Page 467 - MANUAL OF SOP

Manual of OP for Trade Remedy Investigations

manufacturing overhead costs include research and development (R&D)
costs which relate specifically to the subject merchandise.

Complaints regarding lesser returns in case of old plants
19.25.2. The Capital Employed for return purposes consists of Net Fixed Assets
and the Working Capital. It is sometimes complained by the domestic industry that
the returns are lower in case of old plants due to written down value of plant
and machinery. However, it may be clarified here that per unit costs are generally
higher in old plants based on old technology as their consumption norms are also
higher. Further, DGAD goes as per the actual costs as per the books of accounts
under applicable accounting standards to avoid subjectivity and arbitrariness. This
also allows a transparent methodology, which is followed in all cases. Incidentally,
the amount of working capital also varies from one unit to other and from industry
to industry. Since no adjustment is done in case of inter-se variations in working
capital in the audited books of accounts, it may not be appropriate to notionally
amend the figure of NFA as per books of accounts. At the same time, it is pertinent
to note that no adjustment is done in case of new plants also where 22% return is
allowed from day one.

Notional Incidence of Income Tax Paid

19.25.3 It may be worth mentioning here that units in SEZ areas, 100% E.O.Us,
and units in backward areas etc. may be availing tax holiday benefits etc. However,
these units are also allowed the same rate of return. Further, many of the companies
escape paying income tax through various tax saving strategies. Therefore, the
incidence of actual tax rate paid may vary from company to company. However,
return allowed by DGAD includes the notional impact of income tax irrespective of
actual payments. Therefore, this additional tax not actually paid by the respective
company may be additional margin to domestic industry.

Practice followed by EU in determination of Reasonable Return
19.25.4. As per the available information, EU determines the profit margin obtained
by the industry during the part of the injury investigation period, in which the
dumped and/or subsidized imports did not have any negative effects on the situation
of the Union industry. This time span is often a period during which the imports of
the product concerned were either absent or did not reach significant volumes. In
other words, the profit margin used to calculate the target price that will remove
the injury in question must be limited to the profit margin which the domestic

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