Commission Implementing Regulation (EU) No 1347/2014 of 17 December 2014 repealing the definitive countervailing duty on imports of sulphanilic acid originating in India following an expiry review pursuant to Article 18 of Council Regulation (EC) No 597/2009

THE EUROPEAN COMMISSION,

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) and in particular Articles 14 and 18 thereof,

Whereas:

(1) In July 2002, by Regulation (EC) No 1338/2002 (2), the Council imposed a definitive countervailing duty of 7,1 % on imports of sulphanilic acid originating in India (the original investigation).

(2) By Regulation (EC) No 1339/2002 (3), the Council imposed a definitive anti-dumping duty of 21 % on imports of sulphanilic acid originating in the People's Republic of China (the PRC) and a definitive anti-dumping duty of 18,3 % on imports of sulphanilic acid originating in India.

(3) By Decision 2002/611/EC (4) the Commission accepted a price undertaking with regard to both the anti-dumping and anti-subsidy measures on the imports from India offered by one Indian exporting producer, namely Kokan Synthetics and Chemicals Pvt. Ltd (Kokan).

(4) In March 2004, by Commission Decision 2004/255/EC (5), the Commission repealed Decision 2002/611/EC following the voluntary withdrawal of the undertaking by Kokan.

(5) By Decision 2006/37/EC (6) the Commission accepted a new undertaking with regard to both the anti-dumping and anti-subsidy measures on the imports from India offered by Kokan. Regulations (EC) No 1338/2002 and (EC) No 1339/2002 were amended by Council Regulation (EC) No 123/2006 (7) accordingly.

(6) By Regulation (EC) No 1000/2008 (8), the Council imposed the anti-dumping duties on imports of sulphanilic acid originating in the PRC and India following an expiry review of the measures. By Regulation (EC) No 1010/2008 (9), the Council imposed definitive countervailing duties on imports of sulphanilic acid originating in India and amended the level of the anti-dumping duties on Indian imports of sulphanilic acid following an expiry and an interim review.

(7) Following the publication of a notice of impending expiry (10) of the definitive countervailing measures in force, the Commission received on 1 July 2013 a request for the initiation of an expiry review of these measures pursuant to Article 18 of Regulation (EC) No 597/2009 (the basic Regulation). The request was lodged by CUF — Quimicos Industriais (‘the applicant’ or ‘CUF’) the sole producer of sulphanilic acid in the Union thus representing 100 % of the Union production.

(8) The request was based on the grounds that the expiry of the measures would be likely to result in a continuation of subsidisation and recurrence of injury to the Union industry.

(9) Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of an expiry review, the Commission announced on 16 October 2013, by a notice published in the Official Journal of the European Union (11) (the Notice of Initiation), the initiation of an expiry review pursuant to Article 18 of the basic Regulation.

(10) By Notice of Initiation published in the Official Journal of the European Union (12) on 16 October 2013 the Commission also initiated an expiry review investigation pursuant to Article 11(2) of the Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (13) concerning imports of sulphanilic acid originating, inter alia, in India.

(11) The investigation of a continuation or recurrence of subsidisation covered the period from 1 October 2012 to 30 September 2013 (‘the review investigation period’ or ‘RIP’). The examination of the trends relevant for the assessment of the likelihood of continuation or recurrence of injury covered the period from 1 January 2010 to the end of the review investigation period (the period considered).

(12) The Commission officially advised the applicant, the exporting producers in India, the importers, the users known to be concerned, and the representatives of the exporting country of the initiation of the expiry review. The 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.

(13) The sole Union producer, being the only interested party who so requested, was granted a hearing.

(14) In view of the apparent large number of exporting producers in India and of unrelated importers in the Union, sampling was envisaged in the Notice of initiation in accordance with Article 27 of the basic Regulation. 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 to make themselves known to the Commission within 15 days of the initiation of the review and to provide the Commission with the information requested in the Notice of Initiation.

(15) The Commission received two sampling replies from Indian exporting producers. Therefore, no sampling was applied.

(16) One unrelated importer replied to the sampling form however, it did not import the product concerned from the country concerned and did not provide a questionnaire reply. Therefore no sampling was applied.

(17) Since there is only one Union producer, sampling was not applied for the Union producers.

(18) The Commission sought and verified all the information deemed necessary for a determination of the likelihood of continuation of subsidisation, likelihood of continuation or recurrence of injury and for a determination of the Union interest. The Commission sent questionnaires to the sole Union producer, to the two exporting producers in India, to the Government of India (GOI), to known importers and to Union users.

(19) Out of the two Indian exporting producers only one submitted a complete reply. This Indian producer represented a major part of the total Indian exports to the Union during the review investigation period.

(20) The Commission also carried out consultations in Delhi with the GOI, Government of Maharashtra (GOM), Government of Gujarat (GOG) and the Reserve Bank of India (RBI).

(22) The product concerned is sulphanilic acid currently classifiable within CN code ex 2921 42 00 (TARIC code 2921 42 00 60). There are two grades of sulphanilic acid, which are determined according to their purity: a technical grade and a purified grade. In addition, the purified grade is sometimes commercialised in the form of a salt of sulphanilic acid. Sulphanilic acid is used as a raw material in the production of optical brighteners, concrete additives, food colorants and speciality dyes. Limited use by the pharmaceutical industry was noted as well. Though it is not contested that both grades have the same basic physical, chemical and technical characteristics and therefore deemed to be one single product, it is important to note that the investigation showed that in practical terms inter-changeability is limited. In particular users who rely on purified grade sulphanilic acid could only use technical grade in case they could further purify it themselves. Those users who need or prefer technical grade sulphanilic acid could in theory use purified grade, however due to the price difference (20 %-25 %) this is economically not a viable solution.

(23) Sulphanilic acid is a pure commodity product and its basic physical, chemical and technical characteristics are identical whatever the country of origin. The product concerned and the products manufactured and sold by the exporting producer in India on its domestic market and to third countries, as well as those manufactured and sold by the Union producer on the Union market have thus been found to have the same basic physical and chemical characteristics and essentially the same uses, and are therefore considered to be like products within the meaning of Article 2 of the basic Regulation.

(24) Cooperation from the Indian exporters was limited to one exporting producer. In the absence of cooperation from other producers, the amount of countervailable subsidies had to be determined on the basis of the facts available: the replies of the cooperating company, who accounted for major proportion of exports from India to the Union, and on the information provided by the Indian authorities.

(26) The schemes (a), (b), (c), (e), (h), (i), (k) and (l) specified above are based on the Foreign Trade (Development and Regulation) Act 1992 (No 22 of 1992) which entered into force on 7 August 1992 (Foreign Trade Act). The Foreign Trade Act authorises the GOI to issue notifications regarding the export and import policy. These are summarised in Foreign Trade Policy documents which are issued by the Ministry of Commerce every five years and updated regularly. The Foreign Trade Policy document relevant to the RIP of this investigation is ‘Foreign Trade Policy 2009-2014’ (FTP 09-14). In addition, the GOI also sets out the procedures governing the FTP 09-14 in a ‘Handbook of Procedures, Volume I’ (HOP I 09-14). The Handbook of Procedures is updated on regular basis

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

(28) The regional schemes specified above under (f) and (n) are managed by the States of Maharashtra and Gujarat respectively and are based on resolutions of the Government of Maharashtra Industries, Energy and Labour Department and resolutions of the Government of Gujarat Industries and Mines Department.

(29) The Export Credit Scheme specified above under (g) 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.

(30) The Duty Drawback scheme specified above under (j) is based on section 75 of the Customs Act of 1962, on section 37 of the Central Excise Act of 1944, on sections 93A and 94 of the Financial Act of 1994 and on the Customs, Central Excise Duties and Service Tax Drawback Rules of 1995. Drawback rates are published on a regular basis; those applicable to the RIP were the All Industry Rates (AIR) of Duty Drawback 2012-13, published in notification No 92/2012- Cus.(N.T). The duty drawback scheme is also referred to as a duty remission scheme in chapter 4 of FTP 09-14.

(31) It was found that the cooperating exporting producer was not located in an SEZS or in an EPZS. However, the cooperating exporting producer had been set up under the EOUS and received countervailable subsidies in the review investigation period. The description and assessment below is therefore limited to the EOUS.

(32) The details of the EOUS are contained in chapter 6 of the FTP 09-14 and in chapter 6 of the HOP I 09-14.

(33) With the exception of pure trading companies, all enterprises which, in principle, undertake to export their entire production of goods or services may be set up under the EOUS. Undertakings in industrial sectors have to fulfil a minimum investment threshold in fixed assets (10 million Indian rupees) to be eligible for the EOUS.

(34) EOUS can be located and established anywhere in India.

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

(36) A crucial obligation of an EOUS as set out in FTP 09-14 is to achieve net foreign exchange (NFE) earnings, namely in a reference period (five years) the total value of exports has to be higher than the total value of imported goods.

(38) Units operating under these schemes are bonded under the surveillance of customs officials in accordance with Section 65 of the Customs Act.

(39) The cooperating exporting producer was operating under EOUS for the first four months of the review investigation period. The formal letter of de-bonding from the scheme was issued on 6 February 2013. Thus, in the review investigation period the company utilised the scheme only to obtain central sales tax reimbursement. The investigation showed that the exporting producer concerned did not avail of benefits of exemption of import duties and excise duties on domestic purchases, and of partial reimbursement of duty paid on fuel procured from domestic oil companies.

(40) The reimbursement of the central sales tax constitute subsidy within the meaning of Article 3(1)(a)(ii) of the basic Regulation. Government revenue which would be due in the absence of this scheme is forgone, thus conferring a benefit upon the EOU within the meaning of Article 3(2) of the basic Regulation, because it improved its liquidity by obtaining reimbursements of the central sales tax. The subsidy is contingent in law upon export performance and, therefore, deemed to be specific and countervailable under Article 4(4)(a) of the basic Regulation. The export objective of an EOUS as set out in paragraph 6.1 of the FTP 09-14 is a conditio sine qua non to obtain the incentives.

(41) The subsidy amount was calculated on the basis of the amount of central sales tax reimbursed on goods procured locally during the review investigation period. In accordance with Article 7(2) of the basic Regulation this subsidy amount was allocated over the total export turnover generated during the review investigation period as the 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. The subsidy margin thus obtained was 1,4 %.

(42) It was confirmed that DEPBS has effectively been withdrawn from 30 September 2011 that is before the review investigation period. It was therefore not necessary to further analyse this scheme in this investigation.

(43) A detailed description of the EPCGS is contained in chapter 5 of the FTP 09-14 and in chapter 5 of the HOP I 09-14.

(44) It was found that the cooperating exporting producer did not obtain any benefits under the EPCGS in the review investigation period. It was therefore not necessary to further analyse this scheme in this investigation.

(45) It was confirmed that ITES was abolished in April 2011 that is before the review investigation period. It was therefore not necessary to further analyse this scheme in this investigation.

(46) A detailed description of the scheme is contained in sections 4.1.3.1 to 4.1.14 of the FTP 09-14 and sections 4.1 to 4.30 of the HOP I 09-14.

(47) It was found that the cooperating exporting producer did not obtain any benefits under the AAS in the review investigation period. It was therefore not necessary to further analyse this scheme in this investigation.

(48) In order to encourage the establishment of industries in the State of Maharashtra to the less developed areas of the State, the GOM has been granting incentives to new-expansion units set up in developing regions of the State since 1964, under a scheme commonly known as the ‘Package Scheme of Incentives’ (PSI). The scheme has been amended many times since its introduction and in the RIP there were two PSI schemes in force: PSI 2007 (which was valid till April 2013) and PSI 2013. The PSI of the GOM is composed of several sub-schemes amongst which the main ones are: (i) the refund of octroi tax/entry tax, (ii) the exemption from electricity duty, (iii) the exemption from local sales tax/deferral of local sales tax, (iv) interest subsidy for new establishments and (v) certain grants for small and medium enterprises to upgrade technology. The investigation revealed that the only sub-scheme used by the cooperating exporting producer during the review investigation period was the one concerning sales tax deferrals (part of (iii) above) which in fact originated from PSI 2001 but the outstanding sales tax was still partially due in the review investigation period.

(49) In order to be eligible, companies must as a rule invest in less developed areas of the State (which are classified according to their economic development into different categories, for example less developed areas, lesser developed areas and least developed areas) either by setting up a new industrial establishment or by making a large scale capital investment in the expansion or diversification of an existing industrial establishment. The main criterion to establish the amount of incentives is the classification of the area in which the enterprise is or will be located and the size of the investment.

(50) The Eligibility Certificate issued by the GOM to the cooperating exporting producer provided that the company was, under the sales tax deferral sub-scheme, allowed to defer the payment of State sales taxes collected on its domestic sales.

(51) The sales tax deferral sub-scheme of the PSI of the GOM provides subsidies within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation. The sub-scheme examined constitutes a financial contribution by the GOM, since this concession postpones the collection of the GOM's revenue which would be otherwise due. This deferral confers a benefit upon the company as it improves the company's liquidity.

(52) The sub-scheme is only available to companies having invested within certain designated geographical areas within the jurisdiction of the State of Maharashtra. It is not available for companies located outside these areas. The level of benefit is different according to the area concerned. The scheme is specific in accordance with Article 4(2)(a) and Article 4(3) of the basic Regulation and therefore countervailable.

(53) The deferred amount of State sales taxes, under the deferral element of the scheme, which was still due at the end of the review investigation period, was considered equivalent to an interest–free loan of the same amount granted by the GOM. Thus, the benefit to the cooperating exporting producer has been calculated on the basis of the interest that was paid on a comparable commercial loan by the company during the review investigation period.

(54) Pursuant to Article 7(2) of the basic Regulation, the amount of subsidy (numerator) was then allocated over the total company turnover during the review investigation period as the appropriate denominator, because the subsidy is not export contingent and it was not granted by reference to the quantities manufactured, produced, exported or transported.

(55) On the basis of the above, the amount of subsidy that the company has obtained under this scheme is 1,1 %.

(56) It was confirmed that after amendments in the ECS (July 2010 with regard to export credits in INR and May 2012 with regard to export credits in the foreign currency) the preferential export credits' interest rates within the framework of this scheme in principle ceased to exist with the exception of specific limited number of sectors of industry. Since chemical sector in question was not found to be on the list of sectors covered by the interest rates subventions in the review investigation period, it was not necessary to further analyse this scheme in this investigation.

(57) A detailed description of the scheme is contained in section 3.15 of the FTP 09-14 and section 3.9 of the HOP I 09-14.