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Customs Tariff (Identification, Assessment And Collection
Of Countervailing Duty On Subsidized Articles And For
Determination Of Injury) Rules, 1995
1. Short title and commencement.- (1) The Rule may be called
Customs Tariff (Identification, assessment and collection of
countervailing duty on subsidies articles and for determination
injury) Amendment ) Rules 2006.
(2) They shall
come into force on the date of their publication in the
Official Gazette.
2. Definitions.- In these rules, unless the context otherwise
requires, -
(a) "Act" means the
Customs Tariff Act,1975 (51 of 1975);
(b)
"domestic industry" means the domestic producers as a
whole of the like article or domestic producers whose
collective output of the said article constitutes a major
proportion of the total domestic production of that article,
except when such producers are related to the exporters or
importers of the alleged subsidised article, or are themselves
importers thereof, in which case such producers shall be deemed
not to form part of domestic industry:
Provided
that in exceptional circumstances referred to in sub-rule (3)
of rule 13, the domestic industry in relation to the article in
question shall be deemed to comprise two or more competitive
markets and the producers within each of such market be deemed
as a separate industry if, -
(i) the producers within such market sell all or almost all of
their production of the article in question in that market,
and
(ii) the demand in the market is not in
any substantial degree supplied by producers of the said
article located elsewhere in the territory;
(c) "interested party" includes -
(i) an exporter or foreign producer or the importer of an
article subject to investigation for being subsidised or a
trade or business association a majority of the members of
which are producers, exporters or importers of such an
article; and
(ii) a producer of the like
article in India or a trade and business association a
majority of the members of which produce the like article in
India;
(d) "provisional duty" means a countervailing
duty imposed under sub-section (2) of section 9A of the Act;
(e) "specified country" means a country or
territory which includes the country or terriotry with which
the Government of India has an agreement for giving it the most
favoured nation treatment;
(f) all words and
expressions used in these rules, but not defined, shall have
the meaning respectively assigned to them in the Act.
3. Appointment of designated authority.- (1) The Central
Government may, by notification in the Official Gazette ,
appoint a person not below the rank of a Joint Secretary to the
Government of India or such other person as that Government may
think fit as the designated authority for purposes of these
rules.
(2) The Central Government may provide
to the designated authority the services of such other persons
and such other facilities as it deems fit.
4. Duties of the designated authority.- It shall be the duty of
the designated authority in accordance with these rules - (a)
to investigate the existence, degree and effect of any subsidy
in relation to the import of an article;
(b) to
identify the article liable for countervailing duty;
(c) to submit its findings, provisional or otherwise to the
Central Government as to -
(i) the nature and amount of subsidy in relation to an article
under investigation.
(ii) the injury or threat
of injury to an industry established in India or material
retardation to the establishment of an industry in India
consequent upon the import of such articles from the specified
countries.
(d) to recommend the amount of countervailing duty,
which if levied would be adequate to remove the injury to the
domestic industry and the date of commencement of such duty;
and
(e) to review the need for continuance of
countervailing duty.
5. Decision as to country of origin.- In cases where articles are
not imported directly from the country of origin but are
imported from an intermediate country, the provisions of these
rules shall be fully applicable and any such transaction shall,
for the purpose of these rules be regarded as having taken
place between the country of origin and the country of
importation.
6. Initiation of investigation.- (1) Except as provided in
sub-rule (4) the designated authority shall initiate an
investigation to determine the existence, degree and effect of
alleged subsidy only upon receipt of a written application by
or on behalf of the domestic industry.
(2) An
application under sub-rule (1) shall be in the form as may be
specified by the designated authority in this behalf and the
application shall be supported by evidence of -
(a) subsidy and, if possible, its amount,
(b) injury
where applicable, and
(c) where applicable, a casual
link between such subsidized imports and alleged injury.
(3) The designated authority shall not initiate an
investigation pursuant to an application made under sub-rule
(1) unless -
(a) it determines, on the basis of an examination of the
degree of support for, or opposition to the application
expressed by domestic producers of the like article, that the
application has been made by or on behalf of the domestic
industry:
Provided that no investigation shall
be initiated if domestic producers expressly supporting the
application account for less than twenty five per cent of the
total production of the like product by the domestic industry,
and
(b) it examines the accuracy and adequacy
of the evidence provided in the application and satisfies
itself that there is sufficient evidence regarding -
(i) subsidy,
(ii) injury, where applicable; and
(iii) where applicable, a casual link between such subsidized
imports and the alleged injury, to justify the initiation of
an investigation.
Explanation.
- For the purpose of this rule, the application shall be
considered to have been made "by or on behalf of
domestic industry" if it is supported by those domestic
producers whose collective output constitutes more than fifty
per cent of the total production of the like article produced
by that portion of the domestic industry expressing either
support for or opposition as the case may be, to the
application.
(4) Notwithstanding anything contained in sub-rule (1), the
designated authority may initiate an investigation suo motu, if
it is satisfied from the information received from the
Commissioner of Customs appointed under the Customs Act, 1962
(52 of 1962) or any other source that sufficient evidence
exists as to the existence of the circumstances referred to in
sub-clause (b) of sub-rule (3).
(5) The
designated authority shall notify the government of the
exporting country before proceeding to initiate an
investigation.
7. Principles governing investigations.- (1) The designated
authority shall, after it has decided to initiate investigation
to determine the existence, degree and effect of any alleged
subsidization of any article, issue a public notice notifying
its decision. Public notice regarding initiation of
investigation shall, inter alia, contain adequate information
on the following:
(i) the name of the exporting countries and the article
involved;
(ii) the date of initiation of the
investigation;
(iii) a description of the
subsidy practice or practices to be investigated;
(iv) a summary of the factors on which the allegation of
injury is based;
(v) the address to which
representations by interested countries and interested parties
should be directed; and
(vi) the time-limits
allowed to interested countries and interested parties for
making their views known.
(2) A copy of the public notice shall be
forwarded by the designated authority to the known exporters of
the article alleged to have been subsidized, the government of
the exporting country concerned and other interested parties.
(3) The designated authority shall also provide a copy
of the application referred to in sub-rule (1) of rule 6 to -
(i) the known exporters or the concerned trade association
where the number of exporters is large, and
(ii) the government of the exporting country :
Provided that the designated authority shall also make
available a copy of the application, upon request in writing,
to any other interested party.
(4) The designated authority may issue a notice
calling for any information in such form as may be specified by
it from the exporters, foreign producers and governments of
interested countries and such information shall be furnished by
such persons in writing within thirty days from the date of
receipt of the notice or within such extended period as the
designated authority may allow on sufficient cause being shown.
Explanation.- For the purpose
of this sub-rule the public notice and other documents shall be
deemed to have been received one week from the date on which
these documents were sent by the designated authority or
transmitted to the appropriate diplomatic representative of the
exporting country.
(5) The designated authority
shall also provide opportunity to the industrial users of the
article under investigation, and to representative consumer
organisations in cases where the article is commonly sold at
retail level, to furnish information which is relevant to the
investigation regarding subsidization and where applicable
injury and casuality.
(6) The designated
authority may allow an interested country or an interested
party or its representative to present information relevant to
the investigation orally also, but such oral information shall
be taken into consideration only when it is subsequently
reproduced in writing.
(7) The designated
authority shall make available the evidence presented by one
party to other interested parties participating in the
investigation.
(8) In a case where an
interested party refuses access to, or otherwise does not
provide necessary information within a reasonable period, or
significantly impedes the investigation, the designated
authority may record its findings on the basis of facts
available to it and make such recommendations to the Central
Government as it deems fit under such circumstances.
8. Confidential informations.- (1) Notwithstanding anything
contained in sub-rule (1), (2), (3) and (7) of rule 7, sub-rule
(2) of rule 14, sub-rule (4) of rule 17 and sub-rule (3) of
rule 19 copies of applications received under sub-rule (1) of
rule 6 or any other information provided to the designated
authority on a confidential basis by any party in the course of
investigation, shall, upon the designated authority being
satisfied as to its confidentiality, be treated as such by it
and no such information shall be disclosed to any other party
without specific authorisation of the party providing such
information.
(2) The designated authority may
require the parties providing information on confidential basis
to furnish non-confidential summary thereof in sufficient
details to permit a reasonable understanding of the substance
of the confidential information and if, in the opinion of a
party providing such information, such information is not
susceptible of summary, such party may submit to the designated
authority a statement of reasons why summarisation is not
possible.
(3) Notwithstanding anything
contained in sub-rule (2), if the designated authority, is
satisfied that the request for confidentiality is not warranted
or the supplier of the information is either unwilling to make
the information public or to authorise its disclosure in
generalised or summary form, it may disregard such information.
9. Accuracy of the information.- Except in cases referred to in
sub-rule (8) of rule 7 the designated authority shall during
the course of investigation satisfy itself as to the accuracy
of the information supplied by the interested parties upon
which its findings are based.
10. Investigation in the territory of other specified countries.-
(1) The designated authority may carry out investigations in
the territories of other countries, in order to verify the
information provided or to obtain further details :
Provided that the designated authority notifies to such country
in advance and such country does not object to such
investigation.
(2) The designated authority may
also carry out investigations at the premises of any commercial
organisation and may examine its records if such organisation
agrees and if the country in whose territory the said
commercial organisation is situated, is notified and has not
raised any objection for the conduct of such investigation.
11. Nature of subsidy.- (1) The designated authority while
determining the subsidy shall ascertain as to whether the
subsidy under investigation -
(a) relates to export performance including those illustrated
in Annexure III to these rules, or;
(b)
relates to the use of domestic goods over imported goods in
the export article, or
(c) it has been
conferred on a limited number of persons, engaged in
manufacturing, producing or exporting the article unless such
a subsidy is for -
(i) research activities conducted by or on behalf of persons
engaged in the manufacture, production or export; or
(ii) assistance to disadvantaged regions within the
territory of the exporting country; or
(iii)
assistance to promote adaptation of existing facilities to
new environmental requirements:
OMITTED
Explanation.- (1) For the purposes of
sub-clause (i) of clause (c) the term "subsidy for
research activity" means assistance for research
activities conducted by commercial organisations or by higher
education or research establishments on a contract basis with
the commercial organisations if the assistance covers not more
than seventy five per cent of the costs of industrial research
or fifty per cent of the costs of pre-competitive development
activity and provided that such assistance is limited
exclusively to -
(i) costs of personnel (researchers, technicians and other
supporting staff employed exclusively in the research
activity);
(ii) costs of instruments,
equipment, land and buildings used exclusively and permanently
(except when disposed of on a commercial basis) for the
research activity;
(iii) costs of consultancy
and equivalent services used exclusively for the research
activity, including bought in research, technical knowledge,
patents, etc.;
(iv) additional overhead costs
incurred directly as a result of the research activity; and
(v) other running costs (such as those of materials,
supplies and the like), incurred directly as a result of the
research activity.
(2) For the purposes of sub-clause (ii) of clause (c), the term
"subsidy for assistance to disadvantaged regions"
means assistance to disadvantaged regions within the territory
of the exporting country given pursuant to a general framework
of regional development and such subsidy has not been conferred
on limited number of enterprises within the eligible region:
Provided that -
(a) each disadvantaged
region must be a clearly designated contiguous geographical
area with a definable economic and administrative identity;
(b) the region is considered as disadvantaged on the
basis of neutral and objective criteria, indicating that the
region"s difficulties arise out of more than temporary
circumstances; such criteria must be clearly spelled out in
law, regulation, or other official document, so as to be
capable of verification;
(c) the criteria shall
include a measurement of economic development which shall be
based on at least one of the following factors -
(i) one of either income per capita or household income per
capita, or Gross Domestic Product per capita, which must not be
above eighty five per cent of the average for the territory
concerned;
(ii) unemployment rate, which must
be at least one hundred and ten per cent of the average for the
territory concerned, as measured over a three-year period; such
measurement, however, may be a composite one and may include
other factors.
(3) For the purposes of
sub-clause (iii) of clause (c), "subsidy for assistance to
promote adaptation of existing facilities to new environmental
requirements" means assistance to promote adaptation of
existing facilities to new environmental requirements imposed
by law and/or regulations which result in greater constraints
and financial burden on commercial organizations :
Provided that the assistance -
(i) is a
one-time non-recurring measure; and
(ii) is
limited to twenty per cent of the cost of adaptation; and
(iii) does not cover the cost of replacing and
operating the assisted investment, which must be fully borne by
commercial organizations; and (iv) is directly linked to and
proportionate to a commercial organisation"s planned reduction
of nuisances and pollution, and does not cover any
manufacturing cost savings which may be achieved; and
(v) is available to all firms which can adopt the new equipment
and/or production processes.
(3) The designated
authority while determining the subsidy of a kind as referred
to in sub-clause (c) to sub-rule (1) shall take into account,
inter alia the principles laid down in Annexure II to these
rules.
12. Calculation of the amount of the countervailable subsidy (1) For the purposes of these rules, 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 subsidization
(2) As regards the calculation of benefit to the recipient, the
following factors shall apply, namely:-
(a)
government provision of equity capital shall not be considered
to confer a benefit, unless the investment can be regarded as
inconsistent with the usual investment practice (including for
the provision of risk capital) of private investors in the
territory of the country of origin or export;
(b) a loan by a government shall not be considered to confer a
benefit, unless there is a difference between the amount that
the firm receiving the loan pays on the government loan and the
amount that the firm would pay for a comparable commercial loan
which the firm could actually obtain from the market and in
that event the benefit shall be the difference between these
two amounts;
(c) a loan guarantee by a
government shall not be considered to confer a benefit, unless
there is a difference between the amount that the firm
receiving the guarantee pays on a loan guaranteed by the
government and the amount that the firm would pay for a
comparable commercial loan in the absence of the government
guarantee and in such case the benefit shall be the difference
between these two amounts, adjusted for any differences in
fees;
(d) the provision of goods or services or
purchase of goods by a government shall not be considered to
confer a benefit, unless the provision is made for less than
adequate remuneration or the purchase is made for more than
adequate remuneration; whereas, the adequacy of remuneration
shall be determined in relation to prevailing market conditions
for the product or service in question in the country of
provision or purchase (including price, quality, availability,
marketability, transportation and other conditions of purchase
or sale).
(3) The amount of the countervailable
subsidies shall be determined per unit of the subsidised
product exported to India and while establishing this amount
the following elements may be deducted from the total subsidy:
(a) any application fee, or other costs
necessarily incurred in order to qualify for, or to obtain, the
subsidy;
(b) export taxes, duties or other
charges levied on the export of the product to India
specifically intended to offset the subsidy and in cases where
an interested party claims a deduction, he must prove that the
claim is justified.
(4) Where the subsidy is
not granted by reference to the quantities manufactured,
produced, exported or transported, the amount of
countervailable subsidy shall be determined by allocating the
value of the total subsidy, as appropriate, over the level of
production, sales or exports of the products concerned during
the investigation period for subsidisation.
(5)
Where the subsidy can be linked to the acquisition or future
acquisition of fixed assets, the amount of the countervailable
subsidy shall be calculated by spreading the subsidy across a
period which reflects the normal depreciation of such assets in
the industry concerned and the amount so calculated which is
attributable to the investigation period, including that which
derives from fixed assets acquired before this period, shall be
allocated as described in sub-rule (4) and, where the assets
are non-depreciating, the subsidy shall be valued as an
interest-free loan, and be treated in accordance with clause
(b) of sub-rule 2 (b) above.
(6) Where a
subsidy cannot be linked to the acquisition of fixed assets,
the amount of the benefit received during the investigation
period shall in principle be attributed to this period, and
allocated as described in sub-rule (4), unless special
circumstances justify its attribution over a different period.
(7) The designated authority while calculating
the amount of subsidy in countervailing duty investigation
shall take into account, inter-alia, the guidelines laid down
in Annexure IV to these rules.
13. Determination of injury.- (1) In the case of imports from
specified countries, the designated authority shall give a
further finding that the import of such article into India
causes or threatens material injury to any industry established
in India, or materially retards the establishment of an
industry in India.
(2) Except when a finding of
injury is made under sub-rule (3), the designated authority
shall determine the injury, threat of injury, material
retardation to the establishment of an industry and the casual
link between the subsidised import and the injury, taking into
account inter alia, the principle laid down in Annexure I to
the rule.
(3) The designated authority may, in
exceptional cases, give a finding as to the existence of injury
even where a substantial portion of the domestic industry is
not injured if -
(i) there is a concentration
of subsidised imports into an isolated market, and
(ii) the subsidised imports are causing injury to the producers
of almost all of the production within such market.
14. Preliminary findings.- (1) The designated authority shall
proceed expeditiously with the conduct of the investigation and
shall, in appropriate cases, record a preliminary finding
regarding existence of a subsidy and its nature and in respect
of imports from specified countries, it shall also record its
preliminary finding regarding injury to the domestic industry
and such finding shall contain sufficiently detailed
explanation for the preliminary determination on the existence
of a subsidy and injury and shall refer to the matter of fact
and law which have led to arguments being accepted or rejected.
Such finding shall contain -
(i) the names of
the suppliers or, when this is impracticable, the supplying
countries involved;
(ii) a description of the
product which is sufficient for customs purposes;
(iii) the amount of subsidy established and the basis on which
the existence of a subsidy has been determined;
(iv) considerations relevant to the injury determination; and
(v) the main reasons leading to the determination.
(2) The designated authority shall issue a public
notice recording its preliminary findings.
15.Levy of provisional duty.- The Central Government may, in
accordance with the provisions of sub-section (2) of section 9
of the Act, impose a provisional duty on the basis of the
preliminary findings recorded by the designated authority:
Provided that no such duty shall be imposed before the
expiry of sixty days from the date of issue of the public
notice by the designated authority regarding its decision to
initiate investigations :
Provided further that
such duty shall remain in force for a period not exceeding four
months.
16. Termination of investigation.- (1) The designated authority
shall, by issue of a public notice terminate an investigation
immediately if -
(a) it receives a request in
writing for doing so from or on behalf of the domestic industry
affected, at whose instance the investigation was initiated;
(b) it is satisfied in the course of an investigation,
that there is no sufficient evidence either for subsidisation
or, where applicable, injury to justify continuation of the
investigation;
(c) it determines that the
amount of subsidy is less than one per cent ad valorem or in
the case of a product originating from a developing country the
amount of subsidy is less than two per cent.
(d) it determines that the volume of the subsidized imports,
actual or potential or injury where applicable, is negligible
or in the case of a product originating in a developing country
the volume of the subsidized imports represents less than four
per cent of the total imports of the like product into India,
unless imports from developing countries whose individual
shares of total imports represent less than four per cent
collectively account for more than nine per cent of the total
imports of the like product into India.
17. Suspension or termination of investigation on acceptance of
price undertaking.- (1) The designated authority may suspend
or terminate an investigation, if -
(a) the
government of the exporting country -
(i)
furnishes an undertaking that it would withdraw the subsidy.
(ii) in case of specified countries, undertakes to
limit the quantum of subsidy within reasonable limit, or to
take other suitable measures to neutralise the effect of such
subsidy, provided that the designated authority is satisfied
that the injurious effect of the subsidy is eliminated, or
(b) in case of specified countries the exporters
concerned agree to revise their prices so that injurious effect
of subsidy is eliminated and the designated authority is
satisfied that the injurious effect of the subsidy is
eliminated:
Provided that increase in price as
a result of this clause is not higher than what is necessary to
eliminate the amount of subsidy :
Provided
further that the designated authority shall complete the
investigation and record its finding, if the Central Government
so desires or the government of the exporting country so
decides.
(2) No undertaking as regards price
increase under sub-rule (1) shall be accepted unless the
designated authority had made preliminary determination of
subsidization and the injury:
Provided that an
undertaking from an exporter shall be accepted only when the
designated authority has also obtained the consent of the
exporting country.
(3) The designated
authority, may also not accept undertakings offered by any
country or any exporter, if it considers the acceptance of such
undertaking as impracticable or as unacceptable for any other
reason.
(4) The designated authority shall
intimate the acceptance of an undertaking and suspension or
termination of investigation to the Central Government and also
issue a public notice in this regard. The public notice shall,
contain inter alia, the non-confidential part of the
undertaking.
(5) In cases where an undertaking
has been accepted by the designated authority the Central
Government may not impose a duty under sub-section (2) of
section 9 of the Act for such a period the undertaking
acceptable to the designated authority remains valid.
(6) Where the designated authority has accepted any undertaking
under sub-rule (1), it may require the government of the
exporting country, or the exporter from whom such undertaking
has been accepted to provide from time to time information
relevant to the fulfilment of the undertaking and to permit
verification of relevant data:
Provided that in
case of any violation of any undertaking, the designated
authority will intimate the Central Government and complete the
investigation expeditiously.
(7) The designated
authority shall suo motu or on the basis of any request
received from exporters or importers of the article in question
or any other interested person review from time to time the
need for the continuance of any undertaking given earlier.
18. Disclosure of information.- The designated authority, shall,
before giving its final findings, inform all interested parties
and interested countries of the essential facts under
consideration which form the basis of its decision and permit
the interested parties to defend their interest.
19. Final findings.- (1) The designated authority shall, within
one year from the date of initiation of an investigation
determine as to whether or not the article under investigation
is being subsidized and submit to the Central Government its
final finding, as to -
(a) (i) the nature of
subsidy being granted in respect of the article under
investigation and the quantum of such subsidy;
(ii) whether imports of such articles into India in the case of
imports from specified countries, cause or threaten material
injury to an industry established in India or materially
retards the establishment of any industry in India and a casual
link between the subsidized imports and such injury; and
(iii) Whether a retrospective levy is called for and if
so, the reasons therefor and the date of commencement of such
levy.
(b) its reommendation as to the amount of
duty which if levied, would be adequate to remove the injury to
the domestic industry:
Provided that the
Central Government may in circumstances of exceptional nature
extend further the aforesaid period of one year by six months:
Provided further that in those cases where the
designated authority has suspended the investigation on the
acceptance of a price undertaking as provided in rule 17 and
subsequently resumes the same on violation of the terms of the
said undertaking, the period for which investigation was kept
under suspension shall not be taken into account while
calculating the said period of one year.
(2) The
final finding if affirmative, shall contain all information on
the matter of facts and law and reasons which have led to the
conclusion and shall also contain information regarding -
(i) the names of the suppliers, or, when this is
impractical, the supplying countries involved;
(ii) a description of the product which is sufficient for
customs purposes;
(iii) the amount of subsidy
established and the basis on which the existence of a subsidy
has been determined;
(iv) considerations
relevant to the injury determination; and
(v)
the main reasons leading to the determination.
(3) The designated authority shall issue a public notice
regarding its final findings.
20. Levy of duty.- (1) The Central Government may, within three
months of the date of publication of the final findings by the
designated authority under rule 19, impose, by notification in
the Official Gazette, upon importation into India of the
article covered under the final finding, a countervailing duty
not exceeding the amount of subsidy as determined by the
designated authority under rule 19 :
Provided
that in case of imports from specified countries the amount of
duty shall not exceed the amount which has been found adequate
to remove the injury to the domestic industry.
(2) Notwithstanding anything contained in sub-rule (1) where a
domestic industry has been interpreted according to the proviso
to clause (b) of rule 2, a countervailing duty shall be levied
only after the exporters have been given opportunity to cease
exporting at subsidized prices to the area concerned or
otherwise give an undertaking pursuant to rule 17 and such
undertaking has not been promptly given and in such cases duty
cannot be levied only on the product of specified producers
which supply the area in question.
(3) If the
final finding of the designated authority is negative, that is
contrary to the prima facie evidence on whose basis the
investigation was initiated, the Central Govemment shall within
forty five days of the publication of final findings by the
designated authority under rule 19, withdraw the provisional
duty, imposed if any.
21. Imposition of duty on non-discriminatory basis.- Any
countervailing duty imposed under rule 15 or 20 shall be on a
non-discriminatory basis and applicable to all imports of such
article, if found to be subsidised and where applicable,
causing injury except in the case of imports from those sources
from which undertakings in terms of rule 17 have been accepted.
22. Date of commencement of duty.- (1) The countervailing duty
levied under rules 15 and 20 shall take effect from the date of
publication of the notification in the Official Gazette.
(2) Notwithstanding anything contained in sub-rule (1)
-
(a) where a provisional duty has been levied
and where the designated authority has recorded a finding of
injury or where the designated authority recorded a finding of
threat of injury and a further finding that the subsidised
imports, in the absence of provisional duty would have led to
injury, the countervailing duty may be imposed from the date of
imposition of provisional duty:
(b) in the
circumstances referred to in sub-section (4) of section 9 of
the Act, the countervailing duty may be levied retrospectively
from the date commencing ninety days prior to the imposition of
provisional duty:
Provided that in case of
violation of an undertaking referred to in sub-rule (6) of rule
17, no duty shall be levied retrospectively on imports which
have entered for home consumption before violation of such
terms of the undertaking.
23. Refund of duty.-(1) If the countervailing duty imposed by the
Central Government on the basis of the final findings of the
investigation conducted by the designated authority is higher
than the provisional duty already imposed and collected the
differential shall not be collected from importer.
(2) If the countervailing duty fixed after the conclusions of
the investigation is lower than the provisional duty already
imposed and collected, the differential shall be refunded to
the importer.
(3) If the provisional duty
imposed by the Central Government is withdrawn in accordance
with the provisions of sub-rule (3) of rule 20, the provisional
duty already imposed and collected, if any shall be refunded to
the importer.
24. Review.- (1) The designated authority shall, from time to
time, review the need for continued imposition of the
countervailing duty and shall, if it is satisfied on the basis
of information received by it that there is no justification
for the continued imposition of such duty or additional duty,
recommend to the Central Government for its withdrawal.
(2) Any review initiated under sub-rule (1) shall be
concluded within a period not exceeding 12 months from the date
of initiation of such review.
(3) The
provisions of rules 6, 7,8, 9,10,11,12,13,16,17,18,19,20,22 and
23 shall mutatis mutandis apply in the case of review.
ANNEXURE I
Principles governing the
determination of injury
The designated authority shall take into account
inter alia, the following principles while determining injury :-
1. (1) A determination of injury for purposes of
rule 13 shall be based on positive evidence and involve an
objective examination of both (a) the volume of the subsidized
imports and the effect of the subsidized imports on prices in the
domestic market for like products and (b) the consequent impact
of these imports on the domestic producers of such products.
(2) With regard to the volume of the subsidized imports,
the designated authority shall inter alia consider whether there
has been a significant increase in subsidized imports, either in
absolute terms or relative to production or consumption in India.
(3) With regard to the effect of the subsidized
import on prices, the designated authority shall, consider
whether there has been a significant price undercutting by the
subsidized imports as compared with the price of a like article
in India, or whether the affect of such imports is otherwise to
depress prices to a significant degree or to prevent price
increases, which otherwise would have occurred, to a significant
degree.
(4) Where imports of a product from more
than one country are simultaneously subject to countervailing
duty investigations, the designated authority may cumulatively
assess the effect of such imports only if it determines that (a)
the amount of subsidization established in relation to the
imports from each country is more than one per cent ad valorem
and the volume of imports from each country is not negligible and
(b) a cumulative assessment of the effects of the imports is
appropriate in light of the conditions of competition between the
imported products and the like domestic product.
(5) The designated authority while examining the impact of the
subsidized imports on the domestic industry shall include an
evaluation of all relevant economic factors and indices having a
bearing on the state of the industry, including actual and
potential decline in output, sales, market share, profits,
productivity, return on investments, or utilization of capacity;
factors affecting domestic prices; actual and potential negative
effects on cash flow, inventories, employment, wages, growth,
ability to raise capital investments and, in the case of
agriculture, whether there has been an increased burden on
government support programmes.
2. (1) It must be
demonstrated that the subsidized imports are, through the effects
of subsidies, causing injury. The demonstration of a casual
relationship between the subsidized imports and the injury to the
domestic industry shall be based on an examination of all
relevant evidence before the designated authority. The designated
authority shall also examine any known factors other than the
subsidized imports which at the same time are injuring the
domestic industry, and the injuries caused by these other factors
must not be attributed to the subsidized imports. Factors which
may be relevant in this respect include, inter alia, the volumes
and prices on non-subsidized imports of the product in question,
contraction in demand or changes in the patterns of consumption,
trade restrictive practices of and competition between the
foreign and domestic producers, developments in technology and
the export performance and productivity of the domestic industry.
(2) The effect of the subsidized imports shall be
assessed in relation to the domestic production of the like
product when available data permit the separate identification of
that production on the basis of such criteria as the production
process, producers sales and profits. If such separate
identification of that production is not possible, the effects of
the subsidized imports shall be assessed by the examination of
the production of the narrowest group or range of products, which
includes the like product, for which the necessary information
can be provided.
3. A determination of a threat of
material injury shall be based on facts and not merely on
allegation, conjecture or remote possibility. The change in
circumstances which would create a situation in which the subsidy
would cause injury must be clearly foreseen and imminent. In
making a determination regarding the existence of a threat of
material injury, the designated authority shall consider, inter
alia, such factors as :
(i) nature of the subsidy
or subsidies in question and the trade effects likely to arise
therefrom;
(ii) a significant rate of increase of
subsidized imports into the domestic market indicating the
likelihood of substantially increased importation;
(iii) sufficient freely disposable, or an imminent, substantial
increase in, capacity of the exporter indicating the likelihood
of substantially increased subsidized exports to Indian market,
taking into account the availability of other export markets to
absorb any additional exports;
(iv) whether
imports are entering at prices that will have a significant
depressing or suppressing effect on domestic prices, and would
likely increase demand for further imports; and
(v) inventories of the product being investigated.
ANNEXURE II
Principles for determination
of subsidy which has been conferred on a limited number of
persons as referred to in Rule 11
1. The designated authority in order to determine
as to whether a subsidy has been conferred on a limited number of
persons engaged in the manufacture or production of an article,
shall take the following principles into consideration :-
(a) whether the granting authority or the legislation
pursuant to which the granting authority operates, explicitly
limits access to a subsidy to certain enterprises. However, 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, such subsidy shall not be considered to have been
conferred on a limited number of persons engaged in the
manufacture or production of an article, provided that the
eligibility is automatic and such criteria or conditions are
strictly adhered to and such criteria and conditions have been
clearly spelt out in the law, regulation or other official
document of the granting country or territory and are capable of
verification.
Explanation : For
the purposes of the above para objective criteria or conditions
mean criteria or condition which are neutral, which do not favour
certain enterprises over others, and which are economic in nature
and horizontal in application, such as number of employees or
size of enterprises.
(b) Notwithstanding the
determination that a subsidy is not being granted to a limited
number of enterprises in terms of the provisions contained in
para (a) above, if the designated authority has reason to believe
that the subsidy has in fact been conferred to a limited number
of enterprises, it may consider other factors like (1) use of a
subsidy programme by a limited number of certain enterprises or
predominant use by certain enterprises (2) granting of
disproportionately large amounts of subsidy to certain
enterprises and (3) manner in which discretion has been exercised
by the granting authority in decision to grant a subsidy, for
determination of subsidy. The designated authority, in applying
this clause, shall take into account, the extent of
diversification of economic activities within the jurisdiction of
the granting authority, as well as the length of the time during
which the subsidy programme has been in operation.
(c) A subsidy which is limited to certain persons engaged in the
manufacture or production of an article located within a
designated geographical region within the jurisdiction of the
granting authority shall be considered to have been granting to a
limited number of persons engaged in the manufacture or
production.
ANNEXURE III
PART- 1
ILLUSTRATIVE LIST OF EXPORT SUBSIDIES
(a) The provision by governments of direct subsidies to a
firm or an industry contingent upon export performance.
(b) Currency retention schemes or any similar practices which
involve a bonus on exports.
(c) Internal
transport and freight charges on export shipments, provided or
mandated by governments, on terms more favourable than for
domestic shipments.
(d) The provision by
governments or their agencies either directly or indirectly
through government-mandated schemes, of imported or domestic
products or services for use in the production of exported goods,
on terms or conditions more favourable than for provision of like
or directly competitive products or services for use in the
production of goods for domestic consumption, if (in the case of
products) such terms or conditions are more favourable than those
commercially available on world markets to their exporters.
Explanation: The term "commercially available"
means that the choice between domestic and imported products is
unrestricted and depends only on commercial considerations.
(e) The full or partial exemption remission, or deferral
specifically related to exports, of direct taxes or social
welfare charges paid or payable by industrial or commercial
enterprises.
Explanation: For the purpose of this
paragraph:
(i) the term "direct taxes" shall mean taxes on wages,
profits, interests, rents, royalties, and all other forms of
income, and taxes on the ownership of real property;
(ii) the term "import charges" shall mean tariffs,
duties, and other fiscal charges not elsewhere enumerated in
this note that are levied on imports;
(iii) the
term "indirect taxes" shall mean sales, excise,
turnover, value added, franchise, stamp, transfer, inventory and
equipment taxes, border taxes and all taxes other than direct
taxes and import charges;
(iv)
"Prior-stage" indirect taxes are those levied on goods
or services used directly or indirectly in making the product;
(v) "Cumulative" indirect taxes are
multi-stage taxes levied where there is no mechanism for
subsequent crediting of the tax if the goods or services subject
to tax at one stage of production are used in a succeeding stage
of production;
(vi) "Remission" of
taxes includes the refund or rebate of taxes;
(vii) "Remission or drawback" includes the full or
partial exemption or deferral of import charges.
(f) The allowance of special deductions directly related to
exports or export performance, over and above those granted in
respect to production for domestic consumption, in the
calculation of the base on which direct taxes are charged.
(g) The exemption or remission, in respect of the
production and distribution of exported products, of indirect
taxes in excess of those levied in respect of the production and
distribution of like products when sold for domestic consumption.
(h) The exemption, remission or deferral of
prior-stage cumulative indirect taxes on goods or services used
in the production of exported products in excess of the
exemption, remission or deferral of like prior-stage cumulative
indirect taxes on goods or services used in the production of
like products when sold for domestic consumption; provided,
however, that prior-stage cumulative indirect taxes may be
exempted, remitted or deferred on exported products even when not
exempted, remitted or deferred on like products when sold for
domestic consumption, if the prior-stage cumulative indirect
taxes are levied on inputs that are consumed in the production of
the exported product (making normal allowance for waste) and the
item shall be interpreted in accordance with the guidelines on
consumption of inputs in the production process contained in Part
-2 of this Annexure. This paragraph does not apply to value-added
tax systems and border-tax adjustment in lieu thereof; the
problem of the excessive remission of value-added taxes is
exclusively covered by paragraph (g).
(i) The
remission or drawback of import charges in excess of those levied
on imported inputs that are consumed in the production of the
exported product (making normal allowance for waste); provided,
however, that in particular cases a firm may use a quantity of
home market inputs equal to, and having the same quality and
characteristics as, the imported inputs as a substitute for them
in order to benefit from this provision if the import and the
corresponding export operations both occur within a reasonable
time period, not to exceed two years and the item shall be
interpreted in accordance with the guidelines on consumption of
inputs in the production process contained in Part -2 of this
Annexure and the guidelines in the determination of substitution
drawback systems as export subsidies contained in Part -3 of this
Annexure.
(j) The provision by governments (or
special institutions controlled by governments) of export credit
guarantee or insurance programmes, of insurance or guarantee
programmes against increases in the cost of exported products or
of exchange risk programmes, at premium rates which are
inadequate to cover the long-term operating costs and losses of
the programmes.
(k) The grant by governments (or
special institutions controlled by or acting under the authority
of governments) of export credits at rates below those which they
actually have to pay for the funds so employed (or would have to
pay if they borrowed on international capital markets in order to
obtain funds of the same maturity and other credit terms and
denominated in the same currency as the export credit), or the
payment by them of all or part of the costs incurred by exporters
or financial institutions in obtaining credits, in so far as they
are used to secure a material advantage in the field of export
credit terms.
Provided, that if a country is a
party to an international undertaking on official export credits
to which at least twelve original World Trade organisation
Members are parties as of 1 January 1979 (or a successor
undertaking which has been adopted by those original Members), or
if in practice a country applies the interest rates provisions of
the relevant undertaking, an export credit practice which is in
conformity with those provisions shall not be considered an
export subsidy prohibited by these rules.
(l) Any
other charge on the public account constituting an export subsidy
in the sense of Article XVI of GATT 1994.
PART-2
GUIDELINES ON
CONSUMPTION OF INPUTS IN THE PRODUCTION PROCESS
I
1. Indirect tax rebate schemes can allow for exemption,
remission or deferral of prior-stage cumulative indirect taxes
levied on inputs that are consumed in the production of the
exported product (making normal allowance for waste). Similarly,
drawback schemes can allow for the remission or drawback of
import charges levied on inputs that are consumed in the
production of the exported product (making normal allowance for
waste).
2. The Illustrative List of Export
Subsidies in Part 1 of Annexure III of these rules makes
reference to the term "inputs that are consumed in the
production of the exported product" in paragraphs (h) and
(i). Pursuant to paragraph (h), indirect tax rebate schemes can
constitute an export subsidy to the extent that they result in
exemption, remission or deferral of prior-stage cumulative
indirect taxes in excess of the amount of such taxes actually
levied on inputs that are consumed in the production of the
exported product. Pursuant to paragraph (i), drawback schemes can
constitute an export subsidy to the extent that they result in a
remission or drawback of import charges in excess of those
actually levied on inputs that are consumed in the production of
the exported product. Both paragraphs stipulate that normal
allowance for waste must be made in findings regarding
consumption of inputs in the production of the exported product.
II
1. Inputs consumed in the production process are inputs
physically incorporated, energy, fuels and oil used in the
production process and catalysts which are consumed in the course
of their use to obtain the exported product. In examining whether
inputs are consumed in the production of the exported product, as
part of a countervailing duty investigation pursuant to these
rules, the designated authority should proceed on the following
basis, namely:-
(1) Where it is alleged that an
indirect tax rebate scheme, or a drawback scheme, conveys a
subsidy by reason of over-rebate or excess drawback of indirect
taxes or import charges on inputs consumed in the production of
the exported product, the designated authority should first
determine whether the government of the exporting country has in
place and applies a system or procedure to confirm which inputs
are consumed in the production of the exported product and in
what amounts. Where such a system or procedure is determined to
be applied, the designated authority should then examine the
system or procedure to see whether it is reasonable, effective
for the purpose intended, and based on generally accepted
commercial practices in the country of export. The designated
authority may it necessary if he considers carry out certain
practical tests in order to verify information or to satisfy
themselves that the system or procedure is being effectively
applied.
(2) Where there is no such system or
procedure, where it is not reasonable, or where it is instituted
and considered reasonable but is found not to be applied or not
to be applied effectively, a further examination by the exporting
country based on the actual inputs involved would need to be
carried out in the context of determining whether an excess
payment occurred. If the designated authority considers it
necessary, a further examination would be carried out in
accordance with sub-paragraph 1 above.
2. The
designated authority should treat inputs as physically
incorporated if such inputs are used in the production process
and are physically present in the product exported. An input need
not be present in the final product in the same form in which it
entered the production process.
3. In determining
the amount of a particular input that is consumed in the
production of the exported product, a "normal allowance for
waste" should be taken into account, and such waste should
be treated as consumed in the production of the exported product.
The term "waste" refers to that portion of a given
input which does not serve an independent function in the
production process, is not consumed in the production of the
exported product (for reasons such as inefficiencies) and is not
recovered, used or sold by the same manufacturer.
4. The designated authority's determination of whether the
claimed allowance for waste is "normal" should take
into account the production process, the average experience of
the industry in the country of export, and other technical
factors, as appropriate. The designated authority should bear in
mind that an important question is whether the authorities in the
exporting country have reasonably calculated the amount of waste,
when such an amount is intended to be included in the tax or duty
rebate or remission.
PART-3
GUIDELINES IN THE
DETERMINATION OF SUBSTITUTION
DRAWBACK SYSTEMS AS EXPORT
SUBSIDIES
I
Drawback systems can allow for the refund or drawback of
import charges on inputs which are consumed in the production
process of another product and where the export of this latter
product contains domestic inputs having the same quality and
characteristics as those substituted for the imported inputs.
Pursuant to paragraph (i) of the Illustrative List of Export
Subsidies in Part-1 of Annexure III substitution drawback systems
can constitute an export subsidy to the extent that they result
in an excess drawback of the import charges levied initially on
the imported inputs for which drawback is being claimed.
II
1. In examining any substitution drawback system as part
of a countervailing duty investigation pursuant to these rules,
the designated authority should proceed on the following basis,
namely:-
(i) Paragraph (i) of the Illustrative
List of Export Subsidies of Part -1 of Annexure III stipulates
that home market inputs may be substituted for imported inputs in
the production of a product for export provided such inputs are
equal in quantity to, and have the same quality and
characteristics as, the imported inputs being substituted. The
existence of a verification system or procedure is important
because it enables the government of the exporting country to
ensure and demonstrate that the quantity of inputs for which
drawback is claimed does not exceed the quantity of similar
products exported, in whatever form, and that there is not
drawback of import charges in excess of those originally levied
on the imported inputs in question.
(ii) Where it
is alleged that a substitution drawback system conveys a subsidy,
the designated authority should first proceed to determine
whether the government of the exporting country has in place and
applies a verification system or procedure. Where such a system
or procedure is determined to be applied, the designated
authority should then examine the verification procedures to see
whether they are reasonable, effective for the purpose intended,
and based on generally accepted commercial practices in the
country of export. To the extent that the procedures are
determined to meet this test and are effectively applied, no
subsidy should be presumed to exist. The designated authority
may, if he considers necessary, carry out certain practical tests
in order to verify information or to satisfy themselves that the
verification procedures are being effectively applied.
(iii) Where there are no verification procedures, where they are
not reasonable, or where such procedures are instituted and
considered reasonable but are found not to be actually applied or
not applied effectively, there may be a subsidy. In such cases a
further examination by the exporting country based on the actual
transactions involved would need to be carried out to determine
whether an excess payment occurred. If the investigating
authorities deemed it necessary, a further examination would be
carried out in accordance with sub-paragraph (ii) of Part 3 of
this Annexure.
(iv) The existence of a
substitution drawback provision under which exporters are allowed
to select particular import shipments on which drawback is
claimed should not of itself be considered to convey a subsidy.
(v) An excess drawback of import charges in the sense of
paragraph (i) would be deemed to exist where governments paid
interest on any monies refunded under their drawback schemes, to
the extent of the interest actually paid or payable.
ANNEXURE IV
GUIDELINES FOR THE
CALCULATION OF THE AMOUNT OF SUBSIDY IN
COUNTERVAILING
DUTY INVESTIGATIONS
A. CALCULATION OF SUBSIDY PER UNIT/AD
VALOREM The calculation of the benefit shall reflect the
amount of subsidy found to exist during the investigation period
and not simply the face value of the amount at the time it is
transferred to the recipient or foregone by the government. Thus,
the face value of the amount of the subsidy should be transformed
into the value prevailing during the investigation period through
the application of the normal commercial interest rate.
The objective of the calculation should be to arrive at the
amount of subsidy per unit of production during the investigation
period. In the case of consumer products, such as television
sets, the appropriate unit would be each individual item. If bulk
products, such as fertilizers or chemicals, are involved, it
would be appropriate to calculate the subsidy, that is to say,
per tonne, or other appropriate unit of measurement. The per unit
subsidy can be converted into an ad valorem rate by expressing
the per unit subsidy as a percentage of export price. This may be
used to establish whether the subsidy amount is de minimis, since
this is expressed ad valorem (1 % for imports from developed
countries; 2 % for developing countries). In certain
circumstances, it may also be considered to be appropriate to
express the countervailing duty on an ad valorem basis.
B. CALCULATION OF CERTAIN TYPES OF
SUBSIDY (a) Grants
In the case
of a grant (or equivalent) where none of the money is repaid, the
value of the subsidy should be the amount of the grant corrected
for any differences between the point in time of its receipt and
the investigation period, i.e. the period in which the production
or sales are allocated. Therefore, if the grant is expensed
during the investigation period, (that is, its amount is entirely
allocated to production or sales during this period), the
interest that would have accrued during that period should
normally be added. If however, the grant is allocated over a
longer period than the investigation period, the interest may be
added as described in section C (a)(ii).
Any lump
sum of revenue transferred or foregone (e.g. income tax or duty
exemption, rebates, money saved from preferential provision of
goods and services or gained from excessive prices for the
purchase of goods) should be considered as being equivalent to a
grant.
(i) Direct transfer of funds
The amount of subsidy should be the amount received by the
company concerned (a subsidy to cover operating losses would fall
into this category).
(ii) Tax exemptions
The amount of subsidy should be the amount of tax that
would have been payable by the recipient company at the standard
applicable tax rate during the investigation period.
(iii) Tax reductions
The amount of subsidy should
be the difference between the amount of tax actually paid by the
recipient company during the investigation period and the amount
that would have been paid at the normal rate of tax.
(The same method should be applied to all other exemptions and
reduction of obligation, e.g. import duties, social security
contributions, redundancy payments)
(iv)
Accelerated depreciation
Accelerated depreciation
of assets under a government agreed programme should be
considered as a tax reduction. The amount of subsidy should be
the difference between the amount of tax that would have been
paid during the investigation period under the normal
depreciation schedule for the assets concerned, and the amount
actually paid under accelerated depreciation. To the extent that
the accelerated depreciation results in a tax saving for the
company concerned during the investigation period, there is a
benefit.
(v) Interest rate subsidies
In the case of an interest rate subsidy, the amount of subsidy
should be the amount of interest saved by the recipient company
during the investigation period.
(b)
Loans
(1) Basic methodology
(i) In the
case of a loan from the government (where repayment does take
place) the subsidy should be the difference between the amount of
interest paid on the government loan and the interest normally
payable on a comparable commercial loan during the investigation
period.
(ii) A comparable commercial loan would
normally be a loan of a similar amount with a similar repayment
period obtainable by the recipient from a representative bank
operating on the domestic market.
(iii) In this
regard, the commercial interest rate should preferably be
established on the basis of the rate actually paid by the company
concerned on comparable loans from banks. If this is not
possible, the investigation should consider the interest paid on
comparable loans to companies in a similar financial situation in
the same sector of the economy, or, if information on such loans
is not available, to any comparable loan made to companies in a
similar financial situation in any sector of the economy.
(iv) If there are no comparable commercial lending
practices on the domestic market of the exporting country, the
interest rate on a commercial loan may be estimated with
reference to indicators of the economic situation prevailing at
the time, (notably the inflation rate) and the situation of the
company concerned.
(v) If all or part of a loan
is forgiven or defaulted on, the amount not re-paid should be
treated as a grant depending on whether there was a guarantee.
(2) Specific cases
(i) It should be noted
that tax deferrals, or the deferral of any other financial
obligation, should be considered as interest-free loans and the
amount of subsidy calculated as above.
(ii) In the
case of reimbursable grants, these should also be considered as
interest free loans until they are reimbursed. If they are not
reimbursed, in whole or in part, they should be considered as
grants rather than interest-free loans from the date on which
non-reimbursement is established. From this date, the normal
grant methodology should apply. In particular, if the grant is to
be allocated over time, such allocation would start on the
established date of non-reimbursement. The amount of subsidy
should be the amount of the grant, minus any repayments.
(iii) The same approach would apply to
contingent-liability loans. To the extent that such loans are
given at a preferential rate of interest, the subsidy should be
calculated as in paragraph (i). However, if it were to be
determined that the loan would not be repaid, it should be
treated as a grant from the date on which non-repayment was
established. The amount of subsidy should be the amount of the
loan, less any repayments.
(c)
Loan guarantees
(i) In general, a loan
guarantee, by eliminating to some extent the risk of default by
the borrower to the lender, will normally enable a firm to borrow
more cheaply than would otherwise be the case. If the government
provides the guarantee, the fact that loans are obtained at a
lower interest rate than would otherwise be the case does not
mean there is a subsidy, provided that the guarantee is financed
on a commercial basis, since the financing of such a viable
guarantee by the company would be assumed to offset any benefit
of a preferential interest rate.
(ii) In this
situation, it is considered that there is no benefit to the
recipient if the fee which it pays to the guarantee programme is
sufficient to enable the programme to operate on a commercial
basis, i.e. to cover all its costs and to earn a reasonable
profit margin. In such a situation, it is presumed that the fee
covers the risk element involved in obtaining a lower interest
rate. If the guarantee programme is viable during the
investigation period as a whole and the recipient has paid the
appropriate fee, there is no financial contribution from the
government and therefore no subsidy, even if the recipient
involved were to default on its loans during the period.
If the scheme is not viable, the benefit to the recipient
should be the difference between the fees actually paid and the
fees which should have been paid to make the programme viable, or
the difference between the amount the firm pays on the guaranteed
loan and the amount that it would pay for a comparable commercial
loan in the absence of the government guarantee, whichever is the
lower.
(iii) In the case of ad hoc guarantees
(i.e. not part of a programme), it should first be ascertained
whether the fees paid correspond to those charged to other
companies in a similar position which benefit from viable loan
guarantee programmes. If so, there would normally be no subsidy;
if not, the method explained in (ii) above would apply.
(iv) If no fees are paid by the recipient, the amount of subsidy
should be the difference between the amount the firm pays on the
guaranteed loan and the amount that it would pay for a comparable
commercial loan in the absence of the government guarantee.
(v) The same calculation principles would apply to credit
guarantees, i.e., where the recipient is guaranteed against
credit defaults by its customers.
(d)
Provision of goods and services by the government
Principle
(i) The amount of subsidy as regards
the provision of goods or services by the government should be
the difference between the price paid by firms for the goods or
service, and adequate remuneration for the product or service in
relation to prevailing market conditions, if the price paid to
the government is less than this amount.
Adequate
remuneration should normally be determined in the light of
prevailing market conditions on the domestic market of the
exporting country, and the calculation of the subsidy amount must
reflect only that part of the purchases of goods or services
which are used directly in the production or sale of the like
product during the investigation period.
Comparison with private suppliers
(ii) As a first
step, it must be established whether the same goods or services
involved are provided both by the government and by private
operators. If this is the case, the price charged by the
government body would normally constitute a benefit to the extent
that it is below the lowest price available from one of the
private operators to the company involved for a comparable
purchase. The amount of subsidy should be the difference between
these two prices. If the company involved has not made comparable
purchases from private operators, details should be obtained of
the price paid by comparable companies in the same sector of the
economy or, if such data is not available, in the economy as a
whole and the amount of subsidy should be calculated as above.
Government monopoly suppliers
(iii) If,
however, the government is the monopoly supplier of the goods or
services involved, they are considered to be provided for less
than adequate remuneration if certain enterprises or sectors
benefit from preferential prices. The amount of subsidy should be
the difference between the preferential price and the normal
price.
If the goods and services in question are
widely used in the economy, a subsidy will only be specific or
conferred on a limited number of persons if there is evidence of
preferential pricing to a particular firm or sector. It may be
that per unit prices charged vary according to neutral and
objective criteria, for example large consumers pay less per unit
than small ones, as sometimes happens in the provision of gas and
electricity. In such situations, the fact that certain
enterprises benefit from more favourable prices than others would
not mean that the provision in this case was necessarily made for
less than adequate remuneration, provided that the pricing
structure in question was generally applied throughout the whole
economy, without any preferential prices being given to specific
sectors or firms. The amount of subsidy should in principle be
the difference between the preferential price and the normal
price charged to an equivalent company, according to the normal
structure.
(iv) However, if the normal price is
insufficient to cover the supplier"s average total costs plus a
reasonable profit margin (based on sector averages), the amount
of subsidy should be the difference between the preferential
price and the price which would be required to cover the above
costs and profit.
(v) If the government is the
monopoly supplier of the goods or services with a specific use,
e.g. television tubes, the question of preferential pricing does
not arise, and the amount of subsidy should be the difference
between the price paid by the firm involved and the price
required to cover the supplier"s costs and profit margin.
(e) Purchase of goods by government
(i) In a situation where private operators purchase the
kind of goods in question as well as the government body, the
amount of subsidy should be the extent to which the price paid
for the like product by the government exceeds the highest price
offered for a comparable purchase of the same goods by the
private sector.
(ii) If the company involved has
not made comparable sales to private operators, details should be
obtained of the price paid by private operators to comparable
companies in the same sector of the economy, or, if such data is
not available, in the economy as a whole. In such a case, the
amount of subsidy should be calculated as above.
(iii) If the government has a monopoly for the purchase of the
goods in question, the amount of subsidy as regards the purchase
of goods by the government should be the extent to which the
price paid for the goods exceeds adequate remuneration. Adequate
remuneration in this situation is the average costs incurred by
the firm selling the product during the investigation period,
plus a reasonable amount of profit, which will have to be
determined on a case-to-case basis.
The amount of
subsidy should be the difference between the price paid by the
government and adequate remuneration as defined above.
(f) Government provision of equity capital
(i) Government provision of equity capital should not be
considered as conferring a benefit, unless the investment
decision can be regarded as inconsistent with the usual
investment practice (including for the provision of risk capital)
of private investors in the exporting country concerned.
(ii) Therefore, the provision of equity capital does not
of itself confer a benefit. The criterion should be whether a
private investor would have put money into the company in the
same situation in which the government provided equity. On the
basis of this principle, the matter has to be dealt with on a
case-to-case basis.
(iii) If the government buys
shares in a company and pays above the normal market price for
these shares (taking account of any other factors which may have
influenced a private investor), the amount of subsidy should be
the difference between the two prices.
(iv) As a
general rule, in cases where there is no market in freely-traded
shares, the government"s realistic expectation of a return on the
price paid for equity should be considered. In this regard, the
existence of an independent study demonstrating that the firm
involved is a reasonable investment should be considered the best
evidence; if this is not present, the onus should be on the
government to demonstrate on what basis it can justify its
expectation of a reasonable return on investment.
(v) If there is no market price and the equity injection is made
as part of an ongoing programme of such investments by the
government, close attention should be paid not just to the
analysis of the firm in question, but to the overall record of
the programme over the last few years. If the records show that
the programme has earned a reasonable rate of return for the
government, there should be a presumption that the government is
acting according to the usual investment practice of private
investors with regard to the case in question. If the programme
has not generated a reasonable return, the onus should be put on
the government to demonstrate on what basis it can justify its
expectation of a reasonable return on investment.
(vi) The existence of a subsidy should be determined by the
information available to the parties at the time the equity
injection is made. Thus, if an investigation considers an equity
injection that was made several years before, the fact that the
company has performed less well than expected should not mean
that a subsidy exists, provided that the expectation of a
reasonable return was justified in the light of the facts know at
the time of the provision of equity.
On the other
hand, a subsidy might exists even if a reasonable return has been
achieved, if at the equity injection the prospect of such a
return was so uncertain that no private party would have made the
investment.
(vii) In cases where there is no
market price for the equity and there is a subsidy and a benefit,
i.e., the government has not acted according to the usual
investment practice of private investors, all or part of the
equity provided must be considered as a grant.
A
decision to consider all of the equity a grant should be made
only in extreme cases where it is determined that the government
had no intention of receiving any return on its investment and
was in effect giving a disguised grant to the firm in question.
A decision on what portion of the equity to treat as a
grant would depend on how near the government has come to meeting
the private investor standard. This determination should be made
on a case-to-case basis.
(g)
Forgiveness of government-held debt
Forgiveness
of debt held by government or government-owned banks relieves a
company of its repayment obligations and should therefore be
treated as a grant. If the subsidy is to be allocated, the
allocation period should begin at the time of the forgiveness of
the debt. The amount of subsidy should be the outstanding amount
of the debt forgiveness (including any interest accrued).
C. INVESTIGATION PERIOD FOR
SUBSIDY - CALCULATION OF EXPENSE VERSUS ALLOCATION
The amount of subsidy should be established
during an investigation period, which should normally be the most
recent financial year of the beneficiary enterprise. Although any
other period of six months prior to initiation may be used, it is
preferable to use the most recent financial year, since this will
enable all appropriate data to be verified on the basis of
audited accounts.
As many subsidies have effects
for a number of years, subsidies granted before the investigation
period should also be investigated in order to determine what
portion of such subsidy is attributable to the investigation
period.
(i) If the subsidy is granted on a per
unit basis, for example, an export rebate granted per unit of
product, the per unit calculation normally consists of taking the
weighted-average value of the rebate over the investigation
period;
(ii) Other kinds of subsidy are not
readily expressed on a per unit basis, but involve a global sum
of money which has to be allocated to each unit of product as
appropriate. Two exercises may have to be carried out, in this
respect:
- Attribution to the investigation
period of a portion of those subsidies granted before the
investigation period but whose effects extend over a number of
years.
- Allocation of the subsidy amount
attributed to the investigation period per unit of the like
product. In this case, the appropriate denominator for such
allocation has to be selected.
(a) Attribution of
a subsidy amount to the investigation period
(i)
Many types of subsidy, e.g. tax incentives and preferential loans
are recurring and the effect is felt immediately after granting.
Thus, the amount granted to the beneficiary can be expensed in
the investigation period. The expensed amount should normally be
increased by the annual commercial interest rate, to reflect the
full benefit to the recipient, on the assumption that the
beneficiary would have had to borrow the money at the beginning
of the period and repay it at the end.
(ii) For
non-recurring subsidies, which can be linked to the acquisition
of fixed assets, the total value of the subsidy should be spread
over the normal life of the assets. Therefore the amount of
subsidy from, for example, a grant (for which it is assumed that
it is used by the beneficiary to improve its competitiveness in
the long term, and thus to purchase product assets of one kind or
another), can be spread over the normal period used in the
industry involved for the depreciation of assets. This should
normally be done using the straight-line-method. For example, if
the normal depreciation period was five years, 20 % of the value
of the grant should be allocated to the investigation period.
The approach of allocating over time means that
non-recurring subsidies granted several years before the
investigation period may still be countervailed provided that
they still have an effect during the investigation period.
This kind of allocation is equivalent to a series of
annual grants, each having en equal amount. In order to determine
the benefit to the recipient, the appropriate annual commercial
interest rate should be added to each grant, to reflect the
benefit of not having to borrow the money on the open market. In
addition, in order to reflect the full benefit to the recipient
of having a lump sum of money at its disposal from the beginning
of the allocation period, the amount of subsidy should be
increased by the average amount of interest which the recipient
would expect to earn on the non-depreciated amount of total grant
over the whole period of allocation.
(iii) As an
exception to (ii), non-recurring subsidies which amount to less
than 1 % ad valorem may normally be considered to be expensed,
even if they are linked to the purchase of fixed assets.
(iv) In the case of recurring subsidies linked to the
acquisition of fixed assets, e.g. import duty exemptions on
machinery, which date back to before the investigation period,
the benefits accruing from previous years within the depreciation
period should be taken into account and the appropriate amount
attributed to the investigation period.
(v) In
addition, recurring subsidies granted in large, concentrated
amounts prior to the investigation period, may in certain
circumstances be allocated over time if it is determined that
they are likely to be linked to the purchase of fixed assets and
still confer a benefit during the investigation period.
(vi) In the case of subsidies expensed as in paragraphs (i) and
(iii) no subsidies granted before the investigation period should
be taken into account. For subsidies allocated over time, as in
(ii), (iv), and (v), subsidies granted prior to the investigation
period must be considered.
(b) Appropriate
denominator for allocation of subsidy amount
Once
the subsidy amount to be attributed to the investigation period
has been established, the per unit amount may be arrived at by
allocating it over the appropriate denominator, consisting of the
volume of sales or exports of a product concerned.
(i) As regards export subsidies the appropriate denominator for
allocation should be the export volume during the investigation
period, since such subsidies benefit only exports;
(ii) For non-export subsidies the total sales (domestic plus
export) should normally be used as the denominator, since such
subsidies benefit both domestic and export sales.
(iii) If the benefit of a subsidy is limited to a particular
product, the denominator should reflect only sales of that
product. If this is not the case, the denominator should be the
recipient"s total sales. D.
DEDUCTION FROM AMOUNT OF SUBSIDY 1. Only the
following may be deducted from the amount of subsidy:
(i) Any application fee, or other costs necessarily incurred in
order to qualify for, or to obtain, the subsidy
It is up to the exporter in the country concerned to claim a
deduction; in the absence of such a claim accompanied by
verifiable proof, no deduction should be granted. The only fees
or costs that may normally be deducted are those paid directly to
the government in the investigation period. It must be shown that
such payment is compulsory in order to receive the subsidy.
Neither the payments made to private parties, e.g., lawyers,
accountants, incurred in applying for subsidies, nor the
voluntary contributions the governments, for example donations,
are not deductible.
(ii) Export taxes, duties or
other charges levied on the export of a product to India
specifically intended to offset the subsidy
Such
claims for deductions should only be accepted if the charges
involved were levied during the investigation period, and it is
established that they continue to be levied at the time when
definitive measures are recommended.
2. No other
deductions can normally be made from the amount of subsidy. No
allowance can be made for any tax effects of subsidies or for any
other economic or time value effect beyond that which is
specified in this communication.
(Rule has
been amended vide Notification No. 24/2006 - Customs (N.T.)
Dated March 01, 2006)
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