India to resolve stainless steel import dispute with Malaysia

17 July 2015

Indian officials are scheduled to hold a meeting with their Malaysian counterparts to discuss ways of curbing misuse of Asean Free Trade Agreement (FTA) that has led to an alarming rise in stainless steel imports from that country in the last one year.

The meeting will also be attended by officials of the Indian Stainless Steel Development Association (ISSDA), an industry body which has been spearheading the issue.This follows a representation from ISSDA on the issue to the ministry of external affairs and the steel ministry. In particular, it has urged the government to review the Rules of Origin under the IndiaAsean trade in goods agreement at the earliest.

In order to qualify for preferential duty rates as per the India-Asean FTA, products have to meet a norm of 35% value addition. For this, all imports must be accompanied by a certificate of origin issued by the originating country . However, there has been instances of preferential tariff being availed without proper certificate or mis-declaration of value addition norms.

To counter this impact, ISSDA has suggested that a Product Specific Rule (PSR) as defined under the India Korea Comprehensive Economic Partnership Agreement (CEPA) or the India Japan Comprehensive Economic Co-operation Agreement (CECA) be adopted and followed in case of the India-Asean FTA.

"Malaysia has no hot rolling facilities for stainless steel. The input in this case, hot rolled coils required for cold rolling isimported from countries outside the Asean region like China, South Africa. Within the Asean countries, it would not be possible to deliver a 35% value addition in order to qualify for preferential duty ," NC Mathur, president of ISSDA, said.

However, it has been increasingly found that some companies mainly from Malaysia are furnishing preferential certificates of origin to convince Indian customs authorities that the material has originated in Malaysia.

Incidentally, according to latest data for June 2015, Malaysia accounted for 3,364 tonnes of stainless steel imports, second only to China at 19,962 tonnes. Stainless steel imports from China more than doubled to 2.31 lakh tonnes per annum (ltpa) in FY15 as against 1.11 ltpa in FY14. Imports from Malaysia jumped to 27,238 tonnes in FY15 from only 96 tonnes in FY14 in the wake of a 37% increase in total stainless steel imports to 4.59 ltpa in FY15.

While domestic stainless steel capacity is around 27 lakh ltpa, led by key players like, Steel Authority of India Limited (SAIL) and Jindal Stainless Ltd, a portion of it is idle due to imports.

There is also need to ensure reciprocal tariff reduction in all Asean countries for stainless steel products, the ISSDA official said. Though India has opened its market under free trade agreement, it has not achieved a reciprocal tariff reduction in all Asean countries for stainless steel flat products. Among the Asean countries, Thailand, Malaysia and Vietnam have most favoured nation (MFN) tariffs which are considerably higher.