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India concludes its first-ever Quantitative Restriction safeguard investigation

A never-ending safeguard investigation in India has finally concluded with the Indian Authority (‘DGTR’) issuing its final findings in quantitative restrictions safeguard investigation on imports of Isopropyl Alcohol nearly after 22 months since its initiation. This makes it the longest safeguard investigation by India ever!!

This was the first-ever quantitative restriction safeguard investigation conducted by India and is thus worthwhile looking at some key findings made by the DGTR:

1. Domestic producer who imports is eligible ‘domestic industry’ under safeguard provisions

The Indian safeguard provisions do not contain an express provision (like in anti-dumping or anti-subsidy provisions), excluding a domestic producer, who is also an importer.

2. Increase in imports was due to unforeseen developments and the effect of obligations

DGTR concluded that the increase in imports was a result of the oversupply of acetone, and the resultant decline in prices leading to declining IPA prices, which in turn led to a surge in imports of the product. This was held to be unforeseen development.

It also concluded that unforeseen development has to be seen in respect of all imports into India and not for each exporting country separately.

As regards obligations incurred under WTO, DGTR noted that the present duty on the product under consideration is only 7.5%, while the bound rate of customs duty on the product is 40%. The increase in imports, according to DGTR, was thus due to obligations incurred by India under GATT in the form of tariff concessions.

3. Serious injury and causal link existed

DGTR established serious injury by examining demand/consumption situation, domestic industry’s market share, its sales, production, capacity utilization, productivity, profitability, price undercutting

4. Domestic industry must provide a viable adjustment plan to adjust to increased imports

The domestic industry stated that it is in the process of setting up of acetone-based plant and relevant information thereof. This was considered appropriate by DGTR.

5. Public Interest examined

DGTR concluded that the impact of any price increase on the final product will be insignificant as only volumes will be regulated through this measure.

6. Determination of Quota

Quota is based on an average of imports in the three representative years during the POI

DGTR fixed quota after considering –

  • The growth rate in demand during the 63-month period from April 2016 to June 2021 and taking it up to September 2021 by enhancing the average threshold by an additional appropriate factor of growth. What is the ‘appropriate factor’ of growth is not known.

  • Present and future demand.

  • Capacities of Indian producers, which have been correlated with current and future demand.

7. Administration of Quota

Quota allocation is based on a country-specific basis.

All developing countries (except China) as mentioned in per Notification No. .19/2016-Custom (NT), dated 5th February 2016 excluded from measures.

Imports would be permitted through the EDI ports only to facilitate electronic/real-time monitoring of quota.

Quota to be monitored on a quarterly basis.

The total imports allowed in any quarter shall not exceed the total of that quarter and the next quarter.

Any unutilised quota for a quarter shall be added to the next quarter. Further, any excessively utilised quota for a quarter shall be deducted from the quota for the next quarter. This would ensure that the exporters and the associated importers would be able to regulate the volumes smoothly.

In case, the countries with specific quotas exhaust their specific quotas, such countries may use the available residual quota.

8. Next Steps

Ministry of Finance has to take a decision on implementation of said recommendations. There is no time limit prescribed within which the Ministry of Finance has to take a decision.

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