Council Implementing Regulation (EU) No 559/2012 of 26 June 2012 terminating the partial interim review concerning the countervailing measures on imports of certain polyethylene terephthalate (PET) originating in, inter alia, 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 Community (1) (‘the basic Regulation’), and in particular Articles 19 and 24 thereof,

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

Whereas:

(1) By Regulation (EC) No 2603/2000 (2), the Council imposed a definitive countervailing duty on imports of polyethylene terephthalate (PET) originating, inter alia, in India. The definitive findings and conclusions of an accelerated review pursuant to Article 20 of the basic Regulation are set out in Council Regulation (EC) No 1645/2005 (3). Following an expiry review, the Council, by Regulation (EC) No 193/2007 (4), imposed a definitive countervailing duty for a further period of five years. The countervailing measures were amended by Council Regulation (EC) No 1286/2008 (5) following a partial interim review (‘the last review investigation’). The countervailing measures consist of a specific duty. The rate of the duty is between EUR 0 and EUR 106,5 per tonne for individually named Indian producers with a residual duty rate of EUR 69,4 per tonne imposed on imports from all other producers.

(2) Following a name change of one Indian company, South Asian Petrochem Ltd, by Notice 2010/C 335/07 (6), the Commission concluded that the anti-subsidy findings in respect of South Asian Petrochem Ltd should apply to Dhunseri Petrochem & Tea Limited.

(3) By Regulation (EC) No 2604/2000 (7), the Council imposed a definitive anti-dumping duty on imports of PET originating, inter alia, in India. A review pursuant to Article 11(4) of Council Regulation (EC) No 1225/2009 (8) (‘the basic anti-dumping Regulation’) concerning South Asian Petrochem Ltd was subsequently conducted and its definitive findings and conclusions are set out in Council Regulation (EC) No 1646/2005 (9). Following an expiry review, the Council, by Regulation (EC) No 192/2007 (10), imposed a definitive anti-dumping duty for a further period of five years. The anti-dumping measures were amended by Regulation (EC) No 1286/2008 following a partial interim review investigation. The measures were set at the level of the injury elimination and consisted of specific anti-dumping duties. The rate of the duty is between EUR 87,5 and EUR 200,9 per tonne for individually named Indian producers with a residual duty rate of EUR 153,6 per tonne imposed on imports from all other producers (‘the current anti-dumping measures’).

(4) Following a name change of one Indian company, South Asian Petrochem Ltd, by Notice 2010/C 335/06 (11), the Commission concluded that the anti-dumping findings in respect of South Asian Petrochem Ltd should apply to Dhunseri Petrochem & Tea Limited.

(5) By Decision 2005/697/EC (12), the Commission accepted undertakings offered by South Asian Petrochem Ltd setting a minimum import price (‘the undertaking’). Following a name change, the Commission concluded by Notice 2010/C 335/05 (13) that the undertaking offered by South Asian Petrochem Ltd should apply to Dhunseri Petrochem & Tea Limited.

(6) A request for a partial interim review pursuant to Article 19 of the basic Regulation was lodged by Dhunseri Petrochem & Tea Limited, an Indian exporting producer of PET (‘the applicant’). The request was limited in scope to subsidisation and to the applicant. The applicant at the same time also requested the review of the current anti-dumping measures. The residual anti-dumping and countervailing duties are applicable to imports of products produced by the applicant and sales of the applicant to the Union are covered by the undertaking.

(7) The applicant provided prima facie evidence that the continued application of the measure at its current level was no longer necessary to offset the countervailable subsidisation. In particular, the applicant provided prima facie evidence showing that its subsidy amount has decreased well below the duty rate currently applicable to it. This reduction in the overall subsidy level would mainly be due to the termination of its export oriented unit (EOU) status. With a magnitude of 13,5 %, the EOU scheme accounted for the vast majority of the 13,9 % subsidies established during the accelerated review.

(8) Having determined, after consulting the Advisory Committee, that the request contained sufficient prima facie evidence, the Commission announced on 2 April 2011 the initiation of a partial interim review (‘the present review’) pursuant to Article 19 of the basic Regulation by Notice 2011/C 102/08 (14). The review was limited in scope to the examination of subsidisation in respect of the applicant.

(9) The Commission officially informed the applicant, the representatives of the exporting country and the association of Union producers about the initiation of the review. Interested parties were given the opportunity to make their views known in writing and to request a hearing within the time limit set in the notice of initiation.

(10) One interested party requested and was granted a hearing.

(11) In order to obtain the information deemed necessary for its investigation, the Commission sent a questionnaire to the applicant and the Government of India (GOI) and received replies within the deadline set for that purpose.

(12) The Commission sought and verified all information deemed necessary for the determination of subsidisation. The Commission carried out verification visits at the premises of the applicant in Kolkata, India and at the premises of the GOI in New Delhi (Directorate-General of Foreign Trade and Ministry of Commerce) and Kolkata (Commerce & Industries Department, Government of West Bengal).

(13) The investigation of subsidisation covered the period from 1 April 2010 to 31 March 2011 (‘the review investigation period’ or ‘RIP’).

(14) On 2 April 2011 by Notice 2011/C 102/09 (15) the Commission announced the initiation of a partial interim review of the current anti-dumping measures pursuant to Article 11(3) of the basic anti-dumping Regulation, limited in scope to the examination of dumping in respect of the applicant.

(15) In the parallel anti-dumping investigation it was found that the changes are not of a lasting nature. As a consequence, the review investigation was terminated without amending the measures in force.

(16) The product under review is PET having a viscosity of 78 ml/g or higher, according to the ISO Standard 1628-5, currently falling within CN code 3907 60 20 and originating in India (‘the product concerned’).

(17) The investigation revealed that the product concerned produced in India and sold to the Union is identical in terms of physical and chemical characteristics and uses to the product produced and sold on the domestic market in India. It is therefore concluded that products sold on the domestic and export markets are like products within the meaning of Article 2(c) of the basic Regulation.

(19) The schemes (a) to (d) specified in recital 18 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.

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

(21) Scheme (f) is based on the Income Tax Act of 1961, which is amended by the yearly Finance Act.

(22) Scheme (g) is administered by the Government of West Bengal and set out in Government of West Bengal Commerce & Industries Department notification No 580-CI/H of 22 June 1999, replaced by notification No 134-CI/O/Incentive/17/03/I of 24 March 2004.

(23) 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.

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

(25) 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 regardless of whether import duties have actually been paid or not. The DEPBS rate for the product concerned during the RIP of the current investigation was 8 % of fob value, subject to a value cap of INR 58/kg. As a result, the maximum benefit is INR 4,64/kg.

(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 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 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 the time of issuing the export shipping bill, 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.

(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 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.

(28) 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 of HOP I 09-14. Furthermore, as clearly provided in paragraph 9.3 of the HOP I 04-09 and of 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).

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

(30) The DEPBS provides subsidies within the meaning of point (1)(a)(ii) of Article 3 and point (2) of Article 3 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 is therefore deemed to be specific and countervailable under point (a) of the first subparagraph of Article 4(4) of the basic Regulation.

(32) This scheme cannot be considered as permissible duty drawback system or substitution drawback system within the meaning of point (1)(a)(ii) of Article 3 of the basic Regulation as claimed by the applicant. It does not conform to the strict rules laid down in point (i) of Annex I, in Annex II (definition and rules for drawback) and in Annex III (definition and rules for substitution drawback) to 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 point (i) of Annex I and Annexes II and III to 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.

(33) By means of Public Notice No 54 (RE-2010)/2009-2014 of 17 June 2011, the DEPBS received a final extension of three months until 30 September 2011. As no further extension was published subsequently, the DEPBS has effectively been withdrawn from 30 September 2011 onwards. Consequently, this scheme will not confer any benefits on the applicant after 30 September 2011. It has therefore to be verified whether, in accordance with Article 15(1) of the basic Regulation, measures should be imposed on this scheme.

(34) In this respect, it was established that the applicant received similar benefits pursuant to the parallel ‘duty drawback’ scheme. The duty drawback rate for PET was 5,5 % of fob value, subject to a maximum amount of INR 5,50/kg. However, since the ‘duty drawback’ scheme was not used during the RIP, it is not possible to calculate a subsidy amount for this scheme.

(35) The applicant claimed that the Duty Drawback Scheme conforms with the ‘guidelines on consumption of inputs in the production process’ in Annex II to the basic Regulation, specifically paragraph I of the said Annex. However, similar to the DEPBS, it was established that the duty drawback rate is determined regardless of whether import duties have actually been paid or not.

(36) In accordance with point (2) of Article 3 and Article 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 point (1)(a)(ii) of Article 3 of the basic Regulation.

(37) 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.

(38) 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 point (a) of the second subparagraph of Article 7(1) of the basic Regulation.

(39) 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.

(40) Based on the above, the subsidy rate established in respect of this scheme for the applicant during the RIP amounts to 6,7 %.

(41) In the course of the investigation it was found that the applicant 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.

(42) The detailed description of EPCGS is contained in chapter 5 of FTP 04-09 and of FTP 09-14 as well as in chapter 5 of HOP I 04-09 and of HOP I 09-14.

(43) Manufacturer-exporters, merchant-exporters ‘tied to’ supporting manufacturers and service providers are eligible for this scheme.

(44) 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 a 0 % duty rate under the EPCGS, but in such case the time period for fulfilment of the export obligation is shorter.

(45) 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.

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

(47) The EPCGS provides subsidies within the meaning of point (1)(a)(ii) of Article 3 and point (2) of Article 3 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.

(48) Furthermore, 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 point (a) of the first subparagraph of Article 4(4) of the basic Regulation. It has been claimed by the applicant 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. Therefore they should not be treated as specific subsidies and should not be countervailed. However, this claim has to be rejected. It has to be underlined that the subsidy itself was contingent upon export performance i.e. it would not have been granted had the company not accepted a certain export obligation.