9911796707
TMI BlogCustoms Tariff (Identificationn, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, 1995. 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 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an 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 : Provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. (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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishment 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) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificant 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 volorem 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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, whichev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in this communication. ------------------------------------- Notes:- 1. Substituted vide Notification No. 24/2006-Cus. (N.T.), dated 1-3-2006, before it was read as,- (a) relates to export performance, or 2. Substituted vide Notification No, 24/2006-Cus. (N.T.), dated 1-3-2006, before it was read as,- 12. Conferment of benefit. - The designated authority while determining the conferment of benefit to the recipient, pursuant to a subsidy, shall take into account the following guidelines - (a) government provision of equity capital shall 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 territory of the granting country. (b) a loan by a government shall not be considered as conferring a benefit, unless there is a difference between the amount that the commercial organisation receiving the loan pays on the government loan and the amount it would pay on a comparable commercial loan which it could actually obtain on the market. In this case the benefit shall be the difference between these two amounts; (c) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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