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India may impose safeguard duty on 12 Chinese items

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India is likely to impose safeguard duty — an emergency import duty — on about 12 products originating from China. The Directorate General of Safeguards (DGS) under the finance ministry has already recommended safeguard duty on import of soda ash and certain aluminum products from China, earlier this year.

“The government will initiate safeguard duty investigations on about 12 to 13 products belonging to chemicals and base metals sector. Import of these products from China has surged in the past few months, causing injury to the industry. In most cases, this provisional duty is likely to be for a period of 200 days,” said a government official in the know.

Proceedings for imposing safeguard duty on Chinese Nylon Tyre Cord Fabric have already been initiated by the DGS on February 6 this year. Significantly, these moves to protect the domestic industry come at a time when India’s industrial production contracted for two consecutive months ending January, 2009.

These protectionist measures are compatible with the World Trade Organisation (WTO) norms. While acceding to the WTO in 2001, China had agreed that any member of the multilateral trade body could impose safeguard duties on its products, if their imports were harming the domestic industry. This duty is known as transitional safeguard duty and is specific to China.

Under normal circumstances, safeguard duty is product specific, and is applicable to all countries from which the product is being imported.

While imposing any kind of safeguard duty, the country has to prove that the surge in imports has adversely impacted the domestic industry producing the same products. The duty is notified by the Central Board of Excise and Customs (CBEC).

The DGS has recommended a 21 per cent duty on aluminum flat-rolled products as well as aluminum foil imported into India. The recommendation was made on February 2 earlier this year. However, the CBEC has not issued any notification in this regard.

In addition, 31 per cent safeguard duty has also been recommended on imports of Chinese soda ash by the directorate on January 30 this year. But again, the notification is yet to be issued.

Government sources said the notifications had been delayed due to the model code of conduct in force fir the coming general elections.

The complaint on Chinese aluminum imports was filed by the Aluminum Association of India with active support from Hindalco Industries Ltd, which accounts for 70.66 per cent of flat-rolled products produced in the country. The same company also accounts for half of aluminum foils produced in the country.

According to the data provided by the association to the DGS, the share of domestic industry in flat-rolled aluminum products decreased from 85 per cent in 2005-06 to 77.3 per cent in the April-December period of 2008.

In the same time span, market share of Chinese imports in India expanded about three times to nearly 15 per cent in the April-December period of 2008. As a result, capacity utilisation in Indian factories producing the product dropped from 107 per cent to 90.3 per cent.

Complaints from soda ash producers were filed by a consortium of industries, including Tata Chemicals. These companies said that in the April-October period of 2008, average imports per month were about 4,041 metric tonnes. But in November 2008, the country imported 10,000 metric tonnes of the chemical from China. In the next month, imports stood at 15,000 metric tonnes. The companies complained that their inventories grew 20 per cent between November 2008 and January 2009 due to the surge in Chinese soda ash imports.

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