Duty evasion on Chinese sweetener leaves bitter taste, invites probe

DGTR probes alleged circumvention of countervailing duty via trade re-routing

The Directorate General of Trade Remedies (DGTR) has initiated investigation concerning alleged circumvention of countervailing duty imposed on imports of saccharin from China after complaints that the artificial sweetener originating from China is being exported via Thailand.

Saccharin is used in food and beverages, personal care products, table-top sweeteners, electroplating brighteners, pharmaceuticals, among others.  

DGTR had recommended countervailing duty on imports of saccharin from China in June 2019, which was approved and notified by the finance ministry in August 2019. The countervailing duty of 20 per cent is in force until July 2024.

Countervailing duty applies to goods that have benefited from government subsidies in the country of origin, resulting in substantially lower-than-normal prices.

Swati Petro Products, which is the applicant and a major domestic saccharin producer, has claimed there is no known producer of saccharin in Thailand.

“Exports of saccharin consigned from Thailand to India are substantially manufactured in China claiming the same as goods originating in Thailand. Change in pattern of trade, whereby imports from China have declined and imports from Thailand have increased significantly. The imports of product under investigation (PUI) are prima facie subsidised and undercutting the prices of the domestic industry,” it added in its complaint

to DGTR.

The latest available official trade data shows during the April-January period of 2021-22, while import of saccharin from China declined 31.5 per cent to $2.2 million, the import of the artificial sweetener from Thailand shot up by a whopping 8,500 per cent to

$1.4 million.  

“The authority, on the basis of prima facie evidence provided by the applicant, notes that exports of saccharin consigned from Thailand are undermining the remedial effects of the existing countervailing duty measure imposed on imports of PUC from China,” DGTR said in a notification.

Saccharin is considered to be a low-calorie substitute for cane sugar. The PUI in the present case is “saccharin in all its forms”.

Primarily there are two types of saccharin i.e., soluble and insoluble. In market parlance, soluble saccharin is called sodium saccharin, whereas insoluble saccharin is called saccharin or saccharin acid.

Saccharin is produced in two physical forms — granular and powder. Soluble sodium saccharin in granular form is used in situations where saccharin will be dissolved. The powder form, which has been grounded and spray dried, is used in dry mixes and pharmaceuticals. It is slightly soluble in water. The insoluble form of saccharin is used in many pharmaceutical and medical applications.

DGTR has asked relevant stakeholders for information relating to the present investigation within 37 days from the date of receipt of notice. After completion of the investigation within a period of one year, DGTR needs to submit its recommendation to the finance ministry, which will take a final call on further action on the matter.

In the past three years, however, the finance ministry has rejected at least 50-60 recommendations by DGTR, citing public interest.

The Central Board of Indirect Taxes and Customs Chairman Vivek Johri last month told Business Standard that the Centre — while taking a call on whether or not to impose anti-dumping duty — has to balance the interests of the manufacturing industry and the user industry. “That is a tightrope walk we do,” he added.

According to the World Trade Organization, during the 2015-20 period, India initiated 20 countervailing investigations, and 11 measures were in place. As in the case of anti-dumping duties, most of the measures applied to imports originating in China.