Proposal for a COUNCIL REGULATION repealing the countervailing duty on imports of certain broad spectrum antibiotics originating in India and terminating the proceeding in respect of such imports, following review pursuant to Article 18(2) of Council Regulation (EC) No 597/2009
Date: 2011-07-07
Institutions: European Commission
Subjects: India, anti-dumping legislation, antibiotic, import (EU), originating product

EUROPEAN COMMISSION 

Brussels, 7.7.2011 
COM(2011) 410 final 

2011/0179 (NLE) 

Proposal for a 

COUNCIL REGULATION 

repealing the countervailing duty on imports of certain broad spectrum antibiotics 
originating in India and terminating the proceeding in respect of such imports, following 
review pursuant to Article 18(2) of Council Regulation (EC) No 597/2009 

 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

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 
Union  (‘the  basic  Regulation’),  in  the  expiry  review  of  the  countervailing  duty  in  force  in 
respect of imports of certain broad spectrum antibiotics originating in India. 

General context 

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

Existing provisions in the area of the proposal 

A  definitive  countervailing  duty  on  imports  of  certain  broad  spectrum  antibiotics  currently 
falling within CN codes ex 2941 10 00 and ex 2941 90 00 originating in India was imposed 
by Council Regulation (EC) No 713/2005 (OJ L 121, 13.05.2005, p. 1.) as last amended by 
Council Regulation (EC) No 1176/2008 (OJ L 319, 29.11.2008, p. 1). 

Consistency with other policies and objectives of the Union 

Not applicable 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

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. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

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On  12  May  2010,  the  Commission  initiated  upon  substantiated  request  of  two  Union 
producers an expiry review of the countervailing duty in force in respect of imports of certain 
broad spectrum antibiotics originating in India. 

The  review  investigation  found  continuing  subsidisation  of  the  product  concerned,  which, 
should countervailing measures be lifted, would not result in the recurrence of injury to the 
Union industry. It was further established that the lapse of measures would not be against the 
interest of the Union. 

It is therefore proposed that the Council adopt the attached proposal for a Regulation. 

Legal basis 

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

Subsidiarity principle 

The proposal falls under the exclusive competence of the European 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: 

the basic Regulation does not provide for alternative options. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Union budget. 

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2011/0179 (NLE) 

Proposal for a 

COUNCIL REGULATION 

repealing the countervailing duty on imports of certain broad spectrum antibiotics 
originating in India and terminating the proceeding in respect of such imports, following 
review pursuant to Article 18(2) of Council Regulation (EC) No 597/2009 

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 18 thereof, 

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

Whereas: 

1. 

PROCEDURE 

1.1.  Measures in force 

(1) 

the  Council,  by  Regulation  (EC)  713/20052, 

In  May  2005,  following  a  combined  expiry  and  interim  review  ('the  combined 
imposed  a  definitive 
review'), 
countervailing  duty  on  imports  of  certain  broad  spectrum  antibiotics,  namely 
amoxicillin  trihydrate,  ampicillin  trihydrate  and  cefalexin  not  put  up  in  measured 
doses or in forms or packing for retail sale (‘the product concerned’) currently falling 
within CN codes ex 2941 10 00 and ex 2941 90 00 originating in India. The measures 
took  the  form  of  an  ad  valorem  duty  ranging  from  17,3%  to  32%.  The  original 
measures had been imposed by Regulation (EC) No 2164/983. 

(2) 

Following  a  partial  interim  review,  the  Council,  by  Regulation  (EC)  1176/20084, 
amended the countervailing duty rate applicable to one Indian exporter. 

1.2. 

Request for an expiry review 

(3) 

Following the publication of a notice of impending expiry5 of the definitive measures 
in force,  the Commission  received  a  request for the initiation of an expiry review of 

1 
2 
3 
4 

OJ L 188, 18.7.2009, p. 93. 
OJ L 121, 13.05.2005, p. 1 
OJ L 273, 9.10.1998, p. 1. 
OJ L 319, 29.11.2008, p. 1 

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(4) 

(5) 

Council  Regulation  (EC)  No  713/2005  pursuant  to  Articles  18(2)  of  the  basic 
Regulation,  from  two  Union  producers:  DSM  and  Sandoz  (‘the  applicants’), 
representing  a  major  proportion,  in  this  case  more  than  50%  of  the  total  Union 
production of certain broad spectrum antibiotics. 

The request was based on the grounds that the expiry of the measures would be likely 
to  lead  to  a  continuation  or  recurrence  of  subsidisation  and  injury  to  the  Union 
industry. 

Prior to the initiation of the expiry review, and in accordance with Articles 10(9) and 
22(1) of the basic Regulation, the Commission notified the Government of India (‘the 
GOI’) that it had received a properly documented review request. The GOI was invited 
for consultations with the aim of clarifying the situation as regards the contents of the 
request and arriving at a mutually agreed solution. The GOI responded only very late 
to this invitation and, therefore, no such consultations have taken place. 

1.3. 

Initiation of an expiry review 

(6) 

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed for the initiation of an expiry review, the Commission announced on 12 May 
2010,  by  a  notice  published  in  the  Official  Journal  of  the  European  Union6  ('the 
Notice  of  initiation'),  the  initiation  of  an  expiry  review  pursuant  to  Article  18  of  the 
basic Regulation. 

1.4. 

Investigation 

1.4.1. 

Investigation period 

(7) 

The  investigation  of  continuation  or  recurrence  of  subsidisation  covered  the  period 
from 1 April 2009 to 31 March 2010 (‘the review investigation period’ or ‘RIP’). The 
examination  of  the  trends  relevant  for  the  assessment  of  the  likelihood  of  a 
continuation or recurrence of injury covered the period from 1 January 2007 to the end 
of the review investigation period (‘the period considered’). 

1.4.2.  Parties concerned by the investigation 

(8) 

(9) 

(10) 

The  Commission  officially  advised  the  applicants,  other  known  Union  producers, 
exporting producers, importers, up-stream suppliers, users known to be concerned, and 
the  GOI  of  the  initiation  of  the  expiry  review.  Interested  parties  were  given  the 
opportunity to make their views known in writing and to request a hearing within the 
time limit set out in the Notice of initiation. 

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

In view of the apparent large number of exporting producers of the product concerned 
in India which were named in the request, it was considered appropriate, in accordance 
with Article 27 of the basic Regulation, to examine whether sampling should be used. 

5 
6 

OJ C 21, 28.1.2010, p. 40. 
OJ C 123, 12.5.2010, p. 11. 

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In  order  to  enable  the  Commission  to  decide  whether  sampling  would  be  necessary 
and, if so, to select a sample, the above parties were requested, pursuant to Article 27 
of the basic Regulation, to make themselves known within 15 days of the initiation of 
the  review  and  to  provide  the  Commission  with  the  information  requested  in  the 
Notice  of  initiation.  Only  three  exporting  producers  came  forward.  Therefore,  no 
sampling was applied. 

(11)  The Commission sent questionnaires to all parties known to be concerned and to those 
who  made  themselves  known  within  the  deadlines  set  in  the  Notice  of  initiation. 
Replies were received from three Union producers, three exporting producers and the 
GOI.  None  of  the  other  producers  replied  to  the  questionnaire  or  supplied  any 
information. None of the importers came forward during the sampling exercise and no 
other  importers  supplied  the  Commission  with  any  information  or  made  themselves 
known in the course of the investigation.  

(12)  One of the producers claimed that the assessment of the situation of the Union industry 
should  also  include  data  from  another  alleged  Union  producer.  However,  as  it  was 
found that this latter company was not a producer of the product under investigation, 
this claim was rejected. 

(13)  The  Commission  sought  and  verified  all  the  information  it  deemed  necessary  for  a 
determination  of  the  likelihood  of  continuation  or  recurrence  of  subsidisation  and 
resulting  injury  and  of  the  Union  interest.  Verification  visits  were  carried  out  at  the 
premises of the following interested parties: 

(a) Union producers: 

–  DSM  Anti-Infectives  B.V.,  Delft  (The  Netherlands),  which  also  replied  to  the 
Commission’s  questionnaire  on  behalf  of  DSM  Anti-Infectives  Chemferm  S.A., 
Santa  Perpetua  de  Mogoda,  (Spain).  These  two  companies  are  hereafter  jointly 
referred to as ‘DSM’; 

–  Deretil  S.A.  (formerly  DSM  Anti-Infectives  Deretil  S.A.),  Almeria,  Spain, 

referred to as 'Deretil'; and 

–  Sandoz  GmbH,  Kundl  (Austria),  which  also  replied  to  the  Commission’s 
questionnaire  on  behalf  of  Sandoz  Industrial  Products  S.A.,  Barcelona  (Spain). 
Both companies are hereafter jointly referred to as ‘Sandoz’. 

(b) Exporting producers in India: 

–  Lupin Limited, Mumbai; 

–  M/s Surya Pharmaceuticals Ltd., Chandigarh and Baddi; and 

–  Ranbaxy Laboratories Limited, Gurgaon. 

(c) Government of India ('GOI') 

–  Ministry of Commerce, New Delhi 

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2. 

PRODUCT CONCERNED AND LIKE PRODUCT 

(14)  The  product  covered  by  this  review  is  the  same  product  as  the  one  concerned  by 
Council  Regulation  (EC)  No  713/2005,  namely  amoxicillin  trihydrate,  ampicillin 
trihydrate and cefalexin not put up in measured doses or in forms or packing for retail 
sale currently falling within CN codes ex 2941 10 00 and ex 2941 90 00 originating in 
India (‘the product concerned’). 

(15)  The investigation confirmed that, as in the previous review investigation, the product 
concerned and the products manufactured and sold by the exporting producers on the 
domestic  market  in  India,  as  well  as  those  manufactured  and  sold  in  the  EU  by  the 
Union producers, have the same basic physical and technical characteristics as well as 
the same uses and are, therefore, considered to be like products within the meaning of 
Article 2(c) of the basic Regulation. 

3. 

LIKELIHOOD  OF  CONTINUATION  OR  RECURRENCE  OF 
SUBSIDISATION 

3.1. 

Introduction 

(16)  As  mentioned  in  recital  (11)  above,  three  exporting  producers  came  forward  and 
completed  a  questionnaire  reply.  However,  only  two  of  these  three  exporting 
producers reported to have sales of the product concerned to the EU during the RIP. 

(17)  On the basis of the information contained in the review request and the replies to the 
Commission’s  questionnaire,  the  following  schemes,  which  allegedly  involve  the 
granting of subsidies, were investigated:  

Nationwide schemes:  

(a)  Advance Authorisation Scheme ('AAS');  

(b)  Duty Entitlement Passbook Scheme ('DEPBS'); 

(c)  Export Promotion Capital Goods Scheme ('EPCGS'); 

(d)  Focus Market Scheme ('FMS'); 

(e)  Duty Free Import Authorisation ('DFIA'); 

(f)  Export  Oriented  Units  ('EOU')  /  Export  Processing  Zones  ('EPZ')  / 

Special Economic Zones ('SEZ'); 

(g)  Export Credit Scheme ('ECS'); and 

(h) 

Income Tax Exemption Scheme ('ITES'). 

Regional schemes: 

(i) 

Punjab Industrial Incentive Scheme; and 

(j)  Gujarat Industrial Incentive Scheme. 

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(18)  The schemes (a) to (f) 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 
('FTP')  documents,  which  are  issued  by  the  Ministry  of  Commerce  every  five  years 
and  updated  regularly.  Two  FTP  documents  are  relevant  to  the  RIP  of  this  case,  i.e. 
FTP 04-09 and FTP 09-14. The latter entered into force in August 2009. In addition, 
the  GOI  also  sets  out  the  procedures  governing  FTP  04-09  and  FTP  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. 

(19)  Scheme  (g)  is  based  on  sections  21  and  35A  of  the  Banking  Regulation  Act  1949, 
which allow the Reserve Bank of India (RBI) to direct commercial banks in the field 
of export credits. 

(20)  Scheme (h) is based on the Income Tax Act of 1961, which is amended by the yearly 

Finance Act. 

(21)  Scheme (i) is administered by the Government of Punjab and is based on the industrial 

policy and incentives code of the Government of Punjab. 

(22)  Scheme (j) is administerded by the Government of Gujarat and is based on Gujarat's 

industrial incentive policy. 

3.2. 

Advance Authorisation Scheme (‘AAS’) 

(a)  Legal basis 

(23)  The  detailed  description  of  the  scheme  is  contained  in  paragraphs  4.1.1  to  4.1.14  of 
FTP 04-09 and FTP 09-14 and paragraphs 4.1 to 4.30A of HOP I 04-09 and HOP I 09-
14. 

(b)  Eligibility 

(24)  The  AAS  consists  of  six  sub-schemes,  as  described  in  more  detail  in  recital  (25). 
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.  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 FTP 04-09 and FTP 09-14, such as suppliers of an export oriented 
unit (EOU), are eligible for AAS deemed export. Eventually, intermediate suppliers to 
manufacturer-exporters  are  eligible  for  ‘deemed  export’  benefits  under  the  sub-
schemes Advance Release Order (ARO) and back-to-back inland letter of credit. 

(c)  Practical implementation 

(25)  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  resultant  export  product. 
‘Physical’  in  this  context  means  that  the  export  product  has  to  leave  Indian 

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territory.  An  import  allowance  and  export  obligation  including  the  type  of 
export product are specified in the authorisation; 

(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 
authorisation holder can — up to a certain value threshold set by its past export 
performance — import duty free any input to be used in manufacturing any of 
the  items  falling  under  such  a  product  group.  It  can  choose  to  export  any 
resultant  product  falling  under  the  product  group  using  such  duty-exempt 
material; 

(iii) 

intermediate  supplies: this  sub-scheme covers  cases  where two  manufacturers 
intend  to  produce  a  single  export  product  and  divide  the  production  process. 
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  FTP  04-09  and  FTP  09-14.  According  to  the  GOI,  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 EOU 
or to a company situated in a special economic zone (SEZ);  

(v)  ARO: the AAS holder intending to source the inputs from indigenous sources, 
in lieu of direct import, has the option to source them against AROs. In such 
cases, the Advance Authorisations are validated as AROs and are endorsed to 
the  indigenous  supplier  upon  delivery  of  the  items  specified  therein.  The 
endorsement  of  the  ARO  entitles  the  indigenous  supplier  to  the  benefits  of 
deemed exports as set out in paragraph 8.3 of FTP 04-09 and FTP 09-14 (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 invalidated by the 
bank for direct import only in respect of the value and volume of items being 
sourced  indigenously  instead  of  importation.  The  indigenous  supplier  will  be 
entitled to the forecast export benefits as set out in paragraph 8.3 of FTP 04-09 
and  FTP  09-14  (i.e.  AAS  for  intermediate  supplies/deemed  export,  deemed 
export drawback and refund of terminal excise duty).  

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(26)  During  the  RIP,  one  of  the  two  cooperating  exporters  obtained  concessions  under 
AAS. The subschemes that this company used was (i) physical exports. It is therefore 
not necessary to establish the countervailability of the remaining unused sub-schemes.  

(27) 

Imported  input  materials  are  not  transferable  and  have  to  be  used  to  produce  the 
resulting  export  product.  The  export  obligation  must  be  fulfilled  within  a  prescribed 
time-frame after issuance of the authorisation. Since the combined review, it has been 
extended  to  36  months  (was  24  months  with  two  possible  extensions  of  six  months 
each). 

(28)  For verification purposes by the Indian authorities, an Advance Authorisation holder is 
legally obliged to maintain an actual consumption register ('true and proper account') 
of duty-free imported/domestically procured goods against each authorisation, as per 
prescribed  format  (paragraphs  4.26,  4.30  and  Appendix  23  HOP  I  04-09  and  HOP  I 
09-14). 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.  

(29)  With  regard  to  the  use  of  AAS  for  physical  exports  during  the  RIP,  both  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 this scheme is determined by the 
GOI  on  the  basis  of  standard  input-output  norms  ('SIONs').  SIONs  exist  for  most 
products  including  the  product  concerned  and  are  issued  by  the  GOI.  Since  the 
combined review, the SIONs have been revised downwards and during the RIP they 
were, for the main raw material input and depending on the product and route, 2,3% to 
16,1% lower than during the combined review.  

(30) 

In spite of this lowering of the SIONs, it was found that for one of the product types 
concerned,  the  actual  consumption  was  still  below  the  SIONs.  Furthermore,  it  was 
found  that,  although  mandatory,  the  company  did  not  keep  the  consumption  register 
referred to in recital (28) above ('Appendix 23'), verifiable by an external accountant. 
In  spite  of  the  breach  of  this  requirement,  the  company  did  avail  the  benefits  under 
AAS  which  were  moreover,  in  view  of  the  found  overestimation  of  the  SIONs,  in 
excess of the legal provisions therefore. 

(d)  Disclosure comments 

(31)  The GOI and one exporting producer submitted comments on AAS.  

(32)  The GOI claimed that AAS operates as a permitted drawback or substitution drawback 
system with a verification system in conformity with the provisions of Annexes I, II 
and  III  of  the  basic  Regulation  in  place  to  monitor  the  nexus  between  duty  free 
imported  inputs  and  the  resultant  export  products.  The  GOI  further  contended  that, 
according to the basic Regulation, only the remission or drawback of import charges in 
excess  of  those  levied  on  imported  inputs  that  are  consumed  in  the  production  of 
exported  products  can  be  countervailed.  With  regard  to  a  verification  system,  they 
insisted that an adequate verification system was in place. In this context they referred 
to  a  number  of  verification  elements  which  were  available  to  the  GOI  for  such 

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verification,  including  SIONs,  quantity  information  on  import  and  export  documents 
and redemption verification after fulfilment of importation and exportation. The GOI 
also  recalled  that  the  scheme  prescribes  that,  if  there  is  any  unutilized  material,  full 
duty is to be paid along with interest.  

(33)  The exporting producer which had used AAS for its EU sales had no comments on the 
findings  as  concerns  description  and  practical  implementation,  as  summarized  under 
paragraphs (a) to (c) above, but it contested a number of figures in the calculation of 
the subsidy amount. Whilst the calculation was checked and no corrections needed to 
be made, these issues were clarified to the company concerned. 

(e)  Conclusion 

(34)  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. 

(35) 

In  addition,  AAS  for  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. 

(36)  This  expiry  review  has,  therefore,  confirmed  that  the  main  sub-scheme  used  in  the 
present case cannot be considered as 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 Annexes I (item (i)), II (definition and rules 
for  drawback)  and  III  (definition  and  rules  for  substitution  drawback)  of  the  basic 
Regulation.  Although  a  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) does exist, the GOI did not effectively apply 
it.  The  SIONs  themselves  cannot  be  considered  a  verification  system  of  actual 
consumption,  since  they  have  been  found  to  be  overgenerous  and  it  was  established 
that  benefits  received  in  excess  are  not  reclaimed  by  the  GOI.  Indeed,  an  effective 
control done by the GOI based on a correctly kept actual consumption register did not 
take place. 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). Finally, it has been confirmed that, although mandatory by law, the 
involvement  of  chartered  accountants  in  the  verification  process  is,  in  practice,  not 
guaranteed. 

(37)  AAS for physical exports is therefore countervailable. 

(f)  Calculation of the subsidy amount 

(38) 

In  the  absence  of  permitted  duty  drawback  system  or  substitution  drawback  system, 
the countervailable benefit is the remission of total import duties normally due upon 
importation  of  inputs.  In  this  respect  and  as  to  the  claim  of  the  GOI  in  recital  (32) 
above,  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 

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Annex  I(i)  of  the  basic  Regulation  only  an  excess  remission  of  duties  can  be 
countervailed,  provided  the  conditions  of  Annexes  II  and  III  of  the  basic  Regulation 
are met. However, these conditions were not fulfilled in the present case. Thus, if an 
absence  of  an  adequate  monitoring  process  is  established,  the  above  exception  for 
drawback schemes is not applicable and the normal rule for countervailing the amount 
of  (revenue  forgone)  unpaid  duties,  rather  than  any  purported  excess  remission, 
applies. 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 it only has to establish 
sufficient evidence to refute the appropriateness of an alleged verification system. 

(39)  The subsidy amount for the exporter 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 used for the product concerned during the 
RIP  (nominator).  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 has been allocated over the export turnover generated 
by  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. 

(40)  The  subsidy  rate  established  in  respect  of  this  scheme  during  the  RIP  for  the  sole 

cooperating producer using it amounts to 12,3 %. 

3.3. 

Duty Entitlement Passbook Scheme (‘DEPBS’) 

(a)  Legal Basis 

(41)  The  detailed  description  of  the  DEPBS  is  contained  in  paragraphs  4.3  of  FTP  04-09 

and FTP 09-14 as well as in chapter 4 of HOP I 04-09 and HOP I 09-14.  

(b)  Eligibility 

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

(c)  Practical implementation 

(43)  An eligible exporter can apply for DEPBS credits which are calculated as a percentage 
of  the  value  of  products  exported  under  this  scheme.  Such  DEPBS  rates  have  been 
established  by  the  Indian  authorities  for  most  products,  including  the  product 
concerned. They are determined on the basis of SIONs (see recital (29) above) and the 
customs duty incidence on the presumed import content, regardless of whether import 
duties  have  actually  been  paid  or  not.  The  DEPB  rates  for  the  product  concerned 
during  the  RIP  of  the  current  investigation  were  8  %  for  amoxicillin  trihydrate  and 
7 %  for  ampicillin  trihydrate  and  cefalexin,  and  therefore  in  all  cases  higher  than 
during the combined review. 

(44)  To be eligible for benefits under this scheme, a company must export. At the point in 
time  of  the  export  transaction,  a  declaration  must  be  made  by  the  exporter  to  the 
authorities  in  India  indicating  that  the  export  is  taking  place  under  the  DEPBS.  In 
order  for  the  goods  to  be  exported,  the  Indian  customs  authorities  issue,  during  the 

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dispatch  procedure,  an  export  shipping  bill.  This  document  shows,  inter  alia,  the 
amount  of  DEPBS  credit  which  is  to  be  granted  for  that  export  transaction.  At  this 
point  in  time,  the  exporter  knows  the  benefit  it  will  receive.  Once  the  customs 
authorities issue an export shipping bill, the GOI has no discretion over the granting of 
a  DEPBS  credit.  The  relevant  DEPBS  rate  to  calculate  the  benefit  is  that  which 
applied at the time the export declaration was made. Therefore, there is no possibility 
for a retroactive amendment to the level of the benefit. 

(45) 

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  unrestrictedly  importable,  except  capital  goods. 
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 24 months from the date of issue. 

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

(47) 

It was found that one cooperating Indian exporting producer used this scheme during 
the RIP. 

(d)  Disclosure comments 

(48)  The  GOI  submitted  that  'benefit  to  the  recipient'  can  be  measured  and  the 
countervailability  of  the  subsidy  can  be  determined  only  when  DEPBS  licenses  are 
sold in the market as they would only confer a benefit if and when they are sold on the 
market.  In  other  words,  DEPBS  credits  would  not  be  countervailable  when  they  are 
used for payment of customs duty on the imported goods which are used as inputs for 
the production of exported goods. 

(e)  Conclusions on DEPBS 

(49)  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  be  otherwise  due.  In  addition,  the  DEPBS  credit 
confers  a  benefit  upon  the  exporter,  because  it  improves  its  liquidity  not  only  if  a 
license  is  sold  on  the  market,  as  was  claimed  by  the  GOI,  but  also  if  it  is  used  for 
payment of customs duty on imported goods. 

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

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(51)  This  scheme  cannot  be  considered  as  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 strict rules laid down in Annex I item (i), Annex 
II  (definition  and  rules  for  drawback)  and  Annex  III  (definition  and  rules  for 
substitution drawback) of the basic Regulation. An exporter is under no obligation to 
actually  consume  the  goods  imported  free  of  duty  in  the  production  process  and  the 
amount of credit is not calculated in relation to actual 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 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.  

(f)  Calculation of the subsidy amount 

(52) 

In  accordance  with  Articles  3(2)  and  5  of  the  basic  Regulation,  the  amount  of 
countervailable  subsidies  was  calculated  in  terms  of  the  benefit  conferred  on  the 
recipient, which is found to exist during the review investigation period. 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  this  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. 

(53) 

In  light  of  the  above,  it  is  considered  appropriate  to  assess  the  benefit  under  the 
DEPBS as being the sum of the credits earned on all export transactions made under 
this scheme during the RIP.  

(54)  Where justified claims were made, fees necessarily incurred to obtain the subsidy were 
deducted from the credits so established to arrive at the subsidy amounts as numerator, 
pursuant to Article 7(1)(a) of the basic Regulation.  

(55) 

In  accordance  with  Article  7(2)  of  the  basic  Regulation  these  subsidy  amounts  have 
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.  

(56)  Based  on  the  above,  the  subsidy  rate  established  in  respect  of  this  scheme  for  the 

cooperating exporting producer using it during the RIP amounts to 6,9%. 

3.4. 

Export Promotion Capital Goods scheme (‘EPCGS’) 

(a)  Legal basis 

(57)  The  detailed  description of  EPCGS  is  contained  in  chapter 5 of FTP 04-09 and FTP 

09-14 as well as in chapter 5 of HOP I 04-09 and HOP I 09-14.  

(b)  Eligibility 

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

service providers are eligible for this scheme.  

(c)  Practical implementation 

(59)  Under  the  condition  of  an  export  obligation,  a  company  is  allowed  to  import  capital 
goods  (new  and  second-hand  capital  goods  up  to  10  years  old)  at  a  reduced  rate  of 
duty. To this end, the GOI issues, upon application and payment of a fee, an EPCGS 
licence.  The  scheme  provides  for  a  reduced  import  duty  rate  of  5%  applicable  to  all 
capital goods imported under the scheme. In order to meet the export obligation, the 
imported  capital  goods  must  be  used  to  produce  a  certain  amount  of  export  goods 
during a certain period. Under FTP 09-14 the capital goods can be imported with 0% 
duty rate under  EPCGS  but in such  case the  time  period  for  fulfilment  of  the  export 
obligation is shorter.  

(60)  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. 

(61) 

It  was  found  that  both  cooperating  exporting  producers  used  this  scheme  during  the 
RIP. 

(d)  Disclosure comments 

(62)  Upon disclosure  the GOI contested the countervailability of EPCGS. In  particular, it 
claimed that EPCGS subsidies with regard to the purchase of capital goods where the 
export obligation was already fulfilled before the RIP, should not anymore be treated 
as contingent upon export performance. One exporting producer which was found to 
have  received  EPCGS  subsidies  claimed  that  these  subsidies  should  not  have  been 
taken into account as they would not have been used for purchasing capital goods used 
for the production of the product concerned. 

(e)  Conclusion on EPCGS 

(63)  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  be 
otherwise  due.  In  addition,  the  duty  reduction  confers  a  benefit  upon  the  exporter, 
because the duties saved upon importation improve the company’s liquidity. 

(64)  The  claim  that  EPCGS  subsidies  with  regard to the purchase  of capital  goods where 
the  export  obligation  was  already  fulfilled  before  the  RIP  would  not  anymore  be 
contingent upon export performance has to be rejected. Indeed, it is not contested that 
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.  The  moment  in  time  where  the  export  obligation  would  actually  be 
fulfilled  is  irrelevant  in  that  respect.  As  concerns  the  issue  as  to  whether  or  not  the 
capital  goods  are  used  for  the  production  of  the  product  concerned,  according  to 

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Chapter  5.2  of  FTP  09-14,  the  EPCGS  allows  imports  of  capital  goods  for  pre 
production, production and post production (including CKD/SKD7 thereof as well as 
computer  software  systems).  It  is  therefore  clear  that  also  goods  not  used  for  the 
production  of  the  product  concerned  can  benefit  from  EPCGS.  In  addition,  it  was 
established that the export obligation under EPCGS was fulfilled using exports of the 
product concerned. The claim is therefore rejected. 

(65)  EPCGS  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. 

(f)  Calculation of the subsidy amount 

(66)  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. Interests were added to this amount in order to reflect the full 
value  of  the  benefit  over  time.  The  commercial  interest  rate  for  local  currency  loans 
during  the  review  investigation  period  in  India  was  considered  appropriate  for  this 
purpose. 

(67) 

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 appropriate denominator, 
because the subsidy is contingent upon export performance.  

(68)  The  subsidy  rate  established  in  respect  of  this  scheme  for  the  cooperating  exporting 

producers during the RIP amounts to 0,1 % – 0,5 %. 

3.5. 

Focus Market Scheme ('FMS')  

(a)  Legal basis 

(69)  The detailed description of FMS is contained in paragraph 3.9.1 to 3.9.2.2 of FTP 04-
09  and  paragraph  3.14.1  to  3.14.3  of  FTP  09-14  and  in  paragraph  3.20  to  3.20.3  of 
HOP I 04-09 and paragraph 3.8 to 3.8.2 of HOP I 09-14. 

(b)  Eligibility 

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

(c)  Practical implementation 

(71)  Under this scheme exports of all products to countries notified under Appendix 37(C) 
of HOP I 04-09 and HOP I 09-14 are entitled to duty credit equivalent to 2,5% of the 
FOB  value  of  products  exported  under  this  scheme.  Certain  type  of  export  activities 
are  excluded  from  the  scheme,  e.g.  exports of  imported  goods  or  transhipped  goods, 
deemed exports, service exports and export turnover of units operating under special 

7 

Complete knock-down, semi knock-down 

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economic  zones/export  operating  units.  Also  excluded  from  the  scheme  are  certain 
types of products, e.g. diamonds, precious metals, ores, cereals, sugar and petroleum 
products. 

(72)  The duty credits under FMS are freely transferable and valid for a period of 24 months 
from the date of issue of the relevant credit entitlement certificate. They can be used 
for payment of custom duties on subsequent imports of any inputs or goods including 
capital goods. 

(73)  The credit entitlement certificate is issued from the port from which the exports have 
been  made  and  after  realisation  of  exports  or  shipment  of  goods.  As  long  as  the 
applicant provides to the authorities copies of all relevant export documentation (e.g. 
export  order,  invoices,  shipping  bills,  bank  realisation  certificates),  the  GOI  has  no 
discretion over the granting of the duty credits. 

(d)  Disclosure comments 

(74)  After disclosure the GOI submitted that until the credit entitlement certificate is sold 
on the market, it would confer no benefit whatsoever to the recipient and, therefore, it 
would  not  be  countervailable.  It  was  claimed  that  FMS  duty  credits  would  not  be 
countervailable  when  they  are  used  for  payment  of  customs  duty  on  the  imported 
goods which are used as inputs for the production of exported goods. The cooperating 
exporting producer which had availed benefits under FMS argued that the scheme is 
geographically related to other countries and, therefore, cannot be countervailed by the 
EU. 

(e)  Conclusion on FMS 

(75)  The FMS provides subsidies within the meaning of Article 3(1)(a)(ii) and Article 3(2) 
of  the  basic  Regulation.  A  FMS  duty  credit  is  a  financial  contribution  by  the  GOI, 
since  the  credit  will  eventually  be  used  to  offset  import  duties,  thus  decreasing  the 
GOI’s  duty  revenue  which  would  be  otherwise  due.  In  addition,  regardless  as  to 
whether the credit entitlement certificate is used for offsetting import duties or sold on 
the  market,  the  FMS  duty  credit  confers  a  benefit  upon  the  exporter,  because  it 
improves its liquidity. 

(76)  Furthermore,  FMS  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.  The  fact  that  EU  countries  are  not  covered  under  FMS 
does not contradict either the practical implementations of the scheme nor the way the 
FMS benefit is used, as stated under recitals (72) to (74) above. Therefore, this claim 
had to be rejected. 

(77)  This scheme cannot be considered a permissible duty drawback system or substitution 
drawback system within the meaning of Article 2(1)(a)(ii) of the basic Regulation. It 
does not conform to the strict rules laid down in Annex I point (i), Annex II (definition 
and rules for drawback) and Annex III (definition and rules for substitution drawback) 
of  the  basic  Regulation.  An  exporter  is  under  no  obligation  to  actually  consume  the 
goods imported free of duty in the production process and the amount of credit is not 
calculated in relation to actual inputs used. There is no system or procedure in place to 
confirm which inputs are consumed in the production process of the exported product 

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or whether an excess payment of import duties occurred within the meaning of point 
(i) of Annex I and Annexes II and III of the basic Regulation. An exporter is eligible 
for FMS 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 FMS. Moreover, an exporter can use FMS duty 
credits in order to import capital goods although capital goods are not covered by the 
scope  of  permissible  duty  drawback  systems,  as  set  out  in  Annex  I  point  (i)  of  the 
basic  Regulation,  because  they  are  not  consumed  in  the  production  of  the  exported 
products. 

(f)  Calculation of the subsidy amount 

(78)  The  amount  of  countervailable  subsidies  was  calculated  in  terms  of  the  benefit 
conferred  on  the  recipient,  which  is  found  to  exist  during  the  RIP  as  booked  by  the 
cooperating exporting producer using the scheme on an accrual basis as income at the 
stage  of  export  transaction.  In  accordance  with  Article  7(2)  and  7(3)  of  the  basic 
Regulation  this  subsidy  amount  (nominator)  has  been  allocated  over  the  export 
turnover during the RIP 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. 

(79)  The  subsidy  rate  established  with  regard  to  this  scheme  during  the  RIP  for  the 

cooperating exporting producer using the scheme amounts to < 0,1%. 

3.6. 

Duty Free Import Authorisation ('DFIA') 

(80) 

3.7. 

(81) 

In the course of  the  investigation it was  found  that  the  cooperating  Indian  producers 
did not obtain any benefits under DFIA during the RIP. It was therefore not necessary 
to further analyse this scheme in this investigation. 

Export  Oriented  Units  ('EOU')  /  Export  Processing  Zones  ('EPZ')  /  Special 
Economic Zones ('SEZ') 

In the course of  the investigation it was  found  that  the  cooperating  Indian  producers 
did not obtain any benefits under EOU/EPZ/SEZ during the RIP. It was therefore not 
necessary to further analyse these schemes in this investigation. 

3.8. 

Export Credit Scheme ('ECS') 

(a) Legal basis 

(82)  The details of the scheme are set by in Master Circular on Rupee / Foreign Currency 
Export  Credit  &  Customer  Services  to  Exporters  DBOD  No  DIR.(Exp).  BC 
07/04.02.02/2009-10  of  the  Reserve  Bank  of  India  (RBI),  which  is  addressed  to  all 
commercial banks in India. 

(b) Eligibility 

(83)  Manufacturing exporters and merchant exporters are eligible for this scheme. 

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(c) Practical implementation 

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

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

(86) 

(d) Conclusion on ECS 

(87)  The  preferential  interest  rates  of  an  ECS  credit  set  by  the  RBI  Master  Circular 
mentioned in recital (85) can decrease interest costs of an exporter as compared with 
credit  costs  purely  set  by  market  conditions  and  confer  in  this  case  a  benefit  in  the 
meaning of Article 3(2) of the basic Regulation on such exporter. Export financing is 
not per se more secure than domestic financing. In fact, it is usually perceived as being 
more  risky  and  the  extent  of  security  required  for  a  certain  credit,  regardless  of  the 
finance  object,  is  a  purely  commercial  decision  of  a  given  commercial  bank.  Rate 
differences with regard to different banks are the result of the methodology of the RBI 
to  set  maximum  lending  rates  for  each  commercial  bank  individually.  In  addition, 
commercial  banks  would  not  be  obliged  to  pass  through  to  borrowers  of  export 
financing any more advantageous interest rates for export credits in foreign currency. 

(88)  Despite the fact that the preferential credits under the ECS are granted by commercial 
banks, this benefit is a financial contribution by a government within the meaning of 
Article  2(1)(a)(iv)  of  the  basic  Regulation.  In  this  context,  it  should  be  noted  that 
neither Article 2(1)(a)(iv) of the basic Regulation nor the ASCM require a charge on 
the  public  accounts,  e.g.  reimbursement  of  the  commercial  banks  by  the  GOI,  to 
establish a subsidy, but only government direction to carry out functions illustrated in 
points  (i),  (ii)  or  (iii)  of  Article  3(1)(a)  of  the  basic  Regulation.  The  RBI  is  a  public 
body  and  falls  therefore  under  the  definition  of  a  ‘government’  as  set  out  in  Article 
2(b)  of  the  basic  Regulation.  It  is  100  %  government-owned,  pursues  public  policy 
objectives,  e.g.  monetary  policy,  and  its  management  is  appointed  by  the  GOI.  The 
RBI  directs  private  bodies,  within  the  meaning  of  the  second  indent  of  Article 
3(1)(a)(iv)  of  the  basic  Regulation,  since  the  commercial  banks  are  bound  by  the 
conditions it imposes, inter alia, with regard to the maximum ceilings for interest rates 
on  export  credits  mandated  in  the  RBI  Master  Circular  and  the  RBI  provisions  that 
commercial  banks  have  to  provide  a  certain  amount  of  their  net  bank  credit  towards 
export  finance.  This  direction  obliges  commercial  banks  to  carry  out  functions 
mentioned in Article 3(1)(a)(i) of the basic Regulation, in this case loans in the form of 
preferential export financing. Such direct transfer of funds in the form of loans under 

EN 

19 

   EN 

 
certain conditions would normally be vested in the government, and the practice, in no 
real  sense,  differs  from  practices  normally  followed  by  governments,  within  the 
meaning of Article 3(1)(a)(iv) of the basic Regulation. This subsidy is deemed to be 
specific  and  countervailable  since  the  preferential  interest  rates  are  only  available  in 
relation  to  the  financing  of  export  transactions  and  are  therefore  contingent  upon 
export performance, pursuant to Article 4(4)(a) of the basic Regulation. 

(e) Calculation of the subsidy amount 

(89)  The  subsidy  amount  has  been  calculated  on  the  basis  of  the  difference  between  the 
interest  paid  for  export  credits  used  during  the  RIP  and  the  interest  rate  that  would 
have  been  payable  for  ordinary  commercial  credits  used  by  the  sole  cooperating 
exporting  producer  using  the  scheme.  This  subsidy  amount  (nominator)  has  been 
allocated over the total export turnover during the RIP as appropriate denominator in 
accordance with Article 7(2) of the basic Regulation, because the subsidy is contingent 
upon  export  performance  and  it  was  not  granted  by  reference  to  the  quantities 
manufactured, produced, exported or transported. 

(90)  The subsidy rate established with regard to this scheme for the RIP for the cooperating 

exporting producer using the scheme was negligible. 

3.9. 

Income Tax Exemption Scheme ('ITES') 

(91) 

In the course of  the  investigation it was  found  that  the  cooperating  Indian  producers 
did not obtain any benefits under ITES during the RIP. It was therefore not necessary 
to further analyse this scheme in this investigation. 

3.10. 

Punjab Industrial Incentive Scheme 

(92) 

In the course of  the  investigation it was  found  that  the  cooperating  Indian  producers 
did  not  obtain  any  benefits  under  the  Punjab  Industrial  Incentive  Scheme  during  the 
RIP. It was therefore not necessary to further analyse this scheme in this investigation. 

3.11.  Gujarat Industrial Incentive Scheme 

(93) 

In the  course of the  investigation it was  found  that  the  cooperating  Indian  producers 
did not obtain any benefits under the Gujarat Industrial Incentive Scheme during the 
RIP. It was therefore not necessary to further analyse this scheme in this investigation. 

3.12.  Amount of countervailable subsidies 

(94)  The amount of countervailable subsidies determined in accordance with the provisions 
of  the  basic  Regulation,  expressed  ad  valorem,  for  the  investigated  exporting 
producers range between 7,5% and 12,4%. These amounts of subsidisation exceed the 
de minimis threshold mentioned under Article 14(5) of the basic Regulation. 

(95) 

It  is  therefore  considered  that,  pursuant  to  Article  18  of  the  basic  Regulation, 
subsidisation continued during the RIP. 

3.13.  Conclusions on the likelihood of continuation or recurrence of subsidisation 

EN 

20 

   EN 

 
(96) 

(97) 

(98) 

In accordance with Article 18(2) of the basic Regulation, it was examined whether the 
expiry of the measures in force would be likely to lead to a continuation or recurrence 
of subsidisation. 

In this respect, it is recalled that only two known exporting producers of the product 
concerned  cooperated.  From  the  available  Indian  and  EU  statistical  information  the 
share of these exporters in the total Union sales of Indian exporting producers of the 
product  concerned  cannot  be  established.  However,  those  statistical  data  would 
suggest  that  there  are  other  producers  which  could  sell  the  product  concerned  to  the 
Union. 

It was established that during the RIP, the cooperating exporting producers continued 
to  benefit  from  countervailable  subsidisation  by  the  Indian  government.  The  subsidy 
schemes analysed above give recurring benefits and there are no indications that these 
programmes  would  be  phased  out  or  modified  in  the  foreseeable  future  or  that  the 
cooperating exporting producers would stop obtaining benefits under these schemes.  

(99)  There  is  no  information  available  which  would  indicate  that  the  other  exporting 
producers would not continue to benefit from the subsidy schemes analysed above. It 
is therefore concluded that the subsidisation at the country-wide level continued. 

(100)  In  view  of  the  findings  described  above  it  is  concluded  that  subsidisation  continued 

during the RIP and would be likely to continue in the future.  

4. 

UNION PRODUCTION 

(101)  During  the  review  investigation  period,  the  like  product  was  manufactured  in  the 
Union  by  the  following  Union  producers:  Sandoz,  DSM,  Deretil,  ACS  Dobfar  SpA 
and  Antibioticos  S.A..  Sandoz  and  DSM  requested  an  expiry  review  of  the  anti-
subsidy  measures  in  force.  All  available  information  concerning  Union  producers, 
including information provided in the request and data collected from Union producers 
before  and  after  the  initiation  of  the  review  investigation,  was  used  in  order  to 
establish  the  total  Union  production.  On  that  basis,  the  estimated  total  Union 
production during the RIP was 7.093 tonnes. 

(102)  The Union producers accounting for the total Union production constitute the Union 
industry within the meaning of Article 9(1) of the basic Regulation and are hereafter 
referred to as the ‘Union industry’. Since the like product produced by the three Union 
producers  who  submitted  a  questionnaire  response  during  the  RIP  represented  up  to 
95%  of  the  total  Union  production  of  the  like  product,  these  producers'  data  are 
considered to be representative of the entire Union industry.  

5. 

SITUATION ON THE UNION MARKET 

5.1. 

Preliminary remark 

(103)  To  analyse  the  import  volumes  and  price  trends,  the  Eurostat  import  statistics  for 
TARIC codes 2941 10 10 10, 2941 10 20 10 and 2941 90 00 30 for the years 2007 and 
2008  and  TARIC  codes  2941  10  00  10  and  2941  90  00  30  for  the  year  2009  and 
onwards, as applicable during the period considered, were used. 

EN 

21 

   EN 

 
(104)  Taking  into  account  the  number  of  Union  producers  and  the  fact  that  one  Union 
producer was producing the like product under a tolling agreement with another one, 
the  information  concerning  the  Union  industry,  where  necessary,  has  been  shown  in 
indices or in ranges only, in order to protect confidentiality of data. 

5.2. 

Consumption in the Union market 

(105)  The  like  product  is  sold  by  the  Union  industry  to  unrelated  customers  and 

sold/transferred to related companies for further downstream processing. 

(106)  Sales to unrelated entities were considered to form the ‘free market’. Sales/transfers to 

related entities were considered as "captive use". 

(107)  In calculating the apparent Union consumption of the product concerned and the like 

product, the Commission added: 

– 

– 

– 

– 

the volume of total imports of the product under investigation into the Union as 
reported by Eurostat, 

the  volume  of  sales  of  the  like  product  in  the  Union  produced  by  the  Union 
industry, 

the volume of captive use of the like product by the Union industry, 

and the estimated sales of the like product in the Union by other known Union 
producers. 

(108)  It should be noted that, in order to avoid double-counting of sales volumes, the sales 
made under a tolling agreement between two Union producers were excluded from the 
above calculation. 

(109)  On  the  above  basis,  the  Union  consumption  of  the  product  concerned  and  the  like 

product gradually increased by 28% during the period considered: 

Consumption (in tonnes) 

2007 

2008 

2009 

RIP 

Product  concerned  and  like 
product 

Index 

5.3. 

Imports from India 

6.601 

100 

7.021 

106 

7.783 

118 

8.423 

128 

5.3.1.  Volume, market share and prices of imports from India 

Imports (in tonnes) 

Product  concerned  imports 
for free circulation 

2007 

32,6 

2008 

16,1 

2009 

1,9 

Index 

100 

49 

6 

RIP 

1,4 

4 

EN 

22 

   EN 

 
Product  concerned  imports 
under 
inward  processing 
regime 

Index 

45,5 

100 

3,7 

8 

15,5 

34 

14,5 

32 

(110)  According to Eurostat data, the volume of imports of the product concerned from India 
for free circulation has decreased by 96% during the period considered. A considerable 
drop  by  51  percentage  points  has  been  observed  in  2008  then  followed  by  a  further 
decrease by 43 percentage points in 2009 and two percentage points in the RIP. 

(111)  A  slightly  different  trend  could  be  observed  for  imports  under  inward  processing 
regime  which  are  free  from  countervailing  and custom  duties.  After  an  initial  fall  in 
imports  by  92%  between  2007  and  2008,  imports  increased  in  2009  and  remained 
relatively stable in the RIP. 

Average import price 
(EUR/tonne) 

Product  concerned  imports 
for free circulation 

2007 

2008 

2009 

RIP 

25.863 

28.934 

34.758 

19.200 

Index 

100 

112 

134 

74 

Product  concerned  imports 
under 
inward  processing 
regime 

35.616 

37.443 

30.894 

30.044 

Index 

100 

105 

87 

84 

(112)  The  average  import  price  of  the  product  concerned  from  India  for  free  circulation 
increased by 34% between 2007 and 2009, then sharply dropped in the RIP, to reach a 
level 26 % lower than in 2007. Also prices of imports under inward processing regime 
followed  a  downward  trend  and  decreased  by  16%  over  the  period  considered.  The 
different  price  trends  between  the  two  import  regimes  can  be  explained  by  the 
different type of the product concerned that was mainly imported, i.e. cefalexin, which 
is comparatively more expensive than other types. 

Market share of imports 
from India 

Product  concerned,  imports 
for free circulation 

2007 

2008 

2009 

RIP 

0,5% 

0,2% 

0,0% 

0,0% 

Index 

100 

46 

5 

3 

Product  concerned  imports 
under 
inward  processing 
regime 

Index 

0,7% 

100 

0,1% 

8 

0,2% 

29 

0,2% 

25 

EN 

23 

   EN 

 
(113)  The  market  share  of  imports  from  India  for  free  circulation  or  made  under  inward 
processing  regime  was  very  low  over  the  period  considered  and  decreased  in  both 
cases. 

(114)  One Union producer indicated that Indian imports, which were based on Eurostat data, 
had  been  wrongly  estimated  as  Indian  export  statistics  show  higher  export  volumes 
than  those  stated  by  Eurostat.  In  this  regard,  it  should  be  noted  that  it  is  the 
Commission's  standard  practice  to  use  Eurostat  as  a  basis  for  import  statistics.  It  is 
further  noted  that  Indian  export  statistics  do  not  indicate  the  final  destination  of  the 
exports  and  whether  they  will  actually  enter  the  EU.  This  claim  had  therefore  to  be 
rejected. 

5.3.2.  Price undercutting 

(115)  In  view  of  the  extremely  low  quantity  of  imports  from  India  that  entered  the  EU 
market  for  free  circulation,  no  meaningful  conclusion  could  be  drawn  in  regard  to 
price  undercutting.  In  regard  to  the  imports  under  the  inward  processing  regime,  the 
undercutting  margin  found  was  negative.  However,  these  imports  amounted  to  less 
than  ten  tonnes  and  concerned  only  one  product  type  (cefalexin),  which  is  also  the 
most  expensive  and  less  represented  product  type  on  the  market.  Therefore,  it  was 
concluded  that  the  transaction  data  concerning  imports  under  the  inward  processing 
regime  were  not  representative  for  the  purpose  of  a  meaningful  undercutting 
calculation and not suitable for further analysis.  

(116)  One  Union  producer  indicated  that  a  segregated  analysis  of  the  two  categories  of 
imports,  i.e.  for  free  circulation  and  under  the  inward  processing  regime,  was  not  in 
line  with  the  approach  of  the  previous  review  proceeding  and  was  also  contrary  to 
consistent Commission practice. 

(117)  In this regard, it should be noted that as concluded in recital (115), quantities imported 
either under the inward processing regime or for free circulation were not sufficient to 
allow  meaningful  conclusions  to  be  drawn.  Considering  the  low  level  of  the 
aggregated volume, this conclusion equally applies to that volume. 

5.4. 

Imports from other third countries 

Third country imports 
Volume (tonnes) 

2007 

2008 

2009 

RIP 

Singapore 

China 

Oman 

Other third countries 

Total 

 Index 

 Index 

 Index 

 Index 

Index 

1.557,7 
100 
487,6 
100 
373,4 
100 
67,8 
100 
2.486,5 
100 

1.448,2 
93 
622,5 
128 
438,5 
117 
327,5 
483 
2.836,7 
114 

2.030,5 
130 
1.176,9 
241 
301,7 
81 
74,2 
109 
3.583,3 
144 

2.425,3 
156 
1.234,7 
253 
287,9 
77 
73,2 
108 
4.021,1 
162 

(118)  Imports of the product under review from countries other than India increased by 62% 
during the period considered, with market share surging by more than 10 percentage 
points from 37,6% to 47,7%, which coincided with the increased consumption on the 

EN 

24 

   EN 

 
  
  
  
  
EU  market.  Among  exporting  countries,  Singapore,  China  and  Oman  have  been  the 
major suppliers on the Union market. 

Average import price per 
tonne (EUR) 

Singapore 

China 

Oman 

Other third countries 

Total 

 Index 

 Index 

Index  

 Index 

Index 

2007 
44.218 
100 
29.515 
100 
29.875 
100 
38.324 
100 
39.020 
100 

2008 
36.590 
83 
26.622 
90 
27.665 
93 
35.987 
94 
32.953 
84 

2009 
27.007 
61 
21.224 
72 
23.440 
78 
45.628 
119 
25.193 
65 

RIP 
22.485 
51 
20.683 
70 
22.597 
76 
46.938 
122 
22.385 
57 

(119)  Average import prices from third countries have decreased significantly by 43% over 
the period considered. Although the prices of the main exporting countries (Singapore, 
China and Oman) undercut the EU prices by around 20% in the RIP on a product per 
product basis and the import volumes can be regarded as significant, such low priced 
imports did apparently not affect the profitability of the Union industry. 

(120)  One  Union  producer  claimed  that  the  analysis  of  the  average  import  price  trends 
should  have  taken  account  of  the  various  product  types.  In  this  regard,  it  should  be 
noted that, in line with standard practice, the analysis of, inter alia, price trends has to 
be made on the basis of the product concerned regardless of the share of each product 
type. It is further noted that, in this case, no conclusion was drawn from the trend in 
import  prices  from  third  countries  over  the  period  considered.  The  above  claim 
therefore had to be rejected. 

(121)  All  Union  producers  claimed  that  imports  from,  inter  alia,  China  and  Oman  are 
mainly  of  amoxicillin  trihydrate  for  veterinary  use  and  this  should  have  been  taken 
into  account  in  the  analysis  of  the  above  prices.  In  this  regard,  it  is  noted  that  the 
product under review covers antibiotics for both human and veterinary consumption. 
Furthermore,  the  information  provided  in  support  of  this  allegation  was  not 
substantiated. Therefore, the above claim had to be rejected. 

(122)  One Union producer questioned the basis on which price comparisons for amoxicillin 
trihydrate and ampicillin trihydrate were made in the RIP given the fact that Eurostat 
data  does  not  distinguish  between  these  two  product  types.  In  this  regard,  as  it  was 
found that the Union industry's prices of these two product types were similar, it was 
not unreasonable to make an aggregate price comparison. 

(123)  As far as imports from Singapore are concerned, all Union producers claimed that they 
were made at transfer price between related parties. In these circumstances, to include 
these  imports  would  distort  the  average  prices  from  other  third  countries.  It  is  noted 
that,  if  these  imports  were  to  be  excluded  from  the  price  comparison,  the  above 
mentioned  finding  with  regard  to  the  undercutting  margin  would  not  change 
significantly  and  the  conclusion  that  the  low  priced  imports  did  not  affect  the 
profitability of the Union industry would remain valid. 

EN 

25 

   EN 

 
 
 
 
 
5.5. 

Economic situation of the Union industry 

(124)  For the following economic indicators relating to the Union industry, it was found that 
a  meaningful  analysis  and  evaluation  had  to  focus  on  the  situation  prevailing  on  the 
free  market:  sales  volume  and  sales  prices  on  the  Union  market,  market  share  and 
profitability. Where possible and justified, these findings were subsequently compared 
with the data for the captive market, in order to provide a full picture of the situation 
of the Union industry.  

(125)  As  regards  other  economic  indicators,  however,  it  was  found  on  the  basis  of  the 
investigation, that they could reasonably be examined only by referring to the whole 
activity.  Indeed,  production  (for  both  the  captive  and  the  free  market),  capacity, 
capacity  utilisation,  inventories,  investments,  stocks,  employment,  productivity, 
wages,  growth,  ability  to  raise  capital  depend  upon  the  whole  activity,  whether  the 
production is captive or sold on the free market. 

(126)  Following comments received from one Union producer on the final disclosure of the 
facts  and  considerations  on  the  basis  of  which  it  was  proposed  to  terminate  the 
proceeding,  some  of  the  economic  indicators  in  the  following  recitals  have  been 
corrected. These changes were not of a nature to change the conclusion with regard to 
the situation of the Union industry. 

5.5.1.  Production, capacity and capacity utilisation 

Index capacity 

Index production 

Index capacity utilisation 

2007 

100 

100 

100 

2008 

100 

95 

95 

2009 

104 

96 

92 

RIP 

107 

98 

91 

(127)  The  Union  industry's  production  capacity  was  stable  between  2007  and  2008  before 

increasing by 4% from 2008 to 2009 and by a further 3 percentage points in the RIP. 

(128)  However,  the  production  volume  did  not  follow  this  increase  due  to  unforeseen 
technical difficulties of one Union producer in 2008, when production volume dropped 
by 5% and recovered gradually until the RIP. 

(129)  As  a  result  of  the  increase  in  production  capacity  combined  with  a  small  fall  in 
production,  the  capacity  utilisation  rate  continually  dropped  in  the  period  considered 
and reached a level in the RIP that was 9% below that in 2007.  

5.5.2. 

Sales volume, sales price, market share  

5.5.2.1.  Free market sales 

Sales to unrelated parties in 
the EU 

2007 

2008 

2009 

RIP 

Index volume 

100 

97 

93 

99 

EN 

26 

   EN 

 
 
Index average sales price 

Index market share 

100 

100 

121 

90 

104 

79 

104 

78 

(130)  The Union industry's sales volume to unrelated parties in the RIP was slightly below 
the  level  of  2007,  dropping  by  7  %  in  2009  and  then  increasing  by  six  percentage 
points during the RIP. 

(131)  The average sales price of the Union industry on the EU market increased by 4% over 
the period considered. Prices first increased sharply by 21% in 2008 before dropping 
by 17 percentage points in 2009 and remaining stable in the RIP. 

(132)  One Union producer claimed that the price impact of imports from India on the Union 
industry  was  not  correctly  assessed.  In  this  regard,  it  is  first  of  all  noted  that  no 
undercutting was found as mentioned in recital (115) above. Additionally, as indicated 
in  the  preceding  recital,  Union  industry  prices  increased  by  4%  over  the  period 
considered.  In  these  circumstances  it  is  considered  that  imports  from  India  did  not 
have any negative effect on the situation of the Union industry. 

(133)  Decreasing  sales  on  the  EU  market  to  unrelated  parties  were  reflected  in  the 
development  of  the  market  share  which  dropped  by  22  percentage  points  in  the  RIP 
compared to 2007. 

5.5.2.2.  Captive market 

Captive market in the EU 

2007 

2008 

2009 

Index volume 

Index average sales price of 
captive sales 

Index market share 

100 

100 

100 

115 

100 

109 

122 

111 

104 

RIP 

128 

110 

100 

(134)  While  Union  industry's  sales  volume  to  unrelated  parties  was  decreasing  despite 
increasing demand during the period considered, captive sales increased by 28% 

(135)  The  market  share  of  the  captive  market  of  the  Union  industry  increased  by  9 

percentage points in 2008 before decreasing progressively to the 2007 level. 

5.5.2.3.  Market share of the Union industry / Growth 

Sales to unrelated parties, 
captive sales and captive 
use 

2007 

2008 

2009 

RIP 

Index volume 

Index market share 

100 

100 

107 

100 

108 

92 

114 

90 

(136)  Market  share  of  the  Union  industry  as  a  whole  was  measured  by  adding  free  and 
captive  market  volumes  in  the  EU.  Although  this  volume  increased  over  the  period 

EN 

27 

   EN 

 
considered  by  14%,  the  market  share  of  the  Union  industry  decreased  by  10 
percentage points as market consumption increased by 28% over the same period. This 
indicates that the Union industry did not benefit from the growth in consumption. 

5.5.3. 

Inventories 

Stocks 

Index volume 

2007 

100 

2008 

74 

2009 

63 

RIP 

46 

(137)  The  stock  level  dropped  by  54%  from  2007  to  the  end  of  the  RIP,  which  is  mainly 

explained by the increased captive demand. 

5.5.4.  Profitability 

5.5.4.1.  Profitability on the free market 

Profitability on the free 
market 

2007 

2008 

2009 

Index  

100 

447 

218 

RIP 

253 

(138)  The  profitability  of  Union  industry's  sales  to  unrelated  parties  on  the  Union  market 
improved significantly by 153 percentage points during the RIP. This development can 
be explained by an average increase in prices of 2% and a decrease in production cost. 
As  compared  to  the  profit  margin  achieved  in  the  review  investigation  period  of  the 
last expiry investigation, the profit has increased by more than 400 percentage points. 

(139)  It  should  be  noted  that,  with  the  exception  of  year  2007,  Union  industry  profit  level 
was  above  the  target  profit  margin  established  in  the  previous  expiry  review 
investigation; i.e. 10% ('target profit'), over the period considered.  

(140)  Two Union producers claimed that profitability had not been assessed properly as the 
profit achieved  by  related upstream  suppliers were  deducted  from  their  costs.  In  this 
regard,  it  is  consistent  practice  to  deduct  the  profits  achieved  by  related  parties 
involved in the production of raw materials. In these circumstances, this argument had 
to be rejected. 

5.5.4.2.  Profitability of captive sales 

Profitability of captive sales 

2007 

Index  

100 

2008 

55 

2009 

153 

RIP 

151 

(141)  The profitability  of  Union industry's captive sales on the Union market improved by 
51% during the RIP. This development is largely explained by an average increase in 
prices  of  10%.  However,  since  this  price  trend  is  based  on  transfer  prices,  no 
meaningful conclusion should be drawn from the above. 

5.5.5. 

Investments, return on investment, cash flow and the ability to raise capital 

2007 

2008 

2009 

RIP 

EN 

28 

   EN 

 
 
Index investments 

Index return on investment 

Index cash flow 

100 

100 

100 

246 

233 

236 

342 

52 

83 

129 

62 

107 

(142)  Investments  increased  during  the  period  considered.  The  investments  related  to 
increases in production capacity with the aim to deliver both the captive and the free 
markets. 

(143)  The investigation also showed that the return on investments, i.e. pre-tax net profit of 
the product expressed as a percentage of the net book value of fixed assets allocated to 
the product, decreased during the period considered.  

(144)  Cash flow increased by 7% over the period considered as the decrease in profitability 
could  be  compensated  by  a  decrease  in  inventory  in  the  second  half  of  the  period 
considered. 

5.5.6.  Employment, productivity and wages 

Index employment 

Index productivity 

Index wages 

2007 

2008 

2009 

100 

100 

100 

106 

89 

104 

111 

87 

106 

RIP 

109 

89 

106 

(145)  Employment  increased  by  9%  during  the  period  considered  in  line  with  the 
investments  in  production  capacity,  while  average  wages  increased  by  only  6%. 
Productivity decreased by 11 % overall following the unexpected technical difficulties 
faced by one Union producer. 

5.5.7.  Magnitude  of  the  amount  of  countervailable  subsidies  and  recovery  from  past 

subsidisation 

(146)  Given  the  volume  of  the  subsidised  imports  from  India,  the  impact  of  the  actual 

amount of subsidisation cannot be considered to be significant.  

(147)  The  situation  of  the  Union  industry  improved  significantly  since  the  last  review 
investigation and in the period considered. It can therefore be assessed that the Union 
industry managed to recover fully from past subsidisation.  

5.6. 

Conclusion on the economic situation of the Union industry 

(148)  Between 2007 and the review investigation period, the volume of subsidised imports 
of  the  product  concerned  was  negligible.  With  the  exception  of  certain  injury 
indicators  such  as  market  share,  production  volume  and  return  on  investment,  most 
injury  indicators  including  profitability  (+153%),  sales  price  (+4%),  sales  volume 
(+14%), employment (+10%) and investments (+29%) developed positively during the 
period  considered.  The  profit  levels  achieved  in  the  EU  market  were,  with  the 
exception  of  year  2007,  above  the  target  profit  margin  established  in  the  previous 

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expiry review investigation; i.e. 10%. The positive trend shown by the vast majority of 
indicators is mainly due to the reliability of the Union industry and the long standing 
customer  relationship  that  it  has  developed  over  the  past  years  but  also  to  the  price 
level that it managed to achieve on the market. 

(149)  One Union producer claimed that the analysis of the price and profit trends should take 
account of the shortages in raw materials in 2007 and 2008. It was claimed that these 
shortages  led  to  exceptional  increases  in  prices  and  profits  in  2008  and  to  a  limited 
extent  in  2009.  In  this  regard,  as  can  be  seen  in  tables  5.5.2.1  and  5.5.4.1,  the 
exceptional price and profit levels only pertain to 2008. The profit levels achieved in 
2009 and the RIP appear no longer to be affected by the raw material shortages. The 
conclusion  in  recital  (139) above  that  profits throughout  the  period  considered,  were 
above the target profit remain valid. 

(150)  Regarding captive sales, the option for the Union industry to sell part of its production 
on the captive market ensured high levels of capacity utilisation and enabled the Union 
industry to dilute fixed costs and to remain cost competitive. 

(151)  In conclusion, in view of the positive development of the indicators pertaining to the 
Union industry, it is considered that the Union industry did not suffer material injury 
during the period concerned. 

5.7. 

Effect of subsidised imports 

(152)  Given the low volumes of the product concerned that were imported in the Union over 
the period considered, the subsidised imports did not adversely affect the performance 
of the Union industry. Indeed, as stated above, it is considered that the industry did not 
suffer material injury during the period concerned.  

6. 

LIKELIHOOD OF RECURRENCE OF INJURY 

(153)  It  is  recalled  that  the  Union  industry  did  not  suffer  material  injury  during  the  period 
considered  as  most  injury  indicators  showed  positive  trends  over  this  period.  In 
accordance  with  Article  18(2)  of  the  basic  Regulation,  it  was  therefore  examined 
whether the expiry of the measures in force would be likely to result in a recurrence of 
injury. 

6.1. 

Spare capacity in the country concerned 

(154)  The investigation showed that the capacity utilisation of the three cooperating Indian 
producers  had  reached  very  high  levels  in  the  RIP.  On  that  basis,  spare  capacities, 
which could be directed to the EU market in the absence of measures, would appear to 
be limited.  

(155)  After disclosure it was claimed by several Union producers that the spare capacities in 
India  were  high  and  that  the  capacity  utilisation  rate  of  the  cooperating  Indian 
exporting  producers  was  not  representative  for  the  Indian  sector  as  a  whole.  One 
Union  producer  even  claimed  that  the  spare  capacities  of  seven  leading  Indian 
exporters would represent volumes largely above the EU free market consumption. 

(156)  In this respect it should first be underlined that the capacity utilisation rate of the three 
cooperating exporting producers was a weighted average calculation based on verified 

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data  and  specifically  relating  to  the  product  concerned.  Moreover,  the  three 
cooperating exporting producers concerned were large producers and among the seven 
Indian  exporters  referred  to,  by  the  claimant,  as  "leading".  On  the  contrary,  the  data 
presented  by  the  Union  producers  on  these  seven  Indian  producers'  spare  capacity 
were  mainly  based  on  "market  knowledge"  and,  although  this  was  specifically 
requested,  they  could  not  be  substantiated  by  solid  factual  evidence.  Therefore,  that 
information had to be disregarded and it was confirmed that, based on the verified data 
on the file, Indian spare capacities appear to be limited. 

6.2. 

Export behaviour of the Indian exporting producers 

(157)  On the basis of data from Indian official statistics, it was established that the prices of 
export  sales  to  India's  ten  main  export  markets  were  around  20%  on  average  lower 
than the prices of the Union industry sales on the EU market in the RIP. These Indian 
export prices were in line with the prices of the other main players on the EU market 
as set out in recital (119) above. It was found that that low-priced imports during the 
period  considered  from  these  other  countries  did  not  have  a  negative  effect  on  the 
performance  of  the  Union  industry.  In  these  circumstances,  it  is  considered  that, 
should measures be allowed to lapse, Indian export prices would likely not be harmful 
to the Union industry as it is already facing competition from other exporting countries 
with the same pricing behaviour without suffering any material injury. 

(158)  Two Union producers also submitted that, if measures were to lapse, Indian producers 
would  redirect  exports  currently  sold  on  other  markets  to  the  EU  on  account  of  the 
attractiveness of the EU market in terms of prices. First of all it is noted that, if Indian 
producers  were  to  re-direct  their  exports  to  the  EU,  they  would  enter  in  competition 
with  other  third  countries  that  are  already  exporting  significant  quantities  to  the  EU. 
Furthermore, as mentioned in recital (119) above, it has been concluded that imports 
from third countries, at prices similar to Indian export prices to other markets, have not 
affected the performance of the Union industry. On this basis, it is considered that if 
Indian export quantities to the EU increase at prices similar to those on other export 
markets, the Union industry would not suffer any material injury.  

(159)  Two Union producers also claimed that the fact that there were import bans in place in 
the  US  against  certain  antibiotic  production  plants  in  India  would  lead  to  the  re-
direction  of  additional  quantities  to  the  EU  market.  However,  in  this  regard,  the 
conclusions  in  the  preceding  recital  on  the  possible  re-direction  of  exports  remain 
valid.  

6.3. 

Captive market 

(160)  While the captive market accounted for 50 to 60% of the free and captive markets of 
the  Union  Industry  in  the  period  considered,  consumption  in  the  Union  industry 
captive  market  increased  by  more  than  20%  over  the  same  period.  Considering  the 
characteristics and size of this market, it is believed that, should measures be allowed 
to  lapse,  the  captive  market  would  not  be  affected  by  the  likely  increase  in  Indian 
exports  and  would  therefore  continue  to  ensure  high  capacity  utilisation  rates  and 
economies of scale for the Union industry. 

6.4. 

Conclusion on the likelihood of recurrence of injury 

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(161)  On the basis of the above, it was concluded that, should measures be allowed to lapse, 
subsidised  imports  from  India  are  not  likely  to  cause  material  injury  to  the  Union 
industry as most injury indicators developed positively over the period considered in 
spite  of  significant  and  increasing  imports  from  other  countries  that  were  priced 
similarly to Indian exports to other countries. It was therefore concluded that material 
injury was not likely to recur, should measures be allowed to lapse. 

7. 

UNION INTEREST 

(162)  One  Union  producer  claimed  that  a  Union  interest  test  analysis  should  have  been 
carried  out.  In  this  regard,  as  it  has  been  concluded  that  there  is  no  likelihood  of 
recurrence of injury, a Union interest test serves no purpose. In these circumstances, 
this claim was rejected. 

8. 

SPECIAL MONITORING  

(163)  In view of the finding on the likelihood of continuation of subsidisation as mentioned 
in  recital  (100)  above  and  the  impact  it  might  have  on  future  trade  flows,  the 
Commission will monitor the import volumes of the product concerned. Should there 
be a significant change in these quantities, the Commission will give consideration to 
what action, if any, is to be taken. 

(164)  The  monitoring  will  be  limited  to  a  period  of  2  years  after  the  publication  of  this 

Regulation. 

9. 

TERMINATION 

(165)  In  the  light  of  the  results  of  this  review  investigation,  it  is  considered  appropriate  to 
repeal  the  countervailing  duty  on  imports  of  certain  broad  spectrum  antibiotics 
originating in India. 

(166)  Interested parties were informed of the essential facts and considerations on the basis 
of which it was proposed to terminate the investigation and were given the opportunity 
to comment. The comments received were addressed under the relevant sections above 
and were not of a nature to change the above conclusions. 

HAS ADOPTED THIS REGULATION: 

Article 1 

The  expiry  review  of  the  countervailing  measures  applicable  to  imports  of  certain  broad 
spectrum  antibiotics,  currently  falling  within  CN  codes  ex  2941  10  00  and  ex  2941  90  00 
originating  in  India,  initiated  pursuant  to  Article  18(2)  of  Regulation  (EC)  No  597/2009,  is 
hereby terminated and the measures in force on imports originating in India are repealed. 

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Article 2 

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

Done at Brussels, 

For the Council 
The President 

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