Central Idea

The US and the European Union have imposed countervailing duties (CVDs) on select Indian products such as paper file folders, common alloy aluminum sheet, and forged steel fluid end blocks.
These measures are in retaliation against India’s Remission of Duties and Taxes on Export Products (RoDTEP) scheme, initiated in January 2021.

About Countervailing Duties (CVDs)

	Details
Definition	Tariffs imposed to neutralize the adverse effects of subsidies provided by a foreign government to their export industries.
Purpose	To protect domestic industries from unfair competition due to imports subsidized by the exporting country’s government.
Investigation & Imposition	Requires a domestic investigation to confirm the presence of subsidies and their impact on domestic industries.
WTO Compliance	Imposition of CVDs must comply with World Trade Organization rules.
Types of Subsidies	Includes direct transfers of funds, tax concessions, loan guarantees, and provision of goods/services at a discount.
Calculation	The duty amount is typically equivalent to the value of the foreign subsidy.
Duration	Not permanent; imposed for a specific period and subject to review and removal.
Global Use	Frequently used by countries like the United States, European Union, Canada, and India.
Controversy and Disputes	Can lead to trade disputes, viewed by some as protectionist or unjustified.
Impact on Prices	May result in higher prices for affected goods in the importing country due to increased import costs.

Government and Exporters’ Defense: The Indian government and affected exporters have actively defended against the subsidy allegations. Their defense covered various programs and schemes at both the Central and State levels in India.
Method of Defense: The defense was presented through written and oral responses during the investigations.

India’s Stance on Dispute Resolution: Minister of State for Commerce and Industry indicated India’s openness to bilateral resolution.
WTO Dispute Settlement Mechanism: Any party could approach the WTO Dispute Settlement mechanism if they believe a WTO member has adopted measures inconsistent with WTO agreements.

Growing Trade Tensions: The imposition of CVDs by the US and EU signifies escalating trade tensions with India, particularly concerning the RoDTEP scheme.
Impact on Indian Exports: These duties could potentially impact Indian exporters, affecting trade dynamics between India and these global economic powers.
Prospect of WTO Involvement: The possibility of this dispute reaching the WTO highlights the complexities of international trade laws and the need for careful navigation of global trade policies.

	Details
Introduction	Announced in 2020, replacing the Merchandise Exports from India Scheme (MEIS).
Objective	To refund taxes and duties on exported products not covered under any other scheme, enhancing export competitiveness.
Scope and Coverage	Covers various sectors, beneficial for a wide range of industries, including those not covered under MEIS.
Rebate Rates	Varies based on the taxes and duties incurred on the production and distribution of the exported product.
Eligibility	Exporters must comply with criteria including the condition that goods must be manufactured in India.
Claim Process	Rebate claimed as a transferable duty credit/electronic scrip, maintained in an electronic ledger.
Implementation	Implemented by the Directorate General of Foreign Trade (DGFT) and Customs Department.
Impact	Aims to make Indian exports more competitive globally by offsetting domestic taxes and levies.
Compliance with WTO	Designed to comply with India’s commitments under the WTO framework.
Process	Fully digital and transparent process for claiming rebates, reducing the compliance burden on exporters.