Benchmarking in countervailing duty investigations: An analysis between the Indian and the EU approach

A countervailing duty (‘CVD’) is imposed to neutralise the injurious effect of a specific subsidy that confers a benefit on a foreign producer through a governmental financial contribution. Article 1 of the Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’),[1] states that a subsidy exists where a government or public body provides a financial contribution, such as grants, loans, tax incentives, provision of goods or services, or other forms of support, including income or price support, that confers an economic advantage or benefit upon the recipient enterprise or industry.

A subsidy can be countervailed only where there is (i) a financial contribution by a government or public body within the meaning of Article 1 of the SCM Agreement,[2] (ii) a benefit conferred upon the recipient,[3] and (iii) specificity within the meaning of Article 2 of the SCM Agreement.[4] Hence, determining a ‘benefit’ is often the most technically contested, because it requires the investigating authority to answer a counterfactual question: ‘what would the producer have paid for the same goods, service, loan, or equity infusion in the absence of government intervention?’, which brings us to the concept of ‘benchmarking’.

A benchmark is required where the government or a public body supplies inputs, services, financing, or capital to an enterprise. Such governmental support necessitates a comparison with prevailing market-based conditions to determine whether the recipient has obtained more favourable treatment than would otherwise be available under normal commercial circumstances. Benchmarking, therefore, lies at the heart of benefit determination in countervailing duty investigations. While the legal basis for benchmarking is rooted in Article 14 of the SCM Agreement, investigating authorities often exercise considerable discretion when identifying and constructing appropriate market benchmarks, particularly in economies where government intervention significantly influences market outcomes. As a result, different authorities may arrive at different subsidy margins even when examining similar subsidy programmes.

This article examines how the Indian and EU authorities approach benchmarking in practice and analyses whether their methodologies reflect a common application of WTO principles or distinct investigative philosophies.

The international legal foundation: Article 14 of the SCM Agreement

Article 14 of SCM Agreement,[5] requires that the calculation of benefit be made in relation to the prevailing market conditions for the goods or service in question in the country being investigated. Article 14(d) guides that assessment for the provision of goods: a benefit arises only if the government supplies goods for less than adequate remuneration (‘LTAR’), measured against prevailing market conditions in the country of provision. Benchmarking is the process of identifying that market price for comparison.

In US – Softwood Lumber IV[6] (DS257), the Appellate Body held that the starting point is the private prices of the same or similar goods in the country of provision, the ‘in-country’ price, because Article 14(d) refers to market conditions in that country. The Appellate Body, however, did not treat this as an absolute rule. The basis is the text itself, which ties the comparison to the country of provision, and the logic that a government price should be tested against what independent private sellers charge in that market. Where the government is the predominant supplier, its dominant role may distort private prices, making them unreliable and the comparison circular.  In that case, an investigating authority may use an alternative benchmark. The Appellate Body set conditions, however, it stated that the authority must demonstrate the distortion, and any out-of-country price, or a third-country price must be adjusted to reflect prevailing market conditions in the country of provision, including price, quality, availability, marketability and transportation. The sequence is therefore settled: in-country private prices first, and out-of-country prices only upon demonstrated distortion and with proper adjustments.

The investigation practice: India vs. EU

India’s countervailing duty regime is governed by the Customs Tariff Act, 1975 and the Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidised Articles and for Determination of Injury) Rules, 1995 (‘CVD Rules’). Rule 12(2)(d) of the CVD Rules mirrors Article 14 of the SCM Agreement. On the other hand, the EU’s anti-subsidy regime is set out in Regulation (EU) 2016/1037 (‘Basic Regulation’), Article 6 of which governs the calculation of benefit.[7] Article 6(d) directs that, for the provision of goods or services, benefit is to be assessed against prevailing market conditions for the goods or service in question in the country of provision.

The critical question is whether India and the EU apply the common principles embodied in Article 14 of the SCM Agreement in a similar manner or whether their investigative practices diverge when confronted with distorted market conditions.

To assess the practical application of benchmarking principles, this article compares the treatment of identical subsidy programmes in Indian and EU countervailing duty investigations involving imports from China PR in the same industrial sectors. Such a comparison provides a useful basis for examining whether the two jurisdictions, despite relying on the same legal foundation under the SCM Agreement, have developed distinct approaches to benchmark selection, benefit determination, and subsidy quantification. The analysis demonstrates that significant differences exist not only in the choice of benchmarks but also in the underlying investigative methodologies adopted by the respective authorities.

Investigations analysed

India: Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products (2017)[8] and Pneumatic Tyres (2019).[9]

EU: Certain Hot-Rolled Flat Products of Iron, Non- Alloy or Other Alloy Steel - Regulation (EU) 2023/1123[10] and certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 - Regulation (EU) 2025/61.[11]

Group A: Programmes benchmarked by India and the EU

Preferential Loans

Case	Authority	Why in-country rates were rejected	Benchmark and basis	Calculation of benefit
Preferential Loans: Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products (India) and Certain Hot-Rolled Flat Products of Iron, Non- Alloy or Other Alloy Steel (EU)	India	State banks are government-controlled and the People’s Bank of China (‘PBOC’) limits how lending rates move. Lending rules do not distinguish state from private banks. The Authority concluded that Chinese loan rates reflect heavy government intervention and are not rates found in a functioning market (paras 435–436, 443).	Unlike the EU, the Indian authority did not expressly identify the source of the alternative benchmark or explain the methodology used to construct the comparable commercial lending rate.	Interest paid minus a market-comparable rate. Margin of 0.32%, from one producer’s 2015 annual report, as best facts available (paras 443–445).
	EU	State-owned banks were treated as public bodies and private banks as ‘entrusted and directed’ by the government. No non-government loan in China is therefore a valid benchmark (recital (‘rec.’) 49–53).	A constructed rate: the PBOC standard lending rate plus a risk premium for BB-grade (non-investment grade’) bonds (rec. 53).	Interest paid minus the constructed rate (Art. 6(b)) of the Basic Regulation. The subsidy rate determined in Original Investigation was continued: 1.99%–27.91% (rec. 56, 62).
Preferential Loans: Pneumatic Tyres	India	State-owned banks were held to confer benefits upon exporters in the form of preferential loans, however, PBOC was construed to be the appropriate benchmark to measure the benefit (para 323, 329).	The PBOC benchmark rate for short- and long-term loans, accepted as the commercial rate (paras 323, 329).	State-bank rate charged minus the PBOC rate. A benefit exists only where the loan rate fell below the PBOC rate (para 323, 329).
	EU	Private banks were entrusted and directed by the government. Chinese credit ratings were held unreliable as a measure of credit risk, even for companies rated well locally (rec. 68–70).	The authority used the Chinese central bank’s lending rate and added an extra amount based on the borrowing costs of risky private companies (BB-rated firms). This was done to reflect the interest rate that Chinese producers would likely have faced without government support. For bank service fees such as acceptance and confirmation charges, the authority used the published fees of a commercial UK bank (Metro Bank) because Chinese banks did not provide the necessary information.	Loan by loan: interest paid minus the benchmark rate. Preferential lending in total, including credit lines and bank acceptance drafts: Giti 3.48%, Hankook 0.08% (rec. 122).

The comparison of preferential lending programmes reveals that both jurisdictions recognised substantial government influence within China’s banking sector. However, the authorities differed significantly in benchmark construction. In the stainless-steel investigations, both India and the EU rejected Chinese commercial lending rates as distorted, yet the EU employed a transparent and structured methodology based on risk-adjusted lending rates, whereas the Indian finding did not identify a specific benchmark source. In the tyres investigations, the divergence became even more pronounced, with India accepting the PBOC benchmark rate as a valid commercial reference, while the EU continued to adjust the benchmark through additional credit-risk premia. These findings illustrate that the authorities may reach markedly different subsidy margins despite investigating broadly similar preferential lending programmes.

Group B: Programmes benchmarked by EU, but not by India

Programme	EU: Basis for Benchmarking	India: Treatment and Stated Reason	Analysis of the Approaches
Land-Use Rights: Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products (India) and Certain Hot-Rolled Flat Products of Iron, Non- Alloy or Other Alloy Steel (EU)	No functioning land market in China; the government supplies land-use rights at LTAR; prices often set by the authorities thereby conferring benefit. Benchmark: Taiwan industrial land prices, as adopted in the original investigation (rec. 65–67).	Recorded that land is state-owned and supplied at concessional rates to favored industries and held the programme countervailable. Applied no price test. Margin not computed, for lack of corroborating information (paras 387–390).	India accepted the same market failure but did not complete the next step of choosing a reference price. The stated reason is evidentiary, not legal. The programme is countervailable on paper but carries no margin.
Land-Use Rights: Pneumatic Tyres	Auctioning system - unclear and not functioning; local authorities set prices arbitrarily considering the Chinese Industrial policy. Benchmark: Taiwan as it closely resembles China in terms of economic development, industrial infrastructure, population density, land market conditions, geographic proximity, and strong trade, cultural, and linguistic ties. (rec. 161–170).	Found land-use rights provided at LTAR. Subsidy quantified on facts available because the Government of China and the exporters did not supply adequate information for quantification. (paras 370–372).	While the EU resorted to an external benchmarking, the Indian investigating authority relied on facts available to calculate the subsidy margin based on the highest of the subsidy margins for the cooperating parties as a % of CIF price (Cost, Freight and Insurance).
Export Credit Insurance: Pneumatic Tyres	Sinosure (a public body) provides export credit insurance on terms more favourable than the recipient could normally obtain on the market or provides insurance cover that would otherwise not be available at all on the market. Benchmark: premium rates of the United States Export-Import Bank for exports to member of Organisation for Economic Co-operation and Development (rec. 135–136).	Sinosure’s export insurance scheme could be considered a subsidy because it supports exporters. However, it can only be treated as a countervailable subsidy if the insurance fees charged by Sinosure are lower than normal market rates charged by comparable private insurers. Since no evidence of such under-pricing was provided, the subsidy benefit was not established. (para 339) .	India’s test assumes that a private domestic comparator exists and accordingly, benefit was scrutinized to check if Sinosure provided export guarantees at less than comparable commercial charges by domestic private insurance company. However, the EU found that Sinosure’s dominance means a private comparator does not exist as Sinosure represents around 90% of the domestic market for export insurance because of which a market-based domestic insurance premium could not be established. Therefore, a difference in approach could be identified between the Indian and the EU authorities.

An important question arising from the comparison is whether either approach more closely reflects WTO jurisprudence. The Appellate Body in US-Softwood Lumber IV did not prohibit the use of out-of-country benchmarks; however, it made clear that such benchmarks are exceptional and may only be used after demonstrating that domestic prices have been distorted by the government’s predominant role in the market. In this respect, the EU’s practice appears to reflect a broader interpretation of permissible benchmark substitution, while India’s approach generally remains closer to the presumption that domestic market conditions should serve as the primary reference point. Whether extensive reliance on external benchmarks remains fully consistent with the discipline envisaged in Article 14 of the SCM Agreement continues to be a subject of debate in subsidy investigations involving non-market or heavily state-influenced economies.

Implications for Exporters and Investigating Authorities

The comparison demonstrates that benchmark selection is not merely a technical exercise but often determines the magnitude of the subsidy margin itself. Where an authority constructs external benchmarks using third-country prices, risk-adjusted lending rates, or alternative market references, the resulting subsidy margin may differ materially from one calculated using domestic prices influenced by government intervention. For exporters, these differing approaches have important practical consequences because the methodology ultimately adopted can substantially influence both the subsidy margin and the level of countervailing duties imposed.

Conclusion

The comparative analysis demonstrates that, although both India and the EU derive their legal framework for subsidy quantification from Article 14 of the SCM Agreement, their approaches to benchmark selection and benefit determination differ significantly in practice. While both jurisdictions recognise that government intervention may distort domestic market conditions and render domestic prices unsuitable for measuring the benefit conferred, the manner in which they address such distortions varies considerably. The EU has adopted a more structured and expansive approach, frequently constructing alternative benchmarks based on external market references where domestic prices, lending rates, land-use rights, or input costs are affected by pervasive state intervention. By contrast, the Indian investigating authority has generally adopted a more cautious and evidence-driven approach, relying on alternative benchmarks only in limited situations and, in several cases, refraining from quantification where sufficient evidence is not available on record. The comparison highlights how benchmark selection can materially influence subsidy calculations and, ultimately, the remedial measures imposed. As countervailing investigations increasingly involve economies where government intervention plays a significant role, a thorough understanding of benchmarking methodologies remains essential for exporters, importers, and practitioners alike.

[The authors are Partner and Associate, respectively, in International Trade & WTO practice at Lakshmikumaran & Sridharan Attorneys]

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[1]Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’), 1994, Art. 1.

[2] SCM Agreement, Art. 1.1(a)(1).

[3] SCM Agreement, Art. 1.1(b).

[4] SCM Agreement, Art. 2.

[5]SCM Agreement, Art. 14.

[6] Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004.

[7]Council Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (codification), Art. 6.

[8] Final Findings in the Countervailing Duty/Anti-subsidy investigation concerning imports of certain Hot Rolled and Cold Rolled Stainless Steel Flat Products, originating in or exported from the People’s Republic of China, F. No. 14/18/2015-DGAD dated 4 July 2017.

[9] Final Findings in the Countervailing Duty/Anti-subsidy investigation concerning imports of ‘New Pneumatic Tyres for Buses and Lorries’ from People’s Republic of China, F. No. 6/8/2018-DGAD dated 25 March 2019.

[10] Commission Implementing Regulation (EU) 2023/1123 of 7 June 2023 imposing a definitive countervailing duty on imports of certain hot-rolled flat products of iron, non- alloy or other alloy steel originating in People’s Republic of China following an expiry review pursuant to Article 18 of Regulation (EU) 2016/1037 of the European Parliament and of the Council.

[11] Commission Implementing Regulation (EU) 2025/61 of 15 January 2025 imposing a definitive countervailing duty on imports of certain pneumatic tyres, new or retreaded, of rubber, of a kind used for buses or lorries, with a load index exceeding 121 originating in the People's Republic of China following an expiry review pursuant to Article 18 of Regulation (EU) 2016/1037 of the European Parliament and of the Council.