Steel ministry for removing duty exemption categories

22 December 2015

After anti-dumping and safeguard duties, the Union ministry of steel wants to plug another trade route to prevent cheaper imports. It has recommended that Rule 11(1)(c) for imposition of countervailing duty (CVD) be amended, so that a duty can be imposed on exempted categories of imports.

Senior government officials explained the Rule specifies a ‘non-actionable category’ for the purpose of CVD, which acts as an anti-subsidy duty on imported products. The purpose of a CVD is to provide a level field to domestic companies and countervail the impact of a subsidy given by exporting countries. It is usually set at a rate equivalent to the excise duty imposed on products manufactured in the country.

Three categories of subsidy come under the rule—those given out for research and development in manufacturing, export and production; assistance to disadvantaged regions within a country and assistance to promote adaptation of existing facilities to meet environmental norms. In all three cases, the rule which has been designed to meet norms set by the World Trade Organization, does not allow imposition of CVD. According to Arpita Mukherjee, professor, Icrier, it would be very difficult to amend the Rules which are made under the agreement on Subsidies and Countervailing Measures (SCM) of WTO. "It is already a very good agreement and doesn't stop any country from imposing CVD, one just needs to prove injury."

The Union steel ministry has asked the department of commerce to recommend amendment of the customs rules, so that CVD can be imposed even under the three circumstances. “Though the rule is not being applied strictly, the ministry feels amending the norms will help facilitate imposition of CVD. The domestic industry has been complaining about below-cost import from China and Korea,” said an official.

Increased import has pushed domestic steel companies into losses, cumulating to Rs 4,238 crore in the quarter ending September as against Rs 4,647 crore profit last year during the same period.

The proposal has come on the heels of one for imposition of a threshold price for imports, a minimum import price (MIP). Senior officials in the ministries of commerce and steel are engaged in discussions over both the proposals. Amendment to the CVD rules would require concurrence of the Central Board of Excise and Customs, which usually goes by the advice of the department on commerce on trade matters. The commerce department is likely to soon also issue a notification for imposition of MIP on selected items. The ministry of steel had earlier this month sent a comprehensive list of 14 categories, with about 40 products, to the ministry of commerce and industry for notifying an MIP.

The government had earlier imposed a provisional safeguard duty of 20 per cent on hot rolled coils.