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 ..... on the 1st day of January, 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 ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed 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 purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptible 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 prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T- 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction 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 dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 neut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidies, 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. ------------------------------------- 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 guidel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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