EU Frees Indian Antibiotics from Countervailing Duty

Some Indian broad spectrum antibiotics will now become more competitive in the European Union with the EU scrapping the countervailing duty (CVD) on import of these drugs from India.

This development is a significant boost to Indian pharma majors such as Ranbaxy Laboratories, Lupin Ltd and Surya Pharmaceutical Ltd.

According to a recent EU communiqué from Brussels, the EU Council Regulation has repealed the CVD, thereby reducing the overall duty burden on those products from India.

The antibiotics covered include amoxicillin trihydrate, ampicillin trihydrate and cefalexin. CVD is imposed by a country to protect the local industry from subsidised imports. The duty is over and above the basic Customs duty.

This case was first initiated in 1997 and duties imposed in 1998.

After a review in May 2005, the EU had imposed ad valorem duties ranging from 17.3 per cent to 32 per cent on these products from India. Exports of these products from India to EU had fallen drastically as a consequence of the CVD. The EU companies which claimed that they were affected by Indian imports included DSM and Sandoz.

The EU move followed the results of a review investigation covering the period from April 1, 2009 to March 31, 2010.

The probe concluded that even if the CVD is allowed to lapse, subsidised imports from India are not likely to cause material injury to the EU's pharma industry.

This was because the local industry had developed positively over the review period despite significant and increasing imports of such products from other countries that were priced similarly to Indian exports, the regulation said.

It added that if the CVD measures were repealed, Indian export prices were not likely to be harmful to the EU industry as it (EU industry) was already facing competition from other exporting countries with the same pricing behaviour without suffering any material injury.

"It was therefore concluded that material injury was not likely to recur, should measures be allowed to lapse," the regulation said.

However, the European Commission will continue to monitor for two more years the import volumes of the items concerned. "Should there be a significant change in these quantities, the Commission will give consideration to what action, if any, is to be taken," the regulation said.

Ms Moushami Joshi, Partner, International Trade at Luthra & Luthra Law Offices, which represented the Indian companies (Ranbaxy, Lupin and Surya), stated that the repeal of the measures and termination of the investigation is a welcome relief for antibiotics exports from India especially since the duties had been in force for over 13 years.

India's schemes — allegedly involving the granting of subsidies — that were investigated by the EU included Advance Authorisation Scheme, Duty Entitlement Passbook Scheme, Focus Market Scheme, Export Oriented Units/Special Economic Zones and Export Credit Scheme.