India has taken significant steps to shield its steel industry from a surge in imports by proposing the imposition of a provisional 12% safeguard duty on specific steel products for 200 days. This measure comes after the Directorate General of Trade Remedies identified a serious injury to the domestic industry caused by rising imports. The country’s steel imports, particularly from China, South Korea, and Japan, have been on the rise, exacerbating the situation for local steel producers.
What is Safeguard Duty?
A safeguard duty is a temporary tariff imposed by governments to protect domestic industries from a sudden surge in imports that could harm local production. Unlike anti-dumping duties, which are applied when products are sold below market value, safeguard duties aim to curb import influx regardless of pricing.
In this case, India’s government recognizes the urgent need for protection, particularly given the critical state of the domestic steel industry, which is currently facing a flood of imported steel. The DGTR’s recommendation emphasizes that any delay in imposing this measure could lead to irreversible damage to India’s steel sector.
The Reason Behind the Surge in Steel Imports
India’s steel imports from countries like China, South Korea, and Japan have surged due to a series of global trade dynamics. The imposition of protective measures by the United States in 2018, including tariffs on steel imports, has led to what is known as "trade diversion." As the US raised barriers to steel imports, suppliers turned to other markets, including India, leading to a spike in steel imports.
In response to similar concerns, several countries, including the European Union, South Africa, Turkey, Vietnam, and Malaysia, also introduced safeguard duties and other protective measures for their steel industries. India’s move is seen as part of this broader global trend of implementing trade safeguards to protect local markets from the unintended consequences of such trade diversions.
Details of the Provisional Safeguard Duty
The proposed safeguard duty will be set at 12% ad valorem, meaning it will be calculated as a percentage of the value of the imported steel products. This duty will be levied for 200 days while the final determination of the investigation is being carried out. The DGTR has expressed that this temporary measure is vital to prevent serious injury to the domestic industry in the short term.
Notably, certain product categories, such as stainless steel, cold-rolled grain-oriented electrical steel, and aluminium-coated steel, have been excluded from the safeguard duty. This exclusion is likely to avoid any unnecessary disruptions to specific sectors of the steel market.
Trade Diversion and Its Impact
The concept of trade diversion refers to the rerouting of goods from one market to another as a result of new trade barriers. In this case, the protective measures imposed by the US in 2018 triggered a significant shift in the flow of steel exports, pushing countries like China and South Korea to redirect their products to India.
As a result, India has seen a rise in imports of certain steel products, leading to price suppression and potentially harming domestic manufacturers. The DGTR has stated that India must implement protective measures that are sufficient to combat this trade diversion and safeguard the interests of local steel producers.
Next Steps in the Process
The DGTR’s findings have been presented for public consultation, with a 30-day window for stakeholders to provide their comments on the proposed safeguard duty. Following this period, an oral hearing will be held to discuss the matter before a final decision is made.
While the provisional safeguard duty offers short-term relief, the final outcome of the investigation will determine whether the duty will be extended or modified. The DGTR has emphasized the need for prompt action to prevent further injury to the domestic steel industry.
Key Takeaways:
• Provisional Safeguard Duty: India is proposing a 12% safeguard duty on certain steel imports for 200 days to protect its domestic steel industry.
• Reason for Action: The surge in steel imports, particularly from China, South Korea, and Japan, has caused significant harm to local producers.
• Trade Diversion: Protective measures by the US and other countries have led to the diversion of steel exports to India, intensifying the need for safeguards.
• Excluded Products: Stainless steel, cold-rolled grain-oriented electrical steel, and aluminium-coated steel are exempt from the duty.
• Public Consultation: The DGTR has opened a 30-day window for comments before a final decision is made, following an oral hearing.
• Impact on Industry: The duty aims to shield domestic manufacturers from price suppression and other negative effects of increased imports.
