Commission Implementing Regulation (EU) 2023/1103 of 6 June 2023 imposing a definitive countervailing duty on imports of certain graphite electrode systems originating in India following an expiry review pursuant to Article 18 of Regulation (EU) 2016/1037 of the European Parliament and of the Council

7.6.2023	EN	Official Journal of the European Union	L 147/27

THE EUROPEAN COMMISSION,

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

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union ¹ (‘the basic Regulation’), and in particular Article 18 thereof,

Whereas:

1. PROCEDURE

1.1.   Previous investigations and measures in force

• (1) Following an anti-subsidy investigation, by Regulation (EC) No 1628/2004 ², the Council imposed definitive countervailing duties on imports of certain graphite electrodes systems originating in India. The Council, following an anti-dumping investigation with Regulation (EC) No 1629/2004 ³, also imposed a definitive anti-dumping duty on imports of certain graphite electrodes systems originating in India (‘the original investigation’)

• (2) Following an ex officio partial interim review of the countervailing measures, the Council by Regulation (EC) No 1354/2008 ⁴ amended Regulations (EC) No 1628/2004 and (EC) No 1629/2004.

• (3) Further to an expiry review of the countervailing measures, the Council by Implementing Regulation (EU) No 1185/2010 ⁵ extended the countervailing measures.

• (4) Further to an expiry review of the countervailing measures, the European Commission (‘the Commission’) with Implementing Regulation (EU) 2017/421 ⁶ extended the countervailing measures.

• (5) The countervailing measures took the form of an ad valorem duty rate of 6,3 % and 7,0 % for imports from individually named exporters, and a duty rate of 7,2 % on imports from all other companies in India.

1.2.   Request for an expiry review

• (6) Following the publication of a Notice of impending expiry ⁷, the Commission received a request for a review pursuant to Article 18 of the basic Regulation.

• (7) The request for review was submitted on 9 December 2021 by Union producers, representing around 90 % of the total Union production of certain graphite electrodes systems (‘the applicants’). The request for review was based on the grounds that the expiry of the measures would be likely to result in continuation of subsidisation and or recurrence of injury to the Union industry. Some of the alleged subsidy practices were already countervailed in the original investigation while some others are additional or new subsidies, which were not examined in the original investigation. In view of Article 18(2) of the basic Regulation, the Commission prepared a memorandum on sufficiency of evidence containing the Commission’s assessment on all the evidence at its disposal concerning the country concerned and on the basis of which the Commission initiates this investigation. That memorandum can be found in the file for inspection by interested parties.

• (8) In accordance with Article 10(7) the basic Regulation, the Commission notified the Government of India (‘GOI’) prior to the initiation of the proceeding that it had received a properly documented review request. The Commission invited India for consultations with the aim of clarifying the situation as regards the contents of the review request and arriving at a mutually agreed solution. The GOI accepted the offer of consultations that were subsequently held on 3 March 2022. During the consultations, no mutually agreed solution could be arrived at.

1.3.   Initiation of an expiry review

• (9) Having determined, after consulting the Committee established by Article 25(1) of the basic Regulation, that sufficient evidence existed for the initiation of an expiry review, the Commission, on 9 March 2022, by Notice, published in the Official Journal of the European Union ⁸ (‘the Notice of Initiation’), initiated an expiry review with regard to imports of certain graphite electrode systems originating in India (‘India’ or ‘the country concerned’) on the basis of Article 18 of the basic Regulation.

1.4.   Separate investigation concerning anti-dumping measures imposed on imports of the product under review

• (10) By a notice published in the Official Journal of the European Union on 9 March 2022 ⁹, the Commission also announced the initiation of an expiry review pursuant to Article 11(2) of Regulation (EU) 2016/1036 of the European Parliament and of the Council ¹⁰, of the definitive anti-dumping measures in force with regard to imports into the Union of certain graphite electrode systems originating in India

1.5.   Review investigation period and period considered

• (11) The investigation of a likelihood of continuation or recurrence of subsidisation covered the period from 1 January 2021 to 31 December 2021 (‘the review investigation period’ or ‘RIP’). The examination of trends relevant for the assessment of a likelihood of continuation or recurrence of injury covered the period from 1 January 2018 to the end of the review investigation period (‘the period considered’).

1.6.   Interested parties

• (12) In the Notice of Initiation, the Commission invited interested parties to contact it, in order to participate in the investigation. In addition, the Commission specifically informed the applicants, other known Union producers, the known exporting producers and the Indian authorities, known importers, suppliers and users, traders, as well as associations known to be concerned about the initiation of the investigation and invited them to participate.

• (13) Interested parties had an opportunity to comment on the initiation of the investigation and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings.

1.7.   Sampling

• (14) In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

1.7.1.   Sampling of Union producers

• (15) In its Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected the sample on the basis of production and sales volumes of the like product in the Union. This sample consisted of three Union producers. The sampled Union producers accounted for around 61 % of the estimated total Union production and 64 % of the estimated sales volume of the like product in the Union. The Commission invited interested parties to comment on the provisional sample. The Commission received no comments. The sample was therefore considered representative of the Union industry.

1.7.2.   Sampling of importers

• (16) To decide whether sampling is necessary and, if so, to select a sample, the Commission asked unrelated importers to provide the information specified in the Notice of Initiation.

• (17) No importers came forward and provided the requested information.

1.8.   Questionnaire replies and remote cross-checking

• (18) At the initiation the questionnaires were made available in the file for inspection by interested parties and on DG Trade’s website ¹¹.

• (19) Questionnaire replies were received from the three sampled Union producers, the Government of the Republic of India (‘GOI’) and one Indian exporting producer. None of the users provided a questionnaire or came forward during the investigation.

• (20) The Commission sought and verified all the information it deemed necessary for the determination of the likelihood of continuation or recurrence of subsidisation and resulting injury and for the determination of the Union interest. Verification visits pursuant to Article 26 of the basic Regulation were carried out at the premises of the GOI and of the following companies:

• (a) Union producers

• — GrafTech Iberica S.L., Navarra, Spain

• — Showa Denko Carbon Spain S.A., A Coruna, Spain

• — Tokai Erftcarbon GmbH, Grevenbroich, Germany

• (b) Exporting producer in India:

• — HEG Limited, Bhopal (‘HEG’)

2. PRODUCT UNDER REVIEW AND LIKE PRODUCT

2.1.   Product under review

• (21) The product under review is graphite electrodes of a kind used for electric furnaces, with an apparent density of 1,65 g/cm3 or more and an electrical resistance of 6,0 μΩ.m or less, and nipples used for such electrodes, whether imported together or separately (‘the product under review’), currently falling under CN codes ex 8545 11 00 and ex 8545 90 90 (TARIC codes 8545110010 and 8545909010). ‘the product under review’ or ‘GES’).

2.2.   Like product

• (22) As established in the original investigation as well as in the previous expiry reviews, this expiry review investigation confirmed that the following products have the same basic physical, chemical and technical characteristics as well as the same basic uses:

• — the product under review;

• — the product produced and sold on the domestic market of the country concerned, and

• — the product produced and sold in the Union by the Union industry.

• (23) The Commission decided that those products are therefore like products within the meaning of Article 1(4) of the basic Regulation.

3. LIKELIHOOD OF CONTINUATION OR RECURRENCE OF SUBSIDISATION

• (24) In accordance with Article 18 of the basic Regulation, and as stated in the Notice of Initiation, the Commission examined whether the expiry of the existing measures would be likely to lead to a continuation or recurrence of subsidisation.

3.1.   Subsidies and subsidy programmes within the scope of the investigation

• (25) On the basis of the information contained in the review request, as well as the information submitted by the GOI and the cooperating exporting producer, the following schemes, which allegedly involve the granting of subsidies, were investigated:

Schemes originally investigated and confirmed during the last expiry review

• (a) Advance Authorisation Scheme (‘AAS’);

• (b) Merchandise Export from India Scheme (‘MEIS’);

• (c) Export Promotion Capital Goods Scheme (‘EPCGS’);

• (d) Duty Drawback Scheme (‘DDS’)

• (e) Regional Schemes: electricity duty exemption and fiscal assistance;

Additional schemes

• (f) Remission of Duties and Taxes on Exported Products (‘RODTEP’);

• (g) Pre-shipment and Post-shipment Export Financing, Interest Equalization scheme (‘IES’),

• (h) Duty Free Import Authorisation Scheme (‘DFIA’);

• (i) Regional schemes: electricity rebates and reduced rates;

• (j) Gold Card Scheme, Status Holder Scheme;

• (k) Market Access Initiative (‘MAI’).

3.2.   Schemes originally investigated and confirmed in the last expiry review

3.2.1.   Duty exemption and remission schemes

• (26) The AAS, EPCGS and MEIS schemes 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 normally issued by the Ministry of Commerce every five years and updated regularly.

• (27) The Foreign Trade Policy document relevant for the RIP is Foreign Trade Policy 2015-20 (‘FTP 2015-20’). The FTP 2015-20 entered into force in April 2015 and was originally set to expire on 31 March 2020. However, due to the Covid-19 pandemic FTP 2015-20 was extended several times, the latest extension was until 31 March 2023. The GOI also sets out the procedures governing FTP 2015-20 in a ‘Handbook of Procedures, 2015-20’ (‘HOP 2015-20’).

3.2.2.   Advanced Authorisation Scheme (‘AAS’)

• (28) The Commission established that HEG used AAS during the RIP.

3.2.2.1.   Legal basis

• (29) The detailed description of the scheme is contained in paragraphs 4.03 to 4.24 of the FTP 2015-20 and chapters 4.04 to 4.52 of the HOP 2015-20 and the updated HOP 2015-20.

3.2.2.2.   Eligibility

• (30) AAS consists of six sub-schemes, i.e. physical exports, annual requirement, intermediate supplies, deemed exports, advance release order, or back to back inland letter of credit. 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 annual requirement sub-schemes. Manufacturer-exporters supplying the ultimate exporter are eligible for AAS for intermediate supplies. Main contractors which supply to the ‘deemed export’ categories mentioned in paragraph 7.02 of the FTP 2015-20, such as suppliers of an Export Oriented Unit (‘EOU’), are eligible for the AAS deemed export sub-scheme. Eventually, intermediate suppliers to manufacturer exporters are eligible for ‘deemed export’ benefits under the sub-schemes Advance Release Order and Back to back inland letter of credit.

3.2.2.3.   Practical implementation

• (31) The AAS can be issued for:

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

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

• (c) 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;

• (d) Deemed exports: This sub-scheme allows a main contractor to import inputs free of duty which are required in manufacturing goods to be sold as ‘deemed exports’ to the categories of customers mentioned in paragraph 8.2(b) to (f), (g), (i) and (j) of the FTP 15-20. 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 export-oriented unit (‘EOU’) or to a company situated in a special economic zone (‘SEZ’);

• (e) Advance Release Order (‘ARO’): The AAS holder intending to source the inputs from indigenous sources, in lieu of direct import, has the option to source them against AROs. In such cases the Advance Authorisations are validated as AROs and are endorsed to the indigenous supplier upon delivery of the items specified therein. The endorsement of the ARO entitles the indigenous supplier to the benefits of deemed exports as set out in paragraph 8.3 of the FTP 15-20 (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;

• (f) Back to back inland letter of credit: This sub-scheme again covers indigenous supplies to an Advance Authorisation holder. The holder of an Advance Authorisation can approach a bank for opening an inland letter of credit in favour of an indigenous supplier. The authorisation will be validated by the bank for direct import only in respect of the value and volume of items being sourced indigenously instead of importation. The indigenous supplier will be entitled to deemed export benefits as set out in paragraph 8.3 of the FTP 15-20 (i.e. AAS for intermediate supplies/deemed export, deemed export drawback and refund of terminal excise duty).

• (32) It was found that HEG obtained concessions under the first sub-scheme i.e. AAS physical exports during the RIP. It is therefore not necessary to establish the countervailability of the remaining unused sub-schemes. This is the main sub-scheme. It allows for duty-free import of input materials for the production of a specific resulting export product. ‘Physical’ in this context means that the export product has to leave Indian territory. An import allowance and export obligation including the type of export product are specified in the licence.

• (33) For verification purposes by the Indian authorities, an Advance Authorisation holder is legally obliged to maintain ‘a true and proper account of consumption and utilisation of duty-free imported/domestically procured goods’ in a specified format (chapters 4.51 and Appendix 4H or 4I HOP I 15-2020 ¹²), i.e. an actual consumption register. This register has to be verified by an external chartered accountant/cost and works accountant who issues a certificate stating that the prescribed registers and relevant records have been examined and the information furnished under Appendix 4H is true and correct in all respects.

• (34) With regard to the sub-scheme used during the RIP by the company concerned, i.e. physical exports, the import allowance and the export obligation are fixed in volume and value by the GOI and are documented on the Authorisation. In addition, at the time of import and of export, the corresponding transactions are to be documented by Government officials on the Authorisation. The volume of imports allowed under the AAS is determined by the GOI on the basis of Standard Input Output Norms (‘SIONs’) which exist for most products including the product under review.

• (35) Imported input materials are not transferable and have to be used to produce the resultant export product. The export obligation must be fulfilled within a prescribed time frame after issuance of the licence (18 months with two possible extensions of 6 months each).

• (36) The SION applicable to the product under review was established by the GOI in 1998 and was not revised or adjusted until the RIP. Therefore, the SION is insufficient to effectively monitor the actual consumption. The GOI did also not carry out further examination based on actual input. For the main raw material Needle coke (also named ‘calcined petroleum coke’ or ‘CPC’) the Commission found an important discrepancy between the SION and the actual raw material consumption of the company. The SION allows a ratio of 1.3 of Needle coke per exported ton, whereas the actual ratio needed for production is substantially lower.

• (37) The investigation therefore established that the verification requirements stipulated by the Indian authorities were not sufficient to prevent a benefit.

• (38) The cooperating exporting producer maintained a certain production and consumption register. It was however not possible to verify which inputs (including their origin) were consumed in the production of the exported product and in what amounts. In particular with the system put in place it was not possible to identify and measure with precision whether there was an excess remission because, the raw material is stored in silos, which contain needle coke imported duty free together with needle coke imported with duties, without any local separation. As soon as imported needle coke is stored, a specific charge of imports could thereby no longer be traced.

• (39) HEG confirmed that its consumption register does not allow to establish the actual consumption of duty free imported raw materials and linking it with produced and exported final products. As a result, the sub-scheme used in the present case cannot be considered a permissible duty drawback system.

3.2.2.4.   Conclusion on the AAS

• (40) 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, namely it constitutes a financial contribution of the GOI since it foregoes duty revenue which would otherwise be due and it confers a benefit upon the investigated exporter since it improves its liquidity.

• (41) In addition, AAS physical exports are 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.

• (42) The sub-scheme used in the present case cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. It does not conform to the rules laid down in Annex I item (i), Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution drawback) of the basic Regulation. The GOI did not effectively apply a verification system or a procedure to confirm whether and in what amounts inputs were consumed in the production of the exported product (Annex II(4) of the basic Regulation and, in the case of substitution drawback schemes, Annex III(II)(2) of the basic Regulation). It is also considered that the SIONs for the product under review were not sufficiently precise and that, in themselves, those SIONs cannot constitute a verification system of actual consumption because the design of those standard norms does not enable the GOI to verify with sufficient precision what amounts of inputs were consumed in the export production. In addition, the GOI did not carry out a further examination based on actual inputs involved, although this would need to be carried out in the absence of an effectively applied verification system (Annex II(5) and Annex III(II)(3) to the basic Regulation). This also manifested in the fact that since its establishment in 1998 the SION has never been revised.

• (43) The sub-scheme is therefore countervailable.

• (44) Following the final disclosure, the GOI commented that there is a verification mechanism in place and the same had been duly demonstrated in the verification process.

• (45) The Commission rejected this argument. As explained in recital (36), the SION that determines the amount of tax free imported raw materials has never been revised since its imposition and the Commission found an important discrepancy between the SION and the actual consumption. The Commission concluded that the monitoring of the application of the SION cannot ensure that the benefits are not granted in excess, if the underlying SION, that determines the amount of tax free imported raw materials, is not sufficiently precise and this fact is not monitored. In addition, the Commission found that at HEG it was not possible to trace the imported raw materials to the finished goods.

• (46) Following the final disclosure, the GOI commented that it follows from Paragraph 2 of Section I under Annex II of the WTO’s SCM Agreement (‘ASCM’) that indirect taxes rebate schemes are countervailable only if it provides remissions over and above the import duty on inputs consumed in production of the exported product.

• (47) The GOI further argued that the AAS is not a countervailable program since it does not provide excess remission of import duties over the number of duties accrued on the imported inputs. This followed from Section II of Annex II of the ASCM, which provides guidelines for determining whether inputs are consumed in the production of the exported product. Further the panel report in European Union – countervailing Measures on Certain Polyethylene Terephthalated from Pakistan (WT/DS/486) stated that ‘the excess remission principle’ provides a legal standard which determine whether the remissions of import duties obtained under the duty drawback scheme constitute a financial contribution.

• (48) The Commission explained in recital (36) the Commission found a substantial discrepancy between the SION and the actual consumption. As explained in Recital (38) the cooperating exporting producer maintained a certain production and consumption register. It was however not possible to verify which inputs (including their origin) were consumed in the production of the exported product and in what amounts. In particular, with the system put in place it was not possible to identify and measure with precision whether there was an excess remission. It was also found that no records kept by the companies would enable the calculation of excess remission, thereby making any future certification by an external chartered accountant/cost and works accountant impossible. The GOI has not elaborated in which aspect this lack of possibility to verify does not meet the standard of the quoted Sections of the ASCM.

• (49) The Commission therefore rejected this claim.

3.2.2.5.   Calculation of the subsidy amount

• (50) In the absence of permitted duty drawback systems and lack of the possibility of verification of the actual consumption rate of the relevant inputs, and since there was no reliable evidence showing otherwise, the total amount of custom duties foregone (basic custom duty and custom cess) is considered an excess remission that would constitute a countervailable subsidy in accordance with Article 3(1)(a)(ii) of the basic Regulation. The application fees paid by the company have been deducted.

• (51) In accordance with Article 7(2) of the basic Regulation, the Commission allocated these subsidy amounts over the total export turnover of the company during 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.

• (52) The subsidy rate established with regard to this scheme totalled 1,66 % for HEG during the RIP.

• (53) Following the final disclosure, the GOI claimed that, if the Commission decides to countervail the AAS, only the amount, in excess of the duties, that has been remitted, can be countervailed. The GOI claimed that this follows from the WTO Panel Report on India-Export Related Measures [WT/DS541/R], which stated that any exemption of indirect taxes not in excess of duties levied on imported inputs consumed in production of exported product shall not be regarded as countervailable. The GOI further argues that the panel report (WT/DS/486) provided the legal standard to support this determination.

• (54) As explained in recital (50), in the absence of permitted duty drawback systems and lack of the possibility of verification of the actual consumption rate of the relevant inputs, and since there was no reliable evidence showing otherwise, the total amount of custom duties foregone (basic custom duty and custom cess) is considered an excess remission. The WTO Panel Report on India-Export Related Measures [WT/DS541/R] does not contain a definition that contradicts this consideration.

• (55) The Commission therefore rejected this claim.

3.2.3.   Merchandise Export from India Scheme (‘MEIS’)

• (56) The Commission established that HEG used MEIS during the RIP.

3.2.3.1.   Legal basis

• (57) The detailed description of the MEIS is contained in chapter 3 of FTP 2015-20 and updated FTP 2015-20 and in chapter 3 of the updated HOP 2015-20 ¹³.

3.2.3.2.   Eligibility

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

3.2.3.3.   Practical implementation

• (59) Eligible companies can benefit from the MEIS by exporting specific products to specific countries which are categorised into Group A (‘Traditional Markets’ including all EU Member States), Group B (‘Emerging and Focus Markets’) and Group C (‘Other Markets’). The countries falling under each group and the list of products with corresponding reward rates are listed in Appendix 3B of the updated HOP 2015-20.

• (60) The benefit takes the form of a duty credit equivalent to a percentage of the FOB value of the export. The MEIS rate for export of GES to Group A countries during the RIP amounted to 2 %.

• (61) Pursuant to para 3.06 of the FTP 2015-20 certain types of exports 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 economic zones/export operating units.

• (62) The duty credits under the MEIS are freely transferable and valid for a period of 18 months from the date of issue while the duty credit scrips issued on or after 1 January 2016 shall be valid for a period of 24 months from the date of issue as per paragraph 3.13 of the updated HOP 2015-20.

• (63) They can be used for: (i) payment of custom duties on imports of inputs or goods including capital goods, (ii) payment of excise duties on domestic procurement of inputs or goods including capital goods and payment, (iii) payment of service tax on procurement of services.

• (64) An application for claiming benefits under the MEIS must be filed online on the Directorate-General of Foreign Trade website. Relevant documentation (shipping bills, bank realisation certificate and proof of landing) must be linked with the online application. The relevant Regional Authority (‘RA’) of the GOI issues the duty credit after scrutiny of the documents. As long as the exporter provides the relevant documentation, the RA has no discretion over the granting of the duty credits.

• (65) The MEIS scheme was discontinued from 1 January 2021. However, it was found that benefits were awarded to HEG under the MEIS scheme during the RIP, as the scheme allowed to retroactively claim benefits for previous periods until end of 2021.

3.2.3.4.   Conclusion on MEIS

• (66) The MEIS provides subsidies within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation. MEIS duty credit is a financial contribution by the GOI, since the credit will eventually be used to offset import duties paid on capital goods, thus decreasing the GOI’s duty revenue which would be otherwise due. In addition, MEIS duty credit confers a benefit upon the exporter who is not subject to the payment of those import duties.

• (67) Furthermore, the MEIS 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.

• (68) This scheme cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. It does not conform to the 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 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 MEIS 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 having to demonstrate 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 MEIS. Moreover, an exporter can use MEIS 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. Moreover, no further examination by the GOI was conducted on the basis of actual inputs and transactions in order to determining whether an excess payment occurred.

• (69) It is noted that the MEIS expired as of 1 January 2021 ¹⁴. However, until the end of 2021, the companies could still apply for the MEIS scripts for the export transactions made in 2020. Furthermore, the companies are still able to use the MEIS script obtained in 2021 to balance import duties due, until 15 September 2023. Thus, benefits under this scheme were received during the RIP and will continue even after the end of the investigation.

• (70) Following the final disclosure, the GOI commented that MEIS is not a countervailable program since it is merely intended to refund indirect taxes paid on inputs consumed in the production of exported goods. Further, the value of the duty credit scripts (that are awarded as benefits under the MEIS) is not in excess of indirect taxes incurred by the exporter. Thus, the MEIS program is in accordance with the provisions of paragraphs (g) and (h) of Annex I read with Footnote 1 of the WTO’s ASCM.

• (71) Contrary to what the GOI argues, MEIS provides an excess remission of duties. As demonstrated in recital (68) 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. The mere intention to refund indirect taxes paid on inputs consumed does not replace the need for a monitoring, if these are actually consumed.

• (72) The GOI further commented that MEIS has been terminated by the GOI with effect from 1 January 2021 and the extension of the duty would result in countervailing a program under which no assistance would be conferred to any exporter. The GOI pointed to the fact that in previous investigations the Commission has refrained from countervailing schemes which have been revoked by the GOI.

• (73) In recital (69) the Commission demonstrated that despite the termination of the scheme, HEG received benefits during the RIP, following the termination of the scheme. The Commission also demonstrated that these benefits continue even after the end of the investigation. None of those facts were disputed by the GOI.

• (74) The Commission therefore rejected this claim.

3.2.3.5.   Calculation of the subsidy amount

• (75) In accordance with Article 3(2) and Article 5 of the basic Regulation, the Commission calculated the amount of countervailable subsidies in terms of the benefit conferred on the recipient, which was found to exist during the RIP. In this regard, the Commission established that the benefit is conferred on the recipient at the time when the company receives the benefit under this scheme, following the company’s application. At this moment, the GOI issues a duty credit which is booked by the exporting producer as an account receivable which can be offset by the exporting producer at any moment. This constitutes a financial contribution within the meaning of Article 3(1)(a)(ii) of the basic Regulation. Once the customs authorities issue an export shipping bill, the GOI has no discretion as to whether or not to grant the subsidy. In the light of the above, and since there was no reliable evidence showing otherwise, the Commission considered appropriate to assess the benefit under the MEIS as being the sum of the amounts received under this scheme during the RIP. The Commission took into account MEIS amounts earned on all the export transactions of HEG, as the company exports only product under review.

• (76) In accordance with Article 7(1)(a) of the basic Regulation, fees incurred by the company to obtain the subsidy were deducted from the total subsidy amount where claimed.

• (77) In accordance with Article 7(2) and (3) of the basic Regulation, the Commission allocated this subsidy amount over the export turnover of HEG 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.

• (78) The subsidy rate established with regard to this scheme totalled 0,87 % for HEG during the RIP.

3.2.4.   Export Promotion Capital Goods Scheme (‘EPCGS’)

• (79) Like in the original investigation and the last review, the Commission established that HEG received concessions under the EPCGS which could be allocated to the product under review originating in India during the RIP.

3.2.4.1.   Legal basis

• (80) The detailed description of the EPCGS is contained in chapter 5 of the FTP 2015-20 as well as in chapter 5 of HOP 2015-20.

3.2.4.2.   Eligibility

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

3.2.4.3.   Practical implementation

• (82) 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 duty rate. 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 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 goods deemed for export during a certain period. Under the FTP 2015-20 and updated FTP 2015-20 the capital goods can be imported with a 0 % duty rate under the EPCGS. The export obligation, which amounts to six times the duty saved, must be fulfilled within a period of maximum six years.

• (83) The EPCGS licence holder can also source the capital goods indigenously. In such case, the indigenous manufacturer of capital goods may avail itself 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.

3.2.4.4.   Conclusion on the EPCGS

• (84) 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.

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

• (86) The 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 point (I), of the basic Regulation, because they are not consumed in the production of the exported products.

3.2.4.5.   Calculation of the subsidy amount

• (87) The amount of countervailable subsidies 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. The amount so calculated, which is attributable to the RIP, has been adjusted by adding interest during this period in order to reflect the full-time value of the money. The commercial interest rate during the investigation period in India was considered appropriate for this purpose.

• (88) In accordance with Article 7(1)(a) of the basic Regulation, fees incurred by HEG to obtain the subsidy were deducted from the total subsidy amount where claimed.

• (89) In accordance with Article 7(2) and 7(3) of the basic Regulation, this subsidy amount has been allocated over the export turnover of the product under review during the RIP as the appropriate denominator as the company used machines purchased under the EPCGS only for the production of the product under review, because the subsidy is contingent upon export performance and was not granted by reference to the quantities manufactured, produced, exported or transported.

• (90) The subsidy rate established with regard to this scheme totalled 0,31 % for HEG during the RIP.

3.2.5.   Direct transfer of funds

• (91) The Commission analysed a direct transfer of funds within the DDS scheme. The DDS scheme 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. The drawback rates are published on a regular basis.

3.2.6.   Duty Drawback Scheme (‘DDS’)

• (92) The Commission established that HEG used the DDS during the RIP.

3.2.6.1.   Legal Basis

• (93) The legal basis applicable during the RIP was the Custom & Central Excise Duties Drawback Rules 1995 (‘the 1995 DDS Rules’), as amended in 2006 ¹⁵ and then replaced by Customs and Central Excise Duties Drawback Rules, 2017 ¹⁶ (‘the 2017 Rules’) which entered into force on 1 October 2017. Rule 3(2) of the 1995 DDS Rules governs the method of calculation of this duty drawback scheme. Rule 12(1)(a)(ii) of the said DDS Rules governs the Declaration that the exporting producers need to file in order to benefit from the scheme. These Rules have remained identical in the 2017 DDS Rules and correspond to Rule 3(2) and Rule 13(1)(a)(ii) respectively.

• (94) In addition, Circular No 24/2001 ¹⁷ contains specific instructions how to implement the Rule 3(2) and the Declaration that exporters need to produce under the Rule 12(1)(a)(ii).

• (95) The Rule 4 of the 1995 DDS Rules stipulates that the Central Government may revise amount or rates determined under the rule 3. The Government has made a number of modifications, the last ones revising the rates being Notification No 95/2018 – CUSTOMS and Notification No 07/2020 – CUSTOMS. As a result, for the product under review, the DDS rate was 1,6 % of the FOB value of the exported products. The same DDS rate is applied to GES exported by HEG.

3.2.6.2.   Eligibility

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

3.2.6.3.   Practical implementation

• (97) Under this scheme, any company exporting eligible products is entitled to receive an amount corresponding to a percentage of the declared FOB value of the exported product. According to Rule 3(2) of Custom & Central Excise Duties Drawback Rules, the GOI bases the refundable amount on industry-wide average values of relevant customs duties paid on imported raw materials and an average industry consumption ratio collected from what the GOI considers as being representative manufacturers of the eligible export products. The GOI then expresses the amount to be refunded as a percentage of the average export value of the eligible exported products.

• (98) In order to be eligible to benefit from this scheme, a company must export. At the moment when shipment details are entered in the Customs server (ICEGATE), it is indicated that the export is taking place under the DDS and the DDS amount is fixed irrevocably. After the shipping company has filed the Export General Manifest and the customs office has satisfactorily compared that document with the shipping bill data, all conditions are fulfilled to authorise the payment of the drawback amount by either direct payment on the exporter’s bank account or by draft.

• (99) The exporter also has to produce evidence of realisation of export proceeds by means of a Bank Realisation Certificate (‘BRC’). This document can be provided after the drawback amount has been paid but the GOI will recover the paid amount if the exporter fails to submit the BRC within a given deadline.

• (100) The drawback amount can be used for any purpose and, in accordance with Indian accounting standards, the amount can be booked on an accrual basis as income in the commercial accounts, upon fulfilment of the export obligation.

• (101) The relevant legislation and administrative instructions stipulate that the Indian customs administration should require no evidence that the exporter requesting the duty drawback must have incurred or will incur a customs duty liability for imports of the raw materials needed for the manufacture of the exported product. In addition, during the verification visit, the GOI confirmed that companies that would source domestically all the raw materials would still benefit from the full rate calculated under Rule 3(2) mentioned above HEG exercised DDS with the All Industry Rate, where no proof of actually paid duties is necessary.

3.2.6.4.   Conclusion on the DDS

• (102) The DDS provides subsidies within the meaning of Article 3(1)(a)(i) and Article 3(2) of the basic Regulation. The so-called duty drawback amount is a financial contribution by the GOI as it takes form of a direct transfer of funds by the GOI. There are no restrictions as to the use of these funds. In addition, the duty drawback amount confers a benefit upon the exporter, because it improves its liquidity.

• (103) The rate of duty drawback for exports is determined by the GOI on a product-by-product basis. However, although the subsidy is referred to as a duty drawback, the scheme does not have all the characteristics of a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation; nor does the scheme conform to the rules laid down in Annex I item (I), Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution drawback) of the basic Regulation. The cash payment to the exporter is not necessarily linked to actual payments of import duties on raw materials and is not a duty credit to offset import duties on past or future imports of raw materials. In addition, there is no system or procedure in place to confirm which inputs are consumed in the production of the exported products and in what amounts. In addition, the GOI did not carry out a further examination based on actual inputs involved, although this would need to be carried out in the absence of an effectively applied verification system (Annex II(5) and Annex III(II)(3) to the basic Regulation). No evidence was provided of the existence of a link between the drawback rates and duties paid on raw materials.

• (104) Consequently, the payment which takes form of a direct transfer of funds by the GOI subsequent to exports made by exporters is contingent upon export performance and therefore this scheme is deemed to be specific and countervailable under Article 4(4)(a) of the basic Regulation.

• (105) In view of the above, it is concluded that the DDS is countervailable.

• (106) Following the final disclosure, the GOI claimed that the DDS is not countervailable since it is intended to implement the principle that taxes should not be exported. The said schemes is in accordance with Paragraph 2 of Section I under Annex II of the WTO’s Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’). The drawback of indirect taxes or import charges is not in excess of the amount of such taxes or charges actually levied on inputs that are consumed in the production of the exported product. DDS is merely a program, which reimburses taxes paid on the importation of inputs used in the production of goods exported. The return of values would be calculated from a percentage of the FOB value exported, variable according to the exported goods.

• (107) The GOI also argued that its databases are used for appropriate cross-checks. A Committee also visits manufacturer exporter units for first-hand knowledge of the manufacturing process and observes the nature of inputs ordinarily used and the amount of wastage. The Committee also takes into account the industry experience and broad technical factors, as appropriate. The refund is the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified goods.

• (108) The Commission, however, did not consider that the alleged link between the drawback rates and the duties paid on raw materials is sufficient in order for the scheme to conform to the rules laid down in Annex I item (I), Annex II (definition and rules for drawback) and Annex III (definition and rules for substitution drawback) of the basic Regulation. In particular, the amount of credit was not calculated in relation to actual inputs used. Moreover, there was no system or procedure in place to confirm which inputs (including their amounts and origin) were 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. Moreover, no further examination by the GOI was conducted on the basis of actual inputs and transactions in order to determine whether an excess payment occurred.

• (109) The Commission therefore rejected this claim.

3.2.6.5.   Calculation of the subsidy amount

• (110) In accordance with Article 3(2) and Article 5 of the basic Regulation, the Commission established that the benefit is conferred on the recipient at the time when an export transaction is made under this scheme. At this moment, the GOI is liable to the payment of the drawback amount, which constitutes a financial contribution within the meaning of Article 3(1)(a)(I) of the basic Regulation. Once the customs authorities issue an export shipping bill which shows, inter alia, the amount of drawback which is to be granted for that export transaction, the GOI has no discretion as to whether or not to grant the subsidy.

• (111) In the light of the above, and since there is no reliable evidence showing otherwise, the Commission considered appropriate to assess the benefit under the DDS as being the sum of the drawback amounts earned on export transactions made under this scheme during the RIP. The Commission took into account duty drawback amounts earned on all the export transactions of HEG as the company exports only the product under review.

• (112) In accordance with Article 7(2) of the basic Regulation, the Commission allocated these subsidy amounts over the total export turnover of the company during 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.

• (113) The subsidy rate established with regard to this scheme totalled 1,27 % for HEG during the RIP.

• (114) Following the final disclosure, the GOI argued that, if there is any excess drawback, only the excess drawback can be countervailed. The GOI argued this would be supported by the Panel Report, European Union -Countervailing Measures on Certain Polyethylene Terephthalate from Pakistan, WT/DS486/R. From this Panel report the GOI quoted a section that contains the statement: ‘Consistent with this observation, Annex III (II) provides guidance for investigating authorities that are designed to allow investigating authorities to identify excess remissions.’

• (115) The Panel Report does not contain findings that would contradict the Commission’s conclusion on how to define the excess benefit in this case. As described in recital (111), since there was no evidence of an actual verification process showing otherwise, but only general descriptions of how the Committee works and establishes the DDS ratio, the Commission considered appropriate to assess the benefit under the DDS as being the sum of the drawback amounts earned on export transactions made under this scheme during the RIP.

• (116) The Commission therefore rejected the claim.

3.3.   Additional schemes used to determine the continuation of subsidisation

3.3.1.   Duty exemption and remission schemes

• (117) Similar to MEIS, also the RODTEP scheme is 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’). RODTEP was designed as a successor of the MEIS scheme, but due to differences between these schemes on how the benefits are awarded, there is an overlap in the period in which the two schemes were applied.

3.3.2.   Remission of Duties and Taxes on Exported Products (‘RODTEP’)

• (118) The Commission established that HEG used RODTEP during the RIP.

3.3.2.1.   Legal basis

• (119) The detailed description of RODTEP is contained in chapter 4 of FTP 2015-20 and updated FTP 2015-20 and in chapter 4 of updated HOP 2015-20. It can also be found in the Notification introducing RODTEP into the FTP 2015-20 ¹⁸.

3.3.2.2.   Eligibility

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

3.3.2.3.   Practical implementation

• (121) Eligible companies can benefit from RODTEP by exporting products, which are not excluded according to the list of section 4.55 of FTP 2015-20 as Ineligible Supplies/Items/Categories under the Scheme. GES was not excluded according to this list.

• (122) Under the Scheme a rebate is granted at a notified percentage of FOB value with a value cap per unit of the exported product. The Scheme is implemented by issuance of rebate amount in form of a transferable duty credit/electronic script (e-scrip), which is maintained in an electronic ledger by the Central Board of Indirect Taxes & Customs (CBIC).

• (123) The e-scripts can be used for payment of custom duties on imports of inputs or goods including capital goods under the First Schedule to the Customs Tariff Act, 1975 viz. Basic Customs Duty.

3.3.2.4.   Conclusion on RODTEP

• (124) RODTEP provides subsidies within the meaning of Article 3(1)(a)(ii) and Article 3(2) of the basic Regulation. RODTEP duty credit is a financial contribution by the GOI, since the credit will eventually be used to offset import duties paid on capital goods, thus decreasing the GOI’s duty revenue which would be otherwise due. In addition, RODTEP duty credit confers a benefit upon the exporter who is not subject to the payment of those import duties.

• (125) Furthermore, RODTEP 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.

• (126) This scheme cannot be considered a permissible duty drawback system or substitution drawback system within the meaning of Article 3(1)(a)(ii) of the basic Regulation. It does not conform to the 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 any 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 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. Moreover, no further examination by the GOI was conducted on the basis of actual inputs and transactions in order to determining whether an excess payment occurred.

• (127) Following the final disclosure, the GOI argued that an expiry review is limited to the extension of the duty that is already in force. Therefore, new subsidy schemes such as RODTEP must remain outside the scope of the present review.

• (128) The fact that an expiry review is limited to the extension of a duty already in force, does not limit the Commission in only investigating subsidy schemes that existed in the investigation period of the original investigation. For the purpose of determining, whether a subsidisation above the de minimis level continued during the RIP, the Commission took into account RODTEP since it was included in the review request and it was a follow-up scheme to MEIS.

• (129) The GOI further claimed, that the RODTEP is not countervailable since it is intended to implement the principle that taxes should not be exported. The said schemes is in accordance with Paragraph 2 of Section I under Annex II of the WTO’s Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’). The drawback of indirect taxes or import charges is not in excess of the amount of such taxes or charges actually levied on inputs that are consumed in the production of the exported product. DDS is merely a program, which reimburse taxes paid on the importation of inputs used in the production of goods exported. The reimbursed values would be calculated from a percentage of the FOB value exported, variable according to the exported goods.

• (130) The GOI databases are used for appropriate cross-checks. A Committee also visits manufacturer exporter units for first-hand knowledge of the manufacturing process and observe the nature of inputs ordinarily used and the amount of wastage. The Committee also takes into account the industry experience and broad technical factors, as appropriate. The refund is of the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified goods.

• (131) Contrary to what the GOI argued, the RODTEP is not merely a program, which reimbursed taxes paid on the importation of inputs used in the production of goods exported. As described in recital (126), an exporter is under no obligation to actually consume any 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 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. Therefore, the details that the GOI described on how the rate for the RODTEP scheme is determined by the Committee and cross-checks with its data banks are not relevant as this does not prevent the excess benefit.

• (132) The Commission therefore rejected the claim.

3.3.2.5.   Calculation of the subsidy amount

• (133) In accordance with Article 3(2) and Article 5 of the basic Regulation, the Commission calculated the amount of countervailable subsidies in terms of the benefit conferred on the recipient, which was found to exist during the RIP. In this regard, the Commission established that the benefit is conferred on the recipient at the time when the company receives the benefit under this scheme. At that moment, the GOI issued a duty credit which was booked by HEG as an account receivable which can be offset by HEG at any moment. This constitutes a financial contribution within the meaning of Article 3(1)(a)(ii) of the basic Regulation. Once the customs authorities issue an export shipping bill, the GOI has no discretion as to whether or not to grant the subsidy. In the light of the above, and since there was no reliable evidence showing otherwise, the Commission considered appropriate to assess the benefit under the RODTEP as being the sum of the amounts earned on export transactions made under this scheme during the RIP by the cooperating exporting producer HEG. The Commission took into account RODTEP amounts earned on all the export transactions of HEG, as the company exports only product under review.

• (134) In accordance with Article 7(1)(a) of the basic Regulation, fees incurred by the coopering exporting producer HEG to obtain the subsidy were deducted from the total subsidy amount where claimed.

• (135) In accordance with Article 7(2) and (3) of the basic Regulation, the Commission allocated this subsidy amount over the export turnover of HEG 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.

• (136) The subsidy rate established with regard to this scheme amounted to 0,59 % for HEG during the RIP.

• (137) Following the final disclosure, the GOI argued that, if there is any excess drawback, only the excess drawback can be countervailed. The GOI argued this would be supported by the Panel Report, European Union -Countervailing Measures on Certain Polyethylene Terephthalate from Pakistan, WT/DS486/R. From this Panel report the GOI quoted a section that contains the statement: ‘Consistent with this observation, Annex III (II) provides guidance for investigating authorities that are designed to allow investigating authorities to identify excess remissions.’

• (138) The Panel Report does not contain conclusions that prevent the Commission from its conclusion on how to define the excess benefit. As described in recital (133), since there is no evidence an actual verification process showing otherwise, but only general descriptions of how the Committee works and establishes the RODTEP ratio, the Commission considered appropriate to assess the benefit under the RODTEP as being the sum of the drawback amounts earned on export transactions made under this scheme during the RIP.

• (139) The Commission therefore rejected the claim.

3.3.3.   Preferential financing: Interest Equalization scheme (‘IES’)

• (140) The Commission established that HEG received benefits under the IES which could be allocated to the product under review during the RIP.

3.3.3.1.   Legal basis

• (141) The Reserve bank of India (‘RBI’) announced the ‘Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit’ in Master Circular DBR.Dir.BC.No 62/04.02.001/2015-16 dated 4 December 2015. The IES was originally set to expire in September 2021. However, in March 2022, RBI notified the banks about the retroactive extension of the scheme until 2024, but at the lower rate of 2 %.

3.3.3.2.   Eligibility

• (142) The IES is available to exports of a wide range of products, including GES, irrespective of the size of the exporting producer and to any export for Micro, Small and Medium Enterprises.

3.3.3.3.   Practical implementation

• (143) The IES is a scheme administered by the DGFT. It originally provided a 3-5 % interest offset for loans availed in respect of exports under 416 tariff lines as per Annexure A and exports made by Micro, Small & Medium Enterprises (MSMEs) across all ITC(HS) codes.

• (144) The Master Circular dated 4 December 2015 stipulated that from the month of December 2015 onwards, banks shall reduce the interest rate charged to the eligible exporters as per the guidelines on interest rates on advances by the rate of interest equalisation provided by Government of India. The local banks received compensation from the Reserve Bank of India so that the lower interests are provided to the eligible companies. The interest equalisation benefit is available from the date of disbursement up to the date of repayment or up to the date beyond which the outstanding export credit becomes overdue. However, the interest equalisation is available to the eligible exporters only during the period the scheme is in force.

• (145) When in March 2022, RBI notified the banks about the retroactive extension of the scheme until 2024 at the lower rate of 2 %, it also allowed the private banks to retroactively reimburse to the eligible exporting producers the respective offset amount for the period between October 2021 and March 2022.

3.3.3.4.   Conclusion on the IES

• (146) The IES provides subsidies within the meaning of Article 3(1)(a)(iv) and Article 3(2) of the basic Regulation. Private banks are directly by law to provide interest offsets to eligible companies.

• (147) Furthermore, the IES is contingent in law upon export performance, since such loan interest offset 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.

3.3.3.5.   Calculation of the subsidy amount

• (148) According to Article 6(b) of the basic Regulation, the benefit conferred on the recipient is the difference between the amount of interest that the company pays on the preferential loan and the amount that the company would pay for a comparable commercial loan obtainable on the Indian financial market (namely, the interest offset provided by the law). The amount of countervailable subsidies was therefore considered to be equal to the amount of interest relating to the RIP offset by the RBI and thus saved by HEG. This also includes the amounts that were retroactively reimbursed by the banks with respect to the RIP, due to the retroactive prolongation of the scheme in March 2022.

• (149) In accordance with Article 7(2) of the basic Regulation, the Commission allocated this subsidy amount over the export turnover of HEG 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.

• (150) The subsidy rate established with regard to this scheme amounted to 0,71 % for HEG during the RIP.

3.4.   Other additional schemes

3.4.1.   National schemes

• (151) Duty Free Import Authorisation Scheme (‘DFIA’) is a duty exemption scheme for imports that are incorporated in exports, regulated under Chapter 4 of the FTP 2015-20. The scheme continued under the updated FTP 2015-20. For exports that benefit from AAS, a company cannot claim benefits under DFIA at the same time. No benefit for HEG has been found during the RIP.

• (152) Pursuant to Article 8.1.3 of the Master Circular, creditworthy exporters with good track record are granted an easy access to export credit on best terms through the Gold Card Scheme. The Commission has not found specific benefits for HEG during the RIP that could be linked to the Gold Card Scheme.

• (153) The Status Holder scheme grants benefits to business leaders who have excelled in international trade and have successfully contributed to country’s foreign trade. All exporters with an import-export code number are eligible for the scheme provided that they achieve a defined threshold of export performance levels in the current and previous three financial years. The Commission has not found specific benefits for HEG during the RIP that could be linked to the Status Holder scheme.

• (154) During the RIP, HEG availed itself of Pre-shipment and Post-shipment Export Financing. However, apart from the interest rebate under the Interest Equalization Scheme already discussed in section 3.3 above, the Commission has not found specific benefits for HEG linked to pre-and post-shipment export financing.

• (155) The Market Access Initiative (‘MAI’) is a general export promotion scheme, which however only targets implementing agencies to promote exports and facilitate Market Access. It involves no direct interaction with the exporting Producers but with the Export Promotion Council under the supervision of the Ministry of Commerce. Exporting producers can indirectly benefit from reimbursement of costs for activities linked to export promotion. However, no benefit for HEG has been found during the RIP.

3.4.2.   Regional schemes

• (156) There was no cooperation in this investigation from exporters with production in Karnataka and Maharashtra. Therefore, the Commission would need to base its conclusions on facts available.

• (157) Following the final disclosure, the GOI commented that the Commission countervailed programs from Karnataka and Maharashtra and submitted that there are no producers of the product under review in Maharashtra.

• (158) Contrary to the understanding of the GOI, for the purpose of this investigation the Commission did not make any findings on regional schemes in Karnataka and Maharashtra.

• (159) During the last expiry review, HEG benefited from an exemption of electricity duty provided by the State of Madhya Pradesh to industrial companies investing in electricity generation for captive consumption. HEG’s eligibility to benefit from this scheme expired as of 2016.

• (160) Regarding purchased electricity, the complaint mentioned a rebate of 2 RS as a possible benefit under regional schemes. Electricity invoices reviewed at the company showed differences with regular industrial electricity tariff, including a rebate mentioned in the invoices. As a result, the Commission collected documents from the company and the GOI related to the energy tariffs applicable to HEG in Madhya Pradesh.