in India, it is noted that the actual modalities of the investigated schemes 
and  their  countervailability  have  not  changed  with  respect  to  the  previous 
investigation.  Thus  there  is  no  reason  to  re-calculate  the  subsidy  and  duty  rates  of 
these companies. Consequently, the rates of the duty applicable to all companies other 
than the applicant remain unchanged. 

(82) 

Interested parties were informed of the essential facts and considerations on the basis 
of which it was intended to propose to amend the duty rate applicable to the applicant 
and were given an opportunity to comment.  

(83)  The oral and written comments submitted by the parties were considered and, where 

appropriate, the definitive findings have been modified accordingly, 

HAS ADOPTED THIS REGULATION: 

Article 1 

The  table  in  Article  1(2)  of  Council  Regulation  (EC)  No  367/2006  is  hereby  amended  by 
inserting the following: 

Vacmet India Limited, Anant Plaza, IInd 
Floor,  4/117-2A,  Civil  Lines,  Church 
Road, Agra-282002, Uttar Pradesh, India 

11,0 

"A992" 

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

Article 2 

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

11 

OJ L 188, 18.07.2009 p. 93. 

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Done at Brussels, […] 

For the Council 
The President 

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