Council Regulation (EC) No 2597/1999 of 6 December 1999 imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film originating in India and collecting definitively the provisional, duty imposed
10. 12. 1999 EN Official Journal of the European Communities L 316/1 I (Acts whose publication is obligatory) COUNCIL REGULATION (EC) No 2597/1999 of 6 December 1999 imposing a definitive countervailing duty on imports of polyethylene terephthalate (PET) film originating in India and collecting definitively the provisional, duty imposed THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries not members of the European Community (1) (herein- after referred to as the ‘Basic Regulation’) and in particular Article 15 thereof, After consulting the Advisory Committee, Whereas: (1) (2) (3) (4) 1. PROCEDURE By Commission Regulation No 1810/1999 (2) (herein- after referred to as ‘the provisional duty Regulation’), a provisional countervailing duty was imposed on imports of polyethylene terephthalate (‘PET’) film into the Community originating in India falling within CN codes 3920 62 19 and 3920 62 90. Subsequent to the imposition of the provisional counter- vailing duty, the Indian cooperating exporting producers Ester Industries Ltd, Flex Industries Ltd, Garware Poly- ester Ltd, India Polyfilms Ltd/Jindal Polyester Ltd (related companies), MTZ Polyesters Ltd, Polyplex Corporation Ltd (hereinafter referred to as ‘the Indian exporting producers’), (hereinafter referred to as the ‘GOI’), the complainant Community producers (hereinafter referred to as ‘the Community industry’) and two users of PET film submitted comments in writing. the Government of India In accordance with the provisions of Article 11(5) of the basic Regulation, all the above parties except for one user requested and were granted hearings. One user, which did not make itself known at an earlier stage, reacted further to the imposition of the provi- sional measures. (1) OJ L 288, 21. 10. 1997, p. 1. (2) OJ L 219, 19. 8. 1999, p. 14. (5) (6) (7) (8) (9) The Commission continued to seek and verify all infor- mation it deemed necessary for the definitive findings. The oral and written comments submitted after the imposition of provisional measures and after the above disclosures were considered and, where deemed appro- priate, taken into account in the definitive findings. 2. PRODUCT UNDER CONSIDERATION Recital 7 of the provisional duty Regulation described the product under consideration to be polyethylene terephthalate (PET) film. Recital 8 of the provisional duty Regulation stated further that the product can be split into a variety of segments typically identified within the industry as magnetic, packaging, electrical, imaging and other indus- trial segments and that for the purposes of the invest- igation, the products were grouped in types according to market segment, thickness, coating properties, surface treatment, mechanical properties and clarity/opacity. the imposition of provisional measures After the Commission received a request by the Community industry to consider not only the types classifiable within CN codes 3920 62 19 and 3920 62 90 as set out in the provisional duty Regulation but also those classifi- able within CN codes 3920 62 11 and 3920 62 13 as PET film. The Indian exporting producers opposed the inclusion of the two additional codes claiming that the PET film classifiable within them is not interchangeable with the PET film falling within the other two codes, i. e. 3920 62 19 and 3920 62 90. They pointed out that only these latter codes were included in the complaint of the Community industry and that the two former ones had not been specifically included in the complaint on the grounds that the products categorised within these codes were not interchangeable with those classified within CN codes 3920 62 19 and 3920 62 90. L 316/2 EN Official Journal of the European Communities 10. 12. 1999 (10) On the basis of the information collected in the course of the investigation, the Commission decided not to include CN codes 3920 62 11 and 3920 62 13 within the scope of the investigation as no information has been submitted which would suggest the claim made by the Community industry in the complaint in terms of lack of interchangeability is not correct. that 3. SUBSIDIES 3. 1. GENERAL SUBMISSIONS (11) (12) 3. 1. 1. Addition of interest in the calculation of benefits obtained The exporting producers requested withdrawal of the interest element that had been added in order to calcu- late the total amount of benefit obtained under the various schemes. It was claimed that the addition of interest was unwarranted, beyond the terms of the Agreement on subsidies and countervailing measures (ASCM) and prohibited under Article VI paragraph 3 GATT 1994. The Calculation Guidelines of the Commis- sion would be null and void in this respect. The legal basis for the addition of interest to the face value of the subsidy is Article 5 in conjunction with Article 6 of the basic Regulation. Article 5 states that the amount of countervailable subsidies shall be calculated in terms of the benefit conferred on the recipient which is found to exist during the investigation period for subsidisation. Article 6, which reproduces Article 14 of the ASCM, establishes rules for calculation of the benefit for certain types of subsidies. For all categories of subsi- dies mentioned in Article 6, i. e. provision of equity, loan guarantees and goods and services or loans, purchase of goods, the benchmark for determining the benefit is the equivalent cost of funds on the commercial market. Therefore, by applying the rationale contained in Article 6 as a general rule to all categories of subsi- dies, in order to encompass the full benefit, the costs of borrowing the funds at commercial rates must be included. (13) When expressed as a face value during the investigation period, all subsidies are effectively equivalent to a grant. Since non-repayable grants are not available commer- cially, the recipient, in the absence of such a grant, would have had to raise the equivalent amount from commercial sources and repay it with interest over a period of time. It is this element of the benefit which is covered by adding interest to the nominal subsidy amount. (14) This approach is specifically provided for by the sentence ‘The face value of the amount of the subsidy has to be transformed into the value prevailing during the investigation period through the application of the normal commercial in the Commission's interest rate’ guidelines for the calculation of the amount of subsidy in countervailing duty investigations (calculation guide- lines) (1) and is the Community's standing practice which has been followed in a number of previous cases. the amount of (15) Article VI3 GATT 1994, which is reproduced in Article 19(4) of the ASCM, only states that duties must not be levied in excess of the subsidy. The amount of the subsidy is calculated in terms of benefit found to exist in the investigation period (Article 14 ASCM). Since the company also benefited from the fact that it did not have to source the funds on the financial market, the amount of benefit must also include an interest element. Consequently, since the amount of benefit (including interest) corresponds to the amount of the subsidy and the countervailing duty is calculated in terms of the subsidy margin found, Article VI(3) GATT 1994 is filly respected by the addition of interest. (16) the claim to exclude the interest For these reasons, element in the calculation of the benefits obtained under the various schemes is rejected. 3. 1. 2 Specificity of the various schemes (17) since Article 27(2) of The exporting producers submitted that the presump- tion in Article 2(3) of the ASCM rendering subsidies contingent upon export performance specific will not ipso facto apply, the ASCM provides that the prohibition of subsidies contingent upon export performance shall not apply to developing countries. India is one of the countries listed in Annex VII to the ASCM, and therefore the export subsidies granted by the GOI would not be prohibited. As a consequence, the Commission would be under an obli- gation to demonstrate on the basis of positive evidence that the schemes in question are specific. (18) Article 3(4)(a) of the basic Regulation clearly states that subsidies, including those illustrated in Annex I, shall be in law or in fact, deemed to be specific if they are, contingent on export performance. This condition has been individually examined for each of the subsidy schemes subject to this proceeding. (1) OJ C 394, 17. 12. 1998, p. 7. (19) (20) (21) (22) 10. 12. 1999 EN Official Journal of the European Communities L 316/3 3. 2. INDIVIDUAL SCHEMES 3. 2. 1. Passbook scheme (PBS) the finished product. Therefore, there is no export requirement that the imported inputs being substituted must be equal in quantity to, and have the same quality and characteristics as the home market inputs. The GOI and the exporting producers raised arguments regarding this scheme, which is described in recitals 12 to 19 of the provisional duty Regulation. These argu- ments need not be addressed, given that the benefits obtained under this were not included in the amounts of duty provisionally established for the reasons given in recital 24 of the provisional duty Regulation. Conse- quently, no measures will be imposed on benefits under this scheme and, therefore, no definitive finding is required. 3. 2. 2. Duty entitlement passbook (DEPB) scheme — pre-export basis (24) A company which can obtain its inputs at a lower value or which sources some of the inputs on the domestic market, would be able to import duty-free inputs that could be used for domestic production or sale since the actual imported quantities will have no relation to those set in the SION. There was no evidence found of an effective system or procedure in place to confirm either which duty-free inputs are actually consumed in the production process of the exported finished product or in what quantities. Furthermore, it has been found that the offset that may take place when goods are exported is not carried out on the basis of actual quantities of duty free imported inputs used in the processing of the exported products, but rather on the basis of standard value assumptions concerning inputs of the exported product. The GOI and the exporting producers raised arguments regarding this scheme, which was described in recitals 26 to 30 of the provisional duty Regulation. (25) In particular, it was claimed that the DEPB pre-export scheme is a permitted remission/drawback scheme within the provisions of the basic Regulation, and, as is non-countervailable. It was also claimed that, such, should the scheme be found to be countervailable, only actual excess remissions should be used as a basis for the calculation of the benefit, and the Commission should have examined whether there was in fact an excess drawback of import charges on inputs consumed in the production process. The DEPB on pre-export basis is not a remission/draw- back or substitution scheme within the provisions of the Basic Regulation, despite the existence of the ‘actual user condition’. It is fundamentally a value, and not quantity based scheme. The DEPB rate, which gives rise to import duty exemption, is not calculated in relation to specific physical quantities of inputs actually consumed or to be consumed in the production process. Concretely, inputs are determined on the basis of Standard Input/output Norms (SION) which set notional costings based on what are considered to be the values of inputs that have to be imported to manufacture a particular product. Once the DEPB rate has been set for a particular finished product, inputs can be imported duty free under a DEPB licence. There is no mechanism in place pre-export from which would prevent an exporting producer shifting the ratios of his inputs actually imported, since he is only required to remain within the overall credit ceiling granted. (23) In addition, there is no obligation to actually import all different inputs for which credit has been granted. The only limits to the quantity of any particular input that may be imported under the scheme is the value of the licence granted and the corresponding commitment to is determined that the government of Even if the DEPB pre-export basis were to be considered a duty draw-back system, as alleged, Annex II(II)(5) and Annex III(II)(3) to the basic Regulation provide that, where it the exporting country does not have a verification system in place, a further examination by the exporting country based on actual inputs involved, or actual transactions, respectively, will normally need to be carried out in the context of determining whether an excess payment occurred. Since, as explained above, no such verification system of actual quantities of imported inputs exists, the GOI was required to undertake an examination. The GOI did not carry out such an examination. Therefore, the Commission did not examine whether there was in fact an excess drawback of import charges on inputs consumed in the production of the exported product. (26) In any event, the excess remission of import duties is the basis for calculating the amount of the benefit only in the case of bona fide drawback and substitution draw- back schemes. Since it has been established that the DEPB pre-export scheme is not a drawback or substitu- tion drawback scheme within the meaning of Annex I(i) and Annexes II and III to the basic Regulation, the benefit is the total remission of import duties, not any supposed excess remission. (27) As the DEPB pre-export scheme involves government revenue that is otherwise due being forgone, the scheme is considered to confer a subsidy under Article 2(1)(a)(ii) of the basic Regulation. Since benefit under the scheme cannot be obtained without an export commitment, the scheme is contingent in law upon export performance within the meaning of Article 3(4)(a) of the basic Regu- lation, and is therefore specific. L 316/4 EN Official Journal of the European Communities 10. 12. 1999 Calculation of the subsidy amount (35) This claim has to be rejected for the same reasons as stated in recital 26. (28) The benefit to the exporting producers has been calcu- lated as explained in recital 23 of the provisional duty Regulation, taking additionally into account application fees which have been claimed by the exporting produ- cers. These additional amounts had, however, no influ- ence on the provisionally calculated subsidy margins. (29) Two companies benefited from this scheme during the investigation period and obtained subsidies of 1,31 % and 6,84 %. (30) (31) (32) (33) (34) 3. 2. 3. DEPB scheme — post-export basis The GOI and the exporting producers raised arguments regarding this scheme, which was described in recitals 37 to 39 of the provisional duty Regulation. In particular, it was claimed that the DEPB Scheme on post-export basis would be a permissible substitution drawback scheme since DEPB post-exports credits would be granted only in accordance with notified SION. Under paragraph (I) of Annex I to the basic Regulation, a drawback scheme may permit the use of a quantity of home market inputs equal to, and having the same quality and characteristics as the imported inputs. It was also claimed that the Excise Authorities would be in a position to verify which imported inputs are incor- porated into the exported product. Accordingly, the DEPB Scheme on post-export basis would be a permis- sible substitution drawback scheme under Annex II to the basic Regulation. It should be recalled that, contrary to the DEPB scheme on pre-export basis, no ‘actual user condition’ exists. The credits on the DEPB scheme on post-export basis are calculated as a percentage of the value of exported finished products. Credits thus obtained can be used to offset customs duties normally due on imports of any goods (excluding those on the negative list of imports). There is no restriction to goods for use in the produc- tion of the exported product. Imported goods may be sold on the domestic market or used in any other way. Moreover, licences, and thus credits, are freely transfer- able. Consequently, it can be concluded that the DEPB scheme on post-export basis is not a drawback or substitution drawback scheme within the meaning of Annex I(i) and Annexes II and III of the basic Regulation. The GOI also claimed that the scheme constitutes an export subsidy only to the extent that it provides a drawback of import charges in excess of those actually leviable in imported inputs that are used in export production, and that the Commission has failed to discharge its obligation of determining the extent of this excess. Calculation of the subsidy amount (36) The GOI submitted that, in the case of licences being sold, the Commission would be required to determine the actual value of the benefit derived by the exporting producers through these sales transactions, and not on the basis of the amount of credit granted in the licence. (37) As already explained in recital 43 of the provisional duty Regulation, this claim cannot be granted since the benefit granted by the GOI to the exporting producer in terms of revenue foregone is properly reflected in the value of the licence. Selling a licence at a price different (i. e. higher or lower) than its value represents a purely commercial transaction which does not alter the amount of benefit originally received from the scheme. (38) The benefit to the exporting producers has been calcu- lated as explained in recitals 41 to 44 of the provisional duty Regulation. In this respect, it should be noted that a number of claims were made by four exporting produ- cers and accepted by the Commission. Subsequently, additional costs necessarily incurred to obtain the licence have been taken into account. Also, corrections have been made to the amounts of credit granted. These corrections result the subsidy margins. in minor changes of (39) Four companies benefited from this scheme during the investigation period and obtained subsidies of between 2,34 % and 17,68 %. (40) (41) 3. 2. 4. Export promotion capital goods (EPCG) scheme the objective of The GOI submitted that the EPCG scheme, which was described in recitals 46 to 50 in the provisional duty Regulation, would be to permit the technological upgrading of plant and equipment by enterprises across the economy while also preserving India's scarce foreign exchange resources. It was claimed that the EPCG benefit is not contingent upon export performance because EPCG licences are available regard- less of previous export performance. Moreover, an EPCG licence-holder can always purchase domestic rather than imported capital goods. In regard to this claim, it should be noted that to avail itself of the EPCG scheme, a company must make a commitment to export a certain value of goods within a certain time period. This scheme is therefore contingent in law upon export performance since no benefit can be obtained without a commitment to export goods. As such, it is deemed to be specific under the provisions of Article 3(4)(a) of the basic Regulation and, therefore, countervailable. 10. 12. 1999 EN Official Journal of the European Communities L 316/5 (42) (43) The exporting producers claimed that, under the EPCG Scheme, the Government revenue is not forgone, but only postponed. If an importer of capital goods fails to fulfil his export obligation by the end of the period that the scheme provides, any differential duty will be collected with interest. Thus, the question whether an importer had enjoyed any duty remission at all and whether the government revenue is forgone and, thereby a benefit is conferred, will arise only at the end of the given period for fulfilment of the export obligation under this scheme. It would therefore be premature to consider the import of capital goods under the scheme during the period of investigation. In regard to this claim, it is considered that, when a company applies for this scheme and thereby gives a commitment to export goods, it must be presumed that the export obligation will be met and final exemption from the payment of the import duties will be obtained. Indeed, there must be an expectation on the part of the companies that they will finally not have to pay duties. To assume otherwise would render the scheme meaning- less. (44) Moreover, the investigation has positively established that the GOI in fact grants extensions of the period of export obligation to companies that are unable to meet their export obligation within the period initially estab- lished. (45) it For these reasons, is considered that government revenue is forgone at the time of importation of capital goods and the importing company receives a benefit in the form of the total amount of unpaid duties. Calculation of the subsidy amount (46) The benefit to the exporting producers has been calcu- lated as explained in recital 53 of the provisional duty it should be noted that a Regulation. In this respect, number of claims were made by all exporting producers, which were in part accepted by the Commission. Most notably, costs necessarily incurred in order to qualify for, or to obtain the subsidy and for which substantiated evidence was provided were taken into account. Those costs were notably linked to application fees and bank guarantees. The application fee is a one time operation whereas the bank guarantees can be a one time opera- tion covering a period of several years for the bank guarantee or can be composed of several yearly instal- ments to be paid throughout the period of the validity of the bank guarantee. (47) It should be noted that, one of these companies, MTZ Polyesters Ltd, claimed that the method applied in the provisional duty Regulation is not appropriate in its specific case, since it had been in a totally different situation during the investigation period than the other companies involved in the investigation. Most notably, it was claimed that, owing to unforeseen events, among which was a natural disaster, commercial production started only in October 1998. This led to very low domestic and export sales during the investigation period and consequently to a high subsidy margin. The company therefore proposed and requested to use a different calculation methodology. (48) It should be noted that no such claim had been submitted to the Commission during the investigation until the disclosure of provisional findings. However, with its request, the company submitted detailed and substantiated evidence concerning the start of commer- cial production and the effect that such late start had on its operations. specific and exceptional the application of (49) After careful scrutiny of this submission, the Commis- sion concluded that the request to adopt different calcu- lation methodologies as proposed by the company was not justified. However, the Commission considered that, circumstances given the affecting this company, the same denominator (i. e. actual exports) to this company as that applied to the companies which were in a normal commercial production situation led to results of such a disproportionate nature that they did not adequately reflect the benefit obtained by this company from the countervailable subsidy under this scheme. Accordingly, the Commission, while maintaining the same calculation methodology, made an adaptation of the production and export sales figures of this company, based on verified data from companies in a normal commercial produc- tion situation in order to allocate the benefit conferred by the subsidy during the investigation period. (50) In summary, six companies have availed themselves of this scheme during the investigation period and obtained subsidies of between 1,42 % and 8,75 %. 3. 3. EXPORT PROMOTION ZONES/EXPORT ORIENTED UNITS (EPZ/EOU) (51) The GOI submitted that it does not forgo any revenue under this scheme, which was described in recitals 55 to 58 of the provisional duty Regulation, because customs duties on capital goods are only suspended during the period of bonding. This means that, on imports of the capital goods importer is not required to pay customs duty. However, when the capital goods are sold, or de-bonded, the customs duty becomes payable, at a rate proportionate to the depreciated value of the capital goods at the time of sale or de-bonding. for use within EPZ/EOU units, L 316/6 EN Official Journal of the European Communities 10. 12. 1999 (52) (53) (54) (55) This claim is similar to the one made by the exporting producers concerning the EPCG scheme, i. e. revenue would not be forgone, but merely postponed. However, to presume that capital goods would be imported duty free and then resold on the domestic market, duty paid, In any event, would render the scheme meaningless. even if capital goods were to be resold at a given moment in the future, revenue would be forgone in an amount proportional to the accrued depreciation. If and when such capital goods are sold is a merely commercial decision taken by the company. it For these reasons, is considered that government revenue is forgone at the time of importation of capital goods and the importing company receives a benefit in the form of the total amount of unpaid duties. The exporting producer made a similar claim, and addi- tionally presented arguments relating to the imports of for exported products. Since the EPZ/EOU inputs scheme was used exclusively for the import of capital goods, arguments need not be addressed. additional these This subsidy is contingent in law on export performance within the meaning of Article 3(4)(a) of the basic Regu- lation, since it cannot be obtained without the company accepting an exporting obligation, and therefore deemed to be specific. Calculation of the subsidy amount (56) The benefit of the exporting producer has been calcu- lated as explained in recitals 63 to 65 of the provisional duty Regulation. One company received benefits under this scheme at a rate of 0,7 %. 3. 3. 1. Income tax exemption scheme (57) As already established in the provisional duty Regula- tion, no exporting producer made use of this scheme. Consequently, no measures were imposed and no defin- itive finding is required in the context of the invest- igation. 3. 4. REGIONAL SCHEMES 3. 4. 1. Sales tax (58) (59) the benefit The exporting producers submitted that bestowed under the sales tax exemptions of the States of Gujarat and Maharashtra and the trade tax incentive scheme of the state of Uttar Pradesh is conferred to the purchaser of the goods, and not the seller. Sales or trade tax in these states is a tax levied on sales of goods, and added to the sales prices on the invoice. The seller thereby acts as a tax collector. The sales/trade tax system differs from VAT systems in that sales/trade tax paid cannot be offset against sales/trade tax collected. (60) (61) (62) It has been claimed that the sales or trade tax exemp- tions have been used by the companies exclusively for sales transactions, and not for any substantial purchases of goods. The Commission, doting the verification visit, has found no evidence to the contrary. It was also established that all major suppliers of inputs for the exporting producers are located outside the States concerned. Therefore, sales tax was payable on purchases of goods by the exporting producers. It can therefore be concluded that the sales tax exemp- tions granted by the States of Gujarat and Maharashtra and the trade tax incentive scheme granted by the State of Uttar Pradesh conferred no benefit upon the exporting producer. (63) No measures will be imposed and, therefore, no defin- itive findings on these schemes are required. Finally, it should be noted that these findings do not prejudice findings concerning the usage of these schemes for purchase transactions. (64) (65) 3. 4. 2. Regional schemes — Electricity duty exemp- tion The GOI and one exporting producer, MTZ Polyesters Ltd, submitted that this scheme, which was described in recitals 80 and 81 of the provisional duty Regulation, would not be specific, since it would be available to all new enterprises in Gujarat, regardless of where they are located. The Commission analysed the evidence submitted in order to substantiate this claim. After a careful exam- ination, it can be concluded that, even though some unclear wording in the relevant legislation appears to have been used, notably in the context of defining ‘service undertakings’ and setting differential duty rates, this scheme is indeed available to all new industrial undertakings within the state on an equal basis and during a period of five years. (66) Article 3(2)(b) of the basic Regulation stipulates that where the granting authority, or the legislation pursuant to which the granting authority operates, establishes objective criteria or conditions governing the eligibility for, and the amount of, a subsidy, specificity shall not exist provided that eligibility is automatic and such criteria and conditions are strictly adhered to. Such objective criteria and conditions should, inter alia, be horizontal in application and not favour certain enter- prises over others. (67) In the light of the submissions received and evidence it is considered that the verified in this investigation, scheme meets the criteria of Article 3(2)(b) of the basic Regulation, in so far as it is horizontal in application, since it is available to enterprises in the whole state, and based on objective criteria, namely the creation of new industrial undertakings. 10. 12. 1999 EN Official Journal of the European Communities L 316/7 (68) It is therefore concluded that this scheme is not specific and therefore not countervailable. 3. 4. 3. Regional schemes — Octroi refund (69) Concerning the octroi refund, which was described in recitals 88 to 89 of the provisional duty Regulation, the GOI submitted that the octroi is an indirect tax levied by local authorities in India on goods that enter the terri- torial units of a town or a district. It was argued that the ‘Guidelines on consumption of inputs in the production process’ in Annex II of the ASCM would permit indirect tax-rebate schemes of prior stage cumulative indirect taxes levied on imports that are consumed in the production of exported products. Therefore, this scheme would not be countervailable. or by any other party in relation to the fulfilment of the requirements contained in Article 4(3) of the basic Regu- lation. Certain evidence, which was limited to data stem- ming from 1981/1982, was submitted considerably beyond the deadline. the Commission is neither under an obligation nor in a position to establish that the criteria required for a deter- mination under Article 4(3) of the basic Regulation, including, inter alia, those relating to the measurement of economic development based on statistical evidence, are met in the case of this scheme. circumstances, In these (76) Under these circumstances, the Commission is under an obligation to confirm the findings as outlined in recital 93 of the provisional duty Regulation. It is therefore definitively concluded that this scheme is countervail- able. (70) This argument has to be dismissed, since the octroi refund scheme has no link whatsoever with export production. Calculation of the subsidy amount (71) No substantiated claims regarding specificity of this scheme have been submitted. It is therefore confirmed that this scheme is specific in accordance with Article 3(2)(a) and (c) of the basic Regulation since it is expli- citly limited to certain enterprises, which are located in designated areas, within the jurisdiction of the granting authority. (77) The benefit to the exporting producer has been calcu- lated as explained in recital 94 of the provisional duty Regulation. However, the company provided evidence that it was not entitled to a refund of the full amount of tax, which consequently led to a lower subsidy margin. (78) One company benefited from this scheme during the investigation period and obtained subsidies of 1,08 %. (72) One exporting producer, Garware Ltd, submitted that it had obtained no benefit under this scheme during the investigation period (IP) since the State Authorities of Maharashtra had not yet actually fulfilled its repayment obligation. Polyester (73) This argument has to be rejected, since the benefit obtained is the accrued claim against the State of Mahar- ashtra, to which the company is legally entitled. (74) The GOI, supported by the exporting producers, reit- erated a general green-light claim and submitted that the Commission, especially in the case of developing coun- tries, would be under an obligation to establish that backward regions are not eligible under Article 4(3) of the basic Regulation, than making a deter- rather mination based on facts available. 3. 4. 4. Capital incentive (79) The GOI and the exporting producers raised arguments regarding this scheme, which is described in recitals 96 and 97 of the provisional Regulation. These arguments need not be addressed, given that the benefits obtained under this were not included in the amounts of duty provisionally established for the reasons given in recital 24 of the provisional duty Regulation. Consequently, no measures will be imposed on benefits under this scheme and, therefore, no definitive finding is required. (75) In this respect, it should be noted that, in so far as this scheme is concerned, which was used only by one company located in the area of Aurangabat within the State of Maharashtra, no evidence was submitted within the deadlines applicable to this proceeding by the GOI (80) The amount of countervailable subsidies in accordance with the provisions of the Basic Regulation, expressed ad valorem, for each investigated exporter is as follows. Amount of countervailable subsidies L 316/8 EN Official Journal of the European Communities 10. 12. 1999 S B P B P E D S G C P E U O E / Z P E State schemes t r o p x e - e r P t r o p x e - t s o P x a t - s e l a S e v i t n e c n i l a t i p a C d n u f e r i o r t c O d n u f e r y t i c i r t c e l E Ester Industries Ltd Flex Industries Ltd 6,84 2,34 2,87 10,44 2,13 Garware Polyester Ltd 1,31 1,48 1,08 India Polyfilms Ltd & Jindal Poly- ester Ltd 4,82 1,52 0,70 MTZ Polyester Ltd 8,75 Polyplex Corporation Ltd 17,68 1,42 (in %) L A T O T 12,0 12,5 3,8 7,0 8,7 19,1 4. INJURY (83) Therefore, the findings set out in recitals 105 and 106 of the provisional duty Regulation are hereby confumed. 4. 2. COMMUNITY CONSUMPTION, AND MARKET SHARE IMPORT VOLUMES (81) (82) 4. 1. DEFINITION OF THE COMMUNITY INDUSTRY (84) Recital 106 of the provisional duty Regulation states that four complainant producers fulfil the requirements the basic Regulation, since they of Article 10(8) of account total Community production of the product concerned and are therefore deemed to constitute the Community industry within the meaning of Article 9(1) of the said Regulation. for more than 80 % of The conclusions reached by the Commission at the provisional stage, notably the existence of significant increases of the product concemed, and a substantial increase of their share of the Community market were confirmed. Indian exports of total (85) Therefore, the findings set out in recitals 107 to 110 of the provisional duty Regulation are hereby confirmed. The Indian exporting producers have alleged that the proceeding should never have been initiated, as the complaint did not include sufficient evidence to prove that the requirements of Article 10(8) were fulfilled. They claimed that the fact that the captive production of PET film was left out in the complaint means that the Commission could not estimate the total production of PET film in the Community on the basis of the complaint. This allegation was considered unfounded as the captively produced PET film never entered the open Community market as PET film but as a downstream further processed product. In any event, the level of non-captive production of the complainant producers was substantially sufficient for standing to be estab- lished. 4. 3. PRICES OF SUBSIDISED IMPORTS (86) The Indian exporting producers have alleged that the price comparison of the provisional duty Regulation leads to unfair results for them, as it does not take into account the difference in price between commodity and special types of PET film. They have claimed that the Indian exports consist mainly of commodity-type PET film whereas an important part of PET film produced by the Community industry is of special type. This argu- ment had to be rejected as the aspects of commodity and special type of PET film were taken into account in the product grouping used for the price comparison. 10. 12. 1999 EN Official Journal of the European Communities L 316/9 (87) The Indian exporting producers have claimed further that the exclusion of certain parts of the structure of the product grouping as defined in the questionnaire has caused higher undercutting margins for them. They objected to the simplification of the product-type grouping after the disclosure of the provisional findings, claiming that the simplification led to incorrect compar- ison for PET film types of different quality. They claimed further that the Indian product tends to be of higher shrinkage in terms of thermal properties, narrower width and more hazy as compared to the Community product and therefore the Indian product is of lower quality and less expensive. (88) On the basis of the information received in the invest- igation, at the provisional stage the Commission had decided to simplify the grouping in types of different PET film as compared to what was foreseen by the questionnaires sent to the parties concerned. Therefore, the width, the thermal properties and the distinction between hazy and clear film were not considered. In this respect it has to be noted that, as in all investigations, in particular given the stage of the information collection, the product type grouping set out in the questionnaire in this case was indicative and open to modification. The present investigation has shown that a product grouping differentiation by PET film width would have multiplied the number of product types to be compared signifi- cantly without a clear impact on price comparison. Furthermore, the inclusion of thermal properties and the distinction between hazy and clear film was not possible as for haziness it fumed out that no clear definition exists for this characteristic and for thermal properties the definition given in the questionnaires was not consistently followed by the parties concerned. This led to a situation in which both the Community producers and the Indian exporting producers had used different and incomparable definitions for them. (89) The above allegation of the Indian producing companies has been disregarded, not only because the simplification of the product grouping was inevitable to guarantee a manageable undercutting exercise with representative comparisons of the product groupings declared by both parties concerned (actually around 400 Community industry product grouping codes were compared with about 160 PCN codes of the Indian exporting produ- cers), but also as the undercutting determination already in a simplified form reflects sufficiently the differences in terms of physical characteristics between the types produced by the Indian exporting producers and by the Community industry. (90) All the Indian exporting producers also requested a level of trade adjustment. They argued that whereas they sell a major proportion of their PET film to importers in the Community, the Community industry is mainly selling they directly to converters of PET film. Therefore, claimed that the comparison for the purposes of under- cutting should be made between the importers' resale prices to converters and the prices offered by the Community industry. They submitted that the margin an importer receives from its sales to converters is about trade 25 %, which represents the requested level of adjustment, (91) In this respect it has to be noted that in the question- naire the Commission defined the levels of trade as being (1) distributors, (2) converters, (3) original equip- ment manufacturers, (4) end users and (5) others. The Indian exporting producers have declared in their ques- tionnaire replies that a major proportion of their sales of PET film in Europe is sold to group number five, i. e. ‘others’, without any further clarification. After the disclosure on provisional findings the Indian exporting producers have confirmed that their sales to importers declared under ‘others’ should be considered as sales to distributors. However, the investigation has shown that some of these distributors are also converting the product, indicating that the clarifications submitted by the Indian exporting producers concerning the level of trade are inaccurate. Furthermore, the investigation did not confirm the 25 % price difference between the two levels of trade. In fact as far as the Community industry's sales are concerned, the average selling price to distribu- tors is higher than the price charged to the converters. In the circumstances of the Indian exporting producers, this would mean that any adjustment to be made would actually increase the price undercutting rates determined. The fact that prices to distributors are higher than those to converters in the case of the Community industry is explained by the fact that the converters buy larger quantities and therefore receive a quantity discount. In the case of the Indian exporting producers five compa- nies out of six sold at higher prices to converters than to distributors as submitted by them. However, one company sold at clearly higher prices to distributors and the price difference between the two levels of trade for the rest of the companies was far below 25 %. (92) The investigation has also shown that the two major levels of trade are not clearly separated owing to the fact that some major companies act both as a distributor and as a converter. It was noted further that there is no clear price difference between the two levels as the quantity ordered seems to be a more important price factor than the level of trade. Finally, and contrary to the allegation the forward by the Indian exporting producers, put investigation has shown that the Community industry also sells the product under consideration to distributors as well as to converters. Therefore it was concluded that there are no grounds to grant the Indian exporting producers an adjustment for a level of trade. L 316/10 EN Official Journal of the European Communities 10. 12. 1999 (93) One of that the Indian exporting producers, MTZ, also requested an adjustment for a quality difference. They submitted that they had included off-grade film in their transaction listing used for undercutting calculations and that the off-grade film types should be granted an adjust- ment by way of an increase of their sales price by 100 %. In this respect it should be noted that the ques- tionnaire reply of MTZ states the company produces three qualities of film: A- grade, B-grade and off-grade. However, in the transaction listing no refer- ence to different grades was made. After the disclosure of the provisional measures, MTZ provided further information on how to identify the off-grade products in the transaction listing. Having received this information, the Commission compared the prices between the alleged off grade product types with the rest of the product there is no price difference between the two groups of types. Therefore the request of MTZ for a quality adjustment could not be accepted. types and concluded that (94) Finally, the Indian exporting producers claimed that the Commission should have offset any negative margin of price undercutting by positive ones in their undercutting calculations. Since this was not done, they stated that a higher injury elimination margin had been determined. It should be noted that, in the methodology described in recitals 112 to 114 of the provisional duty Regulation for the calculation of the price undercutting margins, the weighted average net sales prices of the subsidised imports were compared on a model-by-model basis with the weighted average net sales price of the Community industry on the Community market. Therefore, this amount by which the methodology allowed the exporting producers' price in an export transaction exceeded that of the Community industry's weighted average price to be taken into account on a per model basis. The argument was therefore rejected. (95) It follows from the above that the provisional finding set out in recital 114 of the provisional duty Regulation of undercutting ranging between 28,2 % and 50,5 % are confirmed. 4. 4. SITUATION OF THE COMMUNITY INDUSTRY (96) responses of the complainants, The GOI claimed in general terms that based on the non-confidential the Community industry is not suffering any injury at all. In this respect as stated in recitals 115 to 125 of the provisional duty Regulation, the investigation has shown that the overall trends for the Community industry are negative, notably in relation to market share and prices as well as profitability, giving a clear indication of material injury. This trend is sufficiently confirmed in the non-confidential the Community industry. responses of (97) The Indian exporting producers have alleged that the choice of 1995 as a starting year for data collected for the investigation has distorted the analysis in favour of a finding of injury to the Community industry. They have submitted that, since 1995 was an exceptionally good year owing to very high demand, it is only natural that the injury indicators show a negative trend after that. The Indian exporting producers claim that fixing year 1993 as a starting year would have given a fairer view as to the evolution of the injury factors. However, the purpose of the investigation is to evaluate the effect of the countervailable imports on the economic situation of the Community industry during the IP. In order to trends are established for a make such an analysis; number of information indicators on the basis of relating to a number of years (usually three) preceding the IP. The purpose of this analysis is therefore not to compare the starting year with the IP but rather to assess the annual developments within the entire period considered. In any event it should be noted that at the time the decision on the period considered was taken there was no information available of the possibility that the injury indicators would have shown a different pattern had an earlier starting year been chosen. Finally, it should be noted that choosing an earlier starting year would not have been favourable to Indian exporting companies as there was a strong increase in their market share in the time was leading to the IP. (98) the findings stated in recitals 115 to 125 of the provi- sional duty regulation are confirmed. 4. 5. CONCLUSION ON INJURY (99) Based on the above considerations, it is confirmed that the Community industry has suffered material injury within the meaning of Article 8(1) of the basic Regula- tion. 5. CAUSATION 5. 1. EFFECT OF THE SUBSIDISED IMPORTS (100) The Indian exporting producers and GOI claimed that there was no obvious correlation between the Indian subsidised exports and the injury suffered by the Community industry. They claimed that there has been globally a negative price development for PET film caused by a worldwide surplus of the product coupled with a decrease in the price of the key raw materials. The Indian exporting producers claimed further that PET film prices in the Community have just followed the global negative price trend and the fact that the average price of the Community producers declined in 1996 when the market share of the Indian exporting produ- cers decreased should prove the claim. However, it should be recalled that India is one of the major contri- butors to the worldwide surplus on the PET film market and that according to Eurostat figures India cut its prices on the European market as early as 1996 while the other major exporting countries the USA, Japan and South Korea increased their prices. The fact that they 10. 12. 1999 EN Official Journal of the European Communities L 316/11 lost market share in 1996 does not mean that they were not causing injury to the Community industry through increased price pressure resulting in a 3 % decrease in the average price of the Community industry. Finally, it should be recalled that the injury analysis is made on the basis of the IP and that the previous years are mainly used for setting the trend. the arguments put Thus, exporting producers and GOI must be rejected. forward by the Indian 5. 2. EFFECT OF OTHER FACTORS 5. 2. 2. Fluctuation in the price of raw materials (106) The Indian exporting producers have argued that on the basis of the non-confidential questionnaire replies of the Community industry, one can conclude that the average decline in the raw material prices during the period considered has been more like one third than 17 % as stated in the provisional duty Regulation. This, they claim, is confirmed by the publicly available information on raw material price developments. They repeated their previous argument that a one-third decrease in the price of raw materials permits the Community industry to reduce its prices without a corresponding decrease in profitability and that the imports from India therefore did not trigger the price reductions of the Community industry. (101) The findings made as set out in recitals 134 to 144 of the provisional duty Regulation are hereby confirmed with the following additions (107) 5. 2. 1. Imports from other third countries (102) The Indian exporting producers and GOI maintained their argument about the discriminatory aspect of inves- tigating only imports originating in India while the import volumes from South Korea have increased and the Korean average prices have declined during the period considered. The Indian exporting producers claimed that the increase in the import volumes from South Korea is likely to be even higher than officially reported by Eurostat as the importers of Korean PET film are likely to carryout the customs clearance occa- sionally under CN code 3920 69 00 (other polyesters) just as they have done for the PET film of Indian origin. (103) The Commission maintains the arguments presented in the provisional duty Regulation, namely that the abso- lute and relative increase in South Korea's market share has been smaller than that of India and that the prices of South Korean PET film have systematically stayed at a higher level than the Indian prices. Furthermore, the Korean exporting producers reduced their prices only one year later than the Indians. As for the imports under the CN code for other polyesters the Commission has not received any evidence implying that Korean PET film could have been cleared through customs with that code. (104) Finally, and most importantly, it should be noted that the Commission has seen no reason to initiate an invest- igation against South Korea as no evidence of unfair trade in the form of dumping or subsidised exports being practised by the Korean exporting producers has been brought to their attention. (105) Based on the above, the situation with respect to imports originating in India and South Korea are different, a situation of discrimination cannot have occurred. replies It should be noted that the Commission, on the basis of confidential questionnaire investigated price development of all PET film raw materials as stated in recital 140 of the provisional duty Regulation arriving at it is true that the the decrease of 17 %. Furthermore, non-confidential questionnaire replies of the Community industry concentrated on the price development of dimethyl terephthalate (DMT) or terephthalic acid (PTA). As the price of these raw materials decreased more than the prices of other raw materials, a decrease of 17 % in total cost of raw material is consistent with a higher decrease in the costs of DMT and PTA. Therefore the conclusions of recital 140 of the provisional duty Regu- lation are consistent with the replies to the questionnaire received from the Community industry and are therefore confirmed. 5. 2. 3. General difficulties in the polyester sector (108) The Indian exporting producers submitted that the decreasing prices of biaxially orientated polypropylene (BOPP) film would have a direct effect on PET film prices in the packaging sector as the products are interchange- able from a PET film user's perspective. Therefore, they claimed that the prices would have in any case have decreased with or without the increased imports of PET film into the Community. (109) The Commission had to reject this argument as no evidence to support the claim has been brought forward. 5. 3. CONCLUSION ON CAUSATION (110) In view of the above, the conclusion of recital 145 of the provisional duty Regulation is confirmed. L 316/12 EN Official Journal of the European Communities 10. 12. 1999 6. COMMUNITY INTEREST the Indian exporting producers from the Community market. The duties will only remedy the effect of an illegal, injurious subsidisation. 6. 1. PRELIMINARY REMARK (111) No new facts or arguments were submitted by any party with regard to the interest of the Community industry, other Community producers or importers of PET film. 6. 3. CONCLUSION ON COMMUNITY INTEREST (114) In examining the various interests involved and all the above aspects, the Commission can confirm that there are no compelling reasons not to take action against the imports in question. The findings of the provisional duty Regulation are therefore confirmed, notably the conclusions that the impact of measures on those groups would either be beneficial (Community industry and non-captive other Community producers), neutral (captive producers) or at most negative to a limited extend (importers). 7. DEFINITIVE DUTY (115) On the basis of the conclusions on subsidisation, injury, causal link and Community interest, the Commission considers it necessary to adopt definitive countervailing measures. 6. 2. INTEREST OF USERS OF THE PRODUCT CONCERNED 7. 1. INJURY ELIMINATION LEVEL (112) As mentioned in recital 2, the Commission received comments from two users of the product under consid- eration after the disclosure of the finding having led to provisional measures. In the submissions of the users it was claimed that contrary to the provisional findings, PET film is an important raw material cost factor for them and that production of downstream products based on PET film accounts for an important proportion of their total production. They claimed further that the price increases of the Community industry would make it difficult for them to compete on the downstream market against imports from South Korea, People's Republic of China and the USA. It was claimed further that there have been occasions when the Community industry has refused to deliver certain quantities of PET film indicating the existence of a lack of capacity. The Community industry was also alleged to have refused to develop a non-standard film for the specific needs of one of the users where an Indian producer has agreed to do so. Therefore, they claim that it is in the interest of the users to maintain an alternative source of PET film originating in India. (113) The Commission maintains the arguments and conclu- sions presented in recital 153 of the provisional duty Regulation as far as the overall share of PET film out of the total production costs of users overall and the proportion overall of PET film based downstream of the users' total production are concerned. As the analysis concerned reflects an overall analysis, there can be indi- vidual cases in which PET film may be a crucial raw material for a user. This, however, does not alter the average overall results of the investigation. Furthermore, the investigation has shown that even for certain users for whom PET film is an important cost factor, the imports of PET film originating in India had a minor share in their total purchases of PET film. Furthermore, the worries of the users concerning the disappearance of an alternative source of imports in case of capacity shortage or a need to develop a new film type are unfounded as the countervailing duties will not exclude (116) The Community industry suggested that a higher minimum profit margin than 6 % (set by the Commis- sion in recital 156 of the provisional duty Regulation) was necessary. However, it is not important to define a conclusive percentage in this case as, even on the lower figure used by the Commission, the injury margin is greater than the subsidy margin. The Indian exporting producers made requests for adjustments for level of trade and suggested a correction in the calculation method of the underselling margins required to deter- mine the injury elimination level. In addition, MTZ requested an adjustment for quality differences. As set out in recitals 92 and 93, these requests had to be denied. 7. 2. FORM AND LEVEL OF DUTY (117) Changes from the provisional determination of the amount of countervailable subsidies have been made where appropriate. The rate of definitive countervailing duty is accordingly lower than the level of provisional duty for all of the cooperating Indian exporting produ- cers. (118) In accordance with Article 15(1) of the basic Regulation, the countervailing duty rate should correspond to the subsidy margin, unless the injury margin is lower. The following rates of duty therefore apply for the cooper- ating producers: Ester Industries Ltd Flex Industries Ltd Garware Polyester Ltd India Polyfilms Ltd Jindal Polyester Ltd MTZ Polyesters Ltd Polyplex Corporation Ltd 12,0 % 12,5 % 3,8 % 7,0 % 7,0 % 8,7 % 19,1 %. 10. 12. 1999 EN Official Journal of the European Communities L 316/13 (119) Given the high level of cooperation, which covered more than 80 % of imports into the Community of the product concerned originating in India, it was consid- ered appropriate to establish the duty rate for non-coop- erating companies at the same rate as the highest rate that has been established for the cooperating companies, i. e. 19,1 %. This level will ensure that no bonus is granted for non cooperation and that duty evasion will be minimised. (120) Recitals 159 and 160 of the provisional duty Regulation are confirmed. 8. COLLECTION OF THE PROVISIONAL DUTY (121) In view of the magnitude of the countervailable subsi- dies found for the exporting producers and in light of the seriousness of the injury caused to the Community industry, it is considered necessary that the amounts secured by way of provisional countervailing duty under Regulation (EC) No 1810/1999 be definitively collected to the extent of the amount of definitive duties imposed. 9. PROPOSALS FOR UNDERTAKINGS (122) Finally, it should be noted that the Commission services also received proposals for price undertakings from five Indian exporting companies. The Commission services investigated the said proposals and concluded that they cannot be sufficiently monitored or managed due to the Produced by Ester Industries Ltd 75-76, Amrit Nagar, Behind N. D. S. E. Part-1, New Delhi — 110 003, India Flex Industries Ltd A-1, Sector-60, Noida — 201 301 (U. P. ), India Garware Polyester Ltd 50-A Swami Nityanand Marg, Vile Parle (East), Mumbai — 400 057, India India Polyfilms Ltd 112, Indra Prakash Building 21, Barakhamba Road, New Delhi — 110 001, India Jindal Polyester Ltd 115-117, Indra Prakash Building 21, Barakhamba Road, New Delhi — 110 001, India MTZ Polyesters Ltd Sarnath Centre, Upvan Area, Upper Govind Nagar, Malad (E), Mumbai — 400 097, India complexity of the product: about 160 minimum prices would be required to cover all Indian product groupings and there were no guarantees that the suggested organ- isation for monitoring the undertakings, the Export Inspection Agency of India, has the mandate or the technical means to carry out such a detailed control. Therefore, the Commission services had to reject the received proposals for undertakings, HAS ADOPTED THIS REGULATION: Article 1 ex 3920 62 19 1. A definitive countervailing duty is hereby imposed on imports of polyethylene terephthalate (PET) film falling within CN 3920 62 19*10, (TARIC codes 3920 62 19*15, 3920 62 19*25, 3920 62 19*30, 3920 62 19*35, 3920 62 19*40, 3920 62 19*45, 3920 62 19*50, 3920 62 19*55, 3920 62 19*60, 3920 62 19*65, 3920 62 19*70, 3920 62 19*75, 3920 62 19*80, 3920 62 19*81, 3920 62 19*85, 3920 62 19*87, 3920 62 19*89, 3920 62 19*91) and ex 3920 62 90 (TARIC codes 3920 62 90*30, 3920 62 90*91), originating in India. codes The rate of duty applicable to the net free-at-Community- 2. frontier price, before duty, shall be as follows: Rate of duty (%) TARIC additional code 12,0 % A026 12,5 % A027 3,8 % A028 7,0 % A029 7,0 % A030 8,7 % A031 L 316/14 EN Official Journal of the European Communities 10. 12. 1999 Produced by Polyplex Corporation Ltd 2 Ring Road, Kilokri, Opposite Maharani Bagh, New Delhi — 110 014, India Rate of duty (%) TARIC additional code 19,1 % A032 All other Indian companies 19,1 % A999 3. Unless otherwise specified, the provisions in force concerning customs duties shall apply. The amount secured by way of provisional countervailing duty pursuant to Regulation (EC) No 1810/1999 shall be definitively collected at the duty rate definitively imposed. Amounts secured in excess of the definitive rate of countervailing duty shall be released. Article 2 This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities. Article 3 This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 6 December 1999. For the Council The President T. HALONEN