India will seek stricter compliance of rules of origin clause from countries in the ASEAN region to prevent cheaper stainless steel getting dumped into the country without any substantial value-addition talking place in the originating country.
Stainless steel imports from countries such as Malaysia has seen a surge in recent months even though there is very little value addition in the country. Cheap steel is coming with wrong certification using the zero duty benefit available under the Indo –ASEAN free trade agreement (FTA).
Under the Indo-ASEAN free trade agreement (FTA), there is no separate product specific tariff structure, but a rule of origin clause that mandates that exporting country should undertake at least 35 per cent value addition in products to qualify for lower duty under the trade agreement.
Government sources said that trade negotiators were looking at introducing product specific rule (PSR) in Indo-ASEAN FTA to restrict zero duty on products that harm the local industry. The PSR rules are already defined under the India Korea comprehensive economic partnership agreement (CEPA) or the India-Japan comprehensive economic cooperation agreement (CECA).
“The Reserve Bank of India (RBI) has already said that the domestic steel sector poses the most serious stress for the banking segment. Barring problems in the domestic market, steel companies are also facing serious challenges from dumping. The government plans to correct this through changes in international trade agreements,” a steel ministry official privy to the development, said.
It is understood that commerce minister Nirmala Sitharaman has already raised the issue at the meeting of trade ministers of ASEAN and other free trade agreement (FTA) countries that are meeting in Malaysia. She has also taken up the issue bilaterally with Malaysia to tighten in export authorisation process so that companies there could not misuse the provisions of India-ASEAN FTA.
The issue is also likely to be taken up during negotiations at the Regional Comprehensive Economic Partnership (RCEP) meeting slated in Myanmar next month.
The move for changes in international trade agreements comes at a time when the finance minister has already raised protection for carbon steel by increasing import duty by 2.5 per cent. He is also considering a proposal to further raise import duty on various grade of steel to the 15 per cent level. The total steel imports in the country, (including stainless steel), has also risen 72 per cent in 2014-15 to 9.3 million tonnes.
After registering moderate growth in 2013-14, stainless steel imports have shot up by 42 per cent to 4,59,163 tonnes in 2014-14. The domestic stainless steel production is about 1.25 million tonnes. The spurt in imports has not abated in the current fiscal year as well with 1,03,636 tonnes already imported in April-June quarter. Of the June import figure of 36,332 tonnes, imports from Malaysia stands 3,364 tonnes, the highest after China.
“Within the ASEAN country, it would not be possible to deliver a 35 per cent value addition in order to qualify for preferential duty by a simple transformation from hot rolled to cold rolled products. 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,” said a steel industry analyst, not willing to be quoted on the issue because of his association with the government.
A case in point here relates to Malaysia's Bahru Stainless, a subsidiary of Acerinox of Spain, which imports hot rolled coils from group companies like Columbus of South Africa and its parent Acerinox, in Spain and China. It has been alleged that Malaysian authorities issued a preferential certificate of origin clearing 35 per cent value addition even though the company is undertaking limited cold rolling operations, under which a 35 per cent value addition cannot be achieved. This is considered a blatant misuse of the provisions related to rules of origin.
“It is no lack of adequate capacity within the country, which is contributing to the import surge. The domestic industry has been forced to lower its prices and sell below cost or face loss of sales volume and market share,” Indian Stainless Steel Development Association (ISSDA) president N C Mathur said.
“On account of a depressed market and continued surge in imports, most domestic manufacturers of stainless steel are already operating under financial duress,” said Sanak Mishra, secretary general and executive head, Indian Steel Association.
It may be mentioned that during June, India slapped anti-dumping duty of up to $ 316 per tonne on imports of certain steel products from Japan, Korea and China, to protect domestic producers from below-cost inbound shipments.
The steel ministry is in favour of removing steel from the list of tradable items under FTA. In addition, it is also examining a proposal to bring more steel products under quality control order to prevent entry of low-grade steel into the country. At present, the ministry has fixed quality standards for 15 steel products.
Source: mydigitalfc.com
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