RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/W/458
23 July 2001
(01-3650)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
REPLIES TO FOLLOW-UP QUESTIONS AND COMMENTS
CONCERNING PROPOSALS ON THE IMPLEMENTATION-RELATED
ISSUES REFERRED TO THE COMMITTEE IN THE
15 DECEMBER 2000 DECISION OF THE GENERAL COUNCIL
Replies of India to Questions from the
United States, Canada and Japan
The following communication, dated 19 July 2001, has been received from the Permanent
Mission of India.
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India would like to thank the Member countries for their efforts in presenting comments and
seeking further clarifications with respect to India's proposal set forth in G/SCM/W/430 regarding the
aggregate and generalized rates of remission of import duties and the definition of inputs consumed in
the production process. India hereby seeks to give clarifications on various issues raised by the in
documents G/SCM/W/451, G/SCM/W/452 and G/SCM/W/453.
1. Proposal Concerning Aggregate and Generalized Rates of Remission of Import Duties
The various questions raised by the member countries relate to the sample on which the
average amount of input consumed would be calculated, how the proposed system of generalized and
aggregate rates of remission would work, what adjustments would be made, how variations in product
characteristics would be taken into consideration and the nature of on site verification.  Indiaconsiders that it has replied to these concerns earlier.  However for the sake of better understanding
the proposed system is explained in detail again. It is emphasized again that the system proposed by
India takes into consideration the problems faced by small production units in the developing
countries and the difficulties encountered by such units in maintaining detailed costing records to
account for the exact quantity of inputs consumed in the production process.
The various procedural steps as outlined in paragraphs 2.6 to 2.9 of the paper are based on
determination of statistical amount of various inputs required for manufacture of 1 unit of the final
product and determination of the price of the inputs.  The statistical information would be
representative of a industry as a whole and would be based on details of various inputs used for themanufacture of a particular product. These details would be obtained from a large number of
manufacturers engaged in the product of the same final product.  Subsequently the information
generated would be carefully analyzed and compared with similar information available in various
international publications. In addition verification of the submitted information would be conducted at
the site of selected manufacturers.  The various activities mentioned above would result in calculating
the statistical amount of various inputs required for manufacture of 1 unit of the final product. In so
far as determination of the price of the inputs is concerned, international price of the input could beG/SCM/W/458
Page 2
the lowest of the actual transaction prices availabl e with the customs authorities.  This would ensure
that there is no excess remission of import charges.
The rationale for not limiting the sample to exporters is that the aggregate and generalized
rate of remission of import duties crucially depends on statistical information based on arepresentative sample of the industry as a whole. In case the sample is confined to only the exporters
then the resulting data would not give a reasonably accurate picture of the concerned industry wherein
the majority of the producers would not be exporting their output.
It is our experience that the output of small and medium industries usually is limited to a
product and in rare cases confined to a very narrow range of products. Allocation of duty relief would
depend upon the proportion of production, which is subsequently exported. This is one adjustmentwhich would be incorporated in the proposed system of duty remission.  The apportioning would be
done in such situations based on the number of machine hours used. While it may not be practicable
to establish industry norms for all possible product specifications or grade, the industry norm would,
to a large extent, take into consideration significant variations. While individual producers may vary
in efficiency and production techniques, the overall industry average would take into considerationsuch variations so that overall there is no ex cess duty remission. Another adjustment which would be
required would be in situations where the inputs are sourced from domestic as well as imported
sources.  In such cases the duty remission would be limited to imported inputs.
Members will perhaps appreciate why in India’s view the proposed system of statistical norms is
both fair and feasible when it is considered that the system proposed could be rather rigorous.  To
illustrate by just one example products of plastic and rubber could be considered.  While determining
the average amount of inputs consumed following details could be taken into account:
(a) Detailed manufacturing process along with technical justification of wastages claimed
at each stage of manufacturing process.
(b) Technical description/specifications including size, thickness and width and range of
plastic/rubber etc. of the products to be exported along with small samples of export
product.
(c) Chemical name of processing aid, blowing agent & pigment proposed to be imported.(d) Whether the scrap generated in the process is being reused or not. If not, the technical
justification for its non-use may be furnished.  If the scrap is being sold, the sale
value/commercial value may be indicated.
(e) Percentage of rubber compound in the export product.
(f) Percentage composition of rubber compound.
Similar strict guidelines and consideration could be incorporated for other export products while
arriving at the average rate of inputs consumed  under the proposed generalized and aggregate system
of duty remission
Certain concerns have been raised regarding how price variations due to quantity purchases,
currency fluctuations, quality differences and other factors would be taken into account.  As has beenstated earlier for calculating the value of the quantity of the inputs consumed the proposed system
would be based on international price of the input which is the lowest of the actual transaction prices
available with the customs authorities.  This would ensure that there is no excess remission of import
charges. While no prescribed periodicity has been suggested regarding revision of the statisticalG/SCM/W/458
Page 3
norms on inputs consumed in the production process,  this would be on an ongoing basis. Furthermore
on site inspection could be undertaken to verify the actual yield pattern and to ensure that the variation
from the statistical norm is within acceptable limits.
2. Proposal concerning inputs consumed in the production process – India
Clarifications have been sought regarding whether some kind of average final statements over
all companies will be used for arriving at an amount of depreciation and whether accelerated
depreciation would be used if companies used such depreciation for both tax and accounting purposes.
India would like to clarify that it is not the intention to calculate average depreciation of all
companies.  The question of an average financial statement does not arise.  It is further clarified thatthe depreciation as appearing the financial statement of the concerned entity would be used for the
purposes of duty remission/exemption and not the amount of depreciation which is calculated for
taxation purposes.
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