RESTRICTEDWORLD TRADE
ORGANIZATIONG/TRIMS/W/12
9 April 1998
(98-1454)
Committee on Trade-Related Investment Measures Original:  English
QUESTIONS TO INDIA FROM JAPAN
The following communication, dated 16 March 1998, was received from the Permanent
Mission of Japan with the request that it be circulated to Members.*
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1. The Government of Japan has an "advance c opy" of the Indian Ministry of Commerce's
Public Notice No. 60, dated 12 December 1997.  The advance copy states that the notice was "to be
published in the Gazette of India Extraordinary".
(a) Was Public Notice No. 60 published in the Gazette of India Extraordinary (the
"Gazette")?
(b) If so, when?  If not, when will it be published in the Gazette?
(c) Is the copy of Public Notice No. 60 published in the Gazette identical to the advance
copy?  If not, please provide a copy of the notice as published in the Gazette andplease describe the changes made and the reasons for such changes.
(d) When did Public Notice No. 60 take effect?  Where is this effective date specified?
2. Legal basis for Public Notice No. 60:
(a) Does the Export and Import Policy, 1997-2002 provide the legal basis for Public
Notice No. 60?
(b) When was the Export and Import Policy, 1997-2002 promulgated?  Was it published
in the Gazette?  If so, when?  If not, why not?
(c) Are there any other measures, whether legislative or administrative, that provide any
legal basis for Public Notice No. 60?  If so, please provide a copy of the papers
concerned.
(d) Does the Deputy Director of Foreign Trade have the authority to promulgate Public
Notice No. 60?  Does the Director of Foreign Trade have it?  If Public Notice No. 60as formally approved by any other government officials, please provide a copy of
each document evidencing such approval.
                                                     
* See also document G/TRIMS/W/11G/TRIMS/W/12
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3. Other than Public Notice No. 60 and the Export and Import Policy, 1997-2002, are there any
other measures (including laws, decrees, regulations, instructions, and other implementing acts)
relevant to entering into a memorandum of understanding (MOU) with automobile manufacturers
and/or granting licenses to import CKD/SKD kits/components?
Please provide a copy of the papers concerned.
4. Definition of "CKD/SKD kits/components":
(a) What is the scope of the term "CKD/SKD kits/components" as used in Public Notice
No. 60?
(b) In particular, please distinguish that term from the term "components".  That is, what
distinguishes the import of automotive components from the import of "CKD/SKD
kits/components"?
(c) Where is the term "CKD/SKD kits/components" defined in Indian law?
(d) Please compare the term "CKD/SKD kits/components" with the term "components
for motor vehicle in ckd/skd form", which is also used in Public Notice No. 60.
Where is this term defined in Indian law?
5. Please provide a copy of the standard license issued by the Government of India for
importation of "components for motor vehicle in ckd/skd form".  If a different license is issued for
imports of "components" or "CKD/SKD kits/components", please also provide a copy of that.
6. The 1995 Parameters:
(a) Were the 1995 Parameters, which are referenced in Public Notice No. 60, published
in the Gazette?  If so, when?  If not, why not?
(b) Please provide a copy of the 1995 Parameters.
(c) Were the 1995 Parameters repealed or do they remain in effect?(d) Why were the 1995 Parameters changed?  What are the "changed circumstances"
referenced in Public Notice No. 60?
(e) What procedures were followed for revising the 1995 Parameters?  In particular, were
the proposed revisions published (or otherwise provided to affected parties) before
they took effect, was there opportunity for public comment about the proposedrevisions, and if so were any changes made to the proposed revisions as a result of the
public comments?  If they exist, please provide a copy of the proposed revisions and
of each of the public comments submitted.
7. Lists of MOUs:
(a) Please provide a list of all the companies that had entered into an MOU with the
Government of India pursuant to the 1995 Parameters.  For each of such companies,
please also indicate the names of the foreign joint venture partners and the current
status of the MOUs.G/TRIMS/W/12
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(b) Please provide a list of all the companies that have entered into MOUs with the
Government of India pursuant to Public Notice No. 60.  For each of such companies,please also indicate the names of the foreign joint venture partners.
8. The standard form MOU:
(a) Is any MOU submitted by any company fulfil ling the standard format in an appendix
to Public Notice No. 60 automatically signed by the Government of India?
(b) If not, what other standards apply?  Where are those standards specified in Indian
law?  Is an MOU submitted by a company checked, cleared, or approved before
signature by the authority?
(c) Who is the authority responsible for deciding whether to sign an MOU?  How much,
if any, discretion does that official have in making such decisions?  Which Indian lawspecifies the authority and the level of discretion?
(d) Are there any MOUs concluded to date pursuant to Public Notice No. 60 that differed
from the standard format in any respect?
(e) If so, please describe the variations established to date.  Have these variations been
publicized?  Will future draf t MOUs that conform with these variations be signed
automatically or treated as if they fully conformed with the standard format?  If not,
please explain under what circumstances those variations will be accepted again?
(f) If the Indian Government has not entered into any MOU not in the standard format, is
it allowed under Indian law to submit a draft MOU not in the standard format?  If so,please explain who has the authority to accept or reject a draft MOU not in the
standard format, what standards apply to  such decisions, how much discretion the
deciding authority has, whether accepted variations will be publicized, and whether
these variations once accepted will automatically be accepted for subsequent
applicants.
9. Pending applications:
(a) Are there any companies that have submitted an MOU to the Government of India for
its signature pursuant to Public Notice No. 60, but for which the Government has not
yet signed or rejected the signature?  If so, please list all such companies, the names
of the foreign joint venture partners, and the date on which it submitted the MOU for
the Government's signature.
(b) Are MOUs submitted to the Government of India for its signature examined strictly
in the order in which they are submitted?  If not, please explain what other factorsinfluence the order of examination.
(c) Are there any cases in which companies submitted MOUs to the Government of India
for its signature under the 1995 Parameters, for which no action has been taken by the
Government since Public Notice No. 60 took effect?  If so, please list all the
companies concerned and the names of the foreign joint venture partners and please
explain the current status of such submissions.
9bis. What is meant by the term "all existing entrants" in Public Notice No. 60?  Does it include
both the companies which entered into MOUs with the Government of India pursuant to the 1995G/TRIMS/W/12
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Parameters and those, if any, which submitted MOUs to the Government of India for its signature, but
for which no action has been taken by the Government since Public Notice No. 60 took effect?
10. Are there any cases in which companies submitted MOUs to the Government of India for its
approval (under either the 1995 Parameters or Publ ic Notice No. 60) but signature was rejected?  If
so, please list all those companies, the names of the foreign joint venture partners, and the reasons for
the rejection.
11. Impacts on companies with pre-existing MOUs:
(a) Are there any companies which entered into MOUs with the Government of India
under the 1995 Parameters but have not yet entered into revised MOUs under Public
Notice No. 60?
(b) If so, what, if any, have happened to such companies? Where are those consequences
specified in Indian law?
(c) If not, how long have such companies been given to take to enter into revised MOUs?
Where is that period of time specified in Indian law?  What will happen to the
companies which do not enter into the revised MOUs within the specified period of
time?  Where are those consequences specified?
12. Were companies that entered into MOUs under the 1995 Parameters provided any
compensation due to the Government of India's unilateral decision to change the terms of theunderstanding?  If so, how was the amount of compensation determined?  If not, why not?
13. Have the companies been assured that the Government of India will not unilaterally require
any further changes to the terms of the MOUs?  If so, please explain the assurance.
14. What is the legal status under Indian law of MOUs made pursuant to Public Notice No. 60?
Where is this status specified in Indian law?  Is the status the same as that of MOUs made under the1995 Parameters?  If not, what is the difference between them?
15. Are imports of automotive components, other than components in "ckd/skd form", restricted
by the Export-Import Policy?  If so, please explain how they are restricted, where those restrictions
are specified, if they are authorized by Indian law, and what conditions must be satisfied to import
such components.
16. Does the Export-Import Policy restrict imports of "CKD/SKD kits/components" by Indian
companies other than joint venture companies?  If so, what conditions must be satisfied by such
companies to obtain import licenses, where are thos e conditions specified if they are authorized by
Indian law?  If there is any difference between conditions applicable to joint venture companies and
other Indian companies, please explain it.
17. Public Notice No. 60 contrasts the term "manufacture of cars" with the term "mere assembly
of imported kits/components".  What is meant by these two terms?  In particular, please explain the
difference between these two terms.  Where are these terms defined in Indian law?G/TRIMS/W/12
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18. Required minimum foreign equity:
(a) What is the purpose of requiring foreign joint venture partners to contribute a
minimum of US$50,000,000 in equity?
(b) What impact does this requirement have on India's international trade?
(c) Why is this requirement limited to joint venture companies with majority foreign
ownership?
(d) Why is this requirement limited to new joint venture companies?
(e) How does this requirement apply to a case where joint venture company does not
have majority foreign ownership at the time it enters into the MOU with the Indian
Government but the foreign partner subsequently obtains majority ownership?  Does
it matter how long it takes for the joint venture entering into the MOU to obtain the
majority ownership?
(f) How does this requirement apply to a case where a joint venture company has
majority foreign ownership at the time it enters into the MOU  with the Indian
Government but the foreign partner subsequently loses majority ownership?  Does it
matter how long it takes for the joint venture entering into the MOU to lose majority
ownership?
19. Definition of "indigenization":
(a) What is meant by the term "indigenization" in Public Notice No. 60?  Is the term
defined in Indian law?  If so, please also explain it.
(b) What standards are used to determine whether an automotive component is an
"indigenous" component for purposes of the "indigenization" requirement of Public
Notice No. 60?  In particular, is that standard related to a percentage of value-added,sub-components, or materials?  If so, please provide specific figures.  Are these
standards specified in Indian law?
(c) Who determines whether an automotive component is an "indigenous" component for
these purposes?  Where is that authority specified in Indian law?
(d) When is it determined whether an automotive component is an "indigenous"
component for these purposes?  Where is that timing specified in Indian law?
(e) For purposes of determining the compliance of a joint venture company with the
minimum percentage of "indigenization", what is the denominator in the equation?
What is the basis for measuring the total number of components to be divided into the
number of "indigenous" components to determine the percentage of "indigenization"?Is the denominator based on the total number of components alone or is it
value-weighted?  If value-weighted, what method of valuation is used?  Where is this
methodology specified in Indian law?
(f) Over what period of time is the "indigenization" level measured?  A calendar year, a
fiscal year, a quarter, or a month?  The production at the end of the year?  Where is
this period specified in Indian law?G/TRIMS/W/12
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(g) Is a joint venture company entitled to regard components purchased in India as
"indigenous" regardless of whether or not the vendor of the components imported
them?  If not, please explain what obligations the purchaser has, to obtain information
and documentation from the vendor.  Where is the authority for those obligations in
Indian law?
20. Compliance with the "indigenization" requirement:
(a) Who determines whether a joint venture company has met the "indigenization"
requirement in the third and fifth years?  Where is the authority specified in Indian
law?
(b) What is meant by the terms "in the third year" and "in the fifth year"?  By what dates
does a joint venture company have to meet the minimum "indigenization"
requirements?
(c) What happens if a company fails to meet the minimum "indigenization"
requirements?  How about in the case of the third year and the fifth year?  Does it
matter how much the joint venture company falls short of the minimum requirement?
How much discretion does the Indian Government have in making these decisions?
Where are these consequences specified in Indian law?
(d) What happens if a joint venture company fails to meet the 50 per cent requirement in
the third year, but meets it in the fourth or fifth year?  What if it still fails to meet the
50 per cent requirement in the fifth year?  What happens if a company fails to meet
the 70 per cent requirement in the fifth year, but meets it in a subsequent year?
(e) What is meant by the phrase "no need for further import licenses"?  Does this mean
that a joint venture that has reached the 70 per cent "indigenization" level may importas many components or "CKD/SKD kits/components" as it needs thereafter?
(f) What happens after a company meets the 70 per cent "indigenization" level?  Does it
have any further obligations to report to the Indian Government or submit to
Government review of its "indigenization" level?  If so, what happens if it is found
that the company has subsequently fallen below the 70 per cent level?
(g) If a company reports to the Indian Government that it has met the 70 per cent
requirement, does it immediately "go outside the ambit of the MOU automatically"?
Can it submit such a report at any time or only in the annual report?  Or, must the
Government determine that a company has met the 70 per cent requirement before it
goes "outside the ambit of the MOU"?  If the latter, where is the requirement ofgovernment determination specified in Indian law?
(h) What is meant by the phrase "go outside the ambit of the MOU automatically"?  Does
this mean that all obligations under the MOU terminate immediately, except for the
previously incurred export obligation?  Specifically, do the reporting and review
requirements terminate?  If a joint venture company meets the 70 per cent
"indigenization" requirement before the foreign partner contributes US$50,000,000,
must the equity contribution still be made?
21. Why do the new "indigenization" requirements apply to companies that had already entered
into the MOU under the 1995 Parameters?G/TRIMS/W/12
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22. What is meant by the phrase "the party shall aggressively pursue and achieve as soon as
possible the development of the local supply base and increase local content" in the standard format
MOUs?  Does this create any obligation on joint venture companies to do anything other than
complying with the minimum "indigenization" levels specified in Public Notice No. 60?  Where is the
authority for this phrase under Indian law?
23. Scope of the export obligation:
(a) What is meant by the phrase "achieve a broad neutralization of foreign exchange"?
Does it require anything other than "balancing" "the actual CIF value of imports of
CKD/SKD kits/components and the FOB value of exports of cars and auto
components"?
(b) Is there an obligation to "balance" imports of "components" other than "SKD/CKD
kits/components"?  If so, where is the authority for that obligation under Indian law?
(c) Is there an obligation to "balance" purchases in India of imported "components" or
"SKD/CKD kits/components"?  If so, where is the authority for that obligation under
Indian law?
(d) If the answer to the first question in Part C is "yes," is there an obligation to enquire
whether components purchased in India are "indigenous" to India and, if they are not,
to document their "actual CIF value"?  If s o, where is the authority for that obligation
under Indian law?  Is a joint venture company entitled to rely in good faith on
representations made by vendors of components?
(e) Must the value of imports made in the first two years be "balanced" or only imports
made beginning in the third year?
(f) What is meant by the phrase "the EPCG related export obligation" in Public Notice
No. 60?  Please provide copies of the government measures (including laws, decrees,
regulations, instructions, and other implementing acts) relevant to "the EPCG related
export obligation".
(g) What is meant by the phrase "the export obligation would be met by export of cars as
well as auto components" in Public Notice No. 60?  Is there any obligation to exportboth cars and auto components or will export of sufficient quantities of either one
satisfy the export requirement?
24. Compliance with the export obligation:
(a) What is meant by the phrase "the value of imports of CKD/SKD may be regulated
with reference to the export obligation fulf illed in the previous years" as used in
Public Notice No. 60?  In particular, what  is meant by the phrase "with reference to"?
(b) Does this phrase require that the value of imports is automatically limited to the value
of the previous year's exports?  Or do the word "may" and the phrase "with reference
to" mean that the Government has discretion in determining whether to limit imports?
If so, does the Government have discretion in setting the amount of the limitation?
(c) If the Government has such discretion, who has the authority to exercise it and what
standards apply?  In particular, does the percentage of "indigenization" influence thelimitation on imports?  Where are the authority and standards specified in Indian law?G/TRIMS/W/12
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(d) What happens if a company has met the 70% "indigenization" level, but has not
started exporting yet?  Will its imports be limited?  If so, where is the authority to
limit such imports specified in Indian law?
(e) Other than the import limitation starting in the fourth year, are there any other
consequences for failing to start exporting in the third year?  In particular, are there
any other consequences that might be imposed during the third year?  If so, where isthe authority for those consequences specified in Indian law?
25. Why do the new export requirements apply to companies that had already entered into MOUs
under the 1995 Parameters?
26. Does the Government of India inform each of the joint venture companies of the results of the
Joint Annual Review?  Is the company given the opportunity to comment on the results?  May the
results be changed in light of the comments r eceived?  What steps are taken to ensure the
confidentiality of sensitive information obtained as a result of the MOUs, annual reports, or Joint
Annual Reviews?
27. What is meant by the phrase "under foreign collaboration" in Public Notice No. 60?  In
particular, how is this collaboration distinguished from a joint venture?
28. What are the policy purposes of the Public Notice No. 60?  Please explain it in general and
also with respect to the changes from the 1995 Parameters.  Did the Government of India considerwhether any other measures would further those policy purposes?  If so, please explain what other
measures were considered and why this measure was adopted?
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