TaxTMI 
TaxTMI 
Safeguard investigation concerning imports of Dioctyl Phthalate (DOP) –Final findings under Rule 11 of Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997.
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.... Additives Mfg .Co, seeking imposition of Safeguard Duty on imports of Dioctyl Phthalate (hereinafter referred to as DOP) into India alleging that increased imports of Dioctyl Phthalate was causing and/or threatening to cause serious injury to the domestic producers of Dioctyl Phthalate in India. The Notice of Initiation of safeguard investigation concerning imports of Dioctyl Phthalate into India was issued on 23rd May, 2012 and was published in the Gazette of India Extraordinary on the same day vide GSR 383(E). 2. A copy of the Notice of Initiation dated 23rd May, 2012 along with copy of non-confidential version of the application filed by the Domestic Industry were forwarded to the Central Government, in the Ministry of Commerce and other ministries concerned, Govts of exporting countries through their Embassies/ High Commission in New Delhi and all known interested parties listed below in accordance with Rule 6(2) and 6(3) of the Customs Tariff (Identification and Assessment of Safeguards Duty) Rules, 1997: Domestic Producers a. KLJ Plasticizers Limited, b. Payal Polyplast Pvt Ltd. c. PCL Oil & Solvent Ltd. d. N.K. Polymers & Additives Mfg.CO Importers/users a. Alpha Po....
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.... Royal Cushion Vinyl Products Ltd, Plot No. 55, Village, Garadhia, Taluka, Sayli, Distt Baroda, Gujarat cc. Viny Royal Plasticoats Ltd, Plot No. 319, Baroda, Godhra Road, Baska Village Halol, Panchmahal Exporters a. M/s. BASF Petronas Chemicals, SDN B DC 802, Central Tower, Wisma Conspant 1, Jalan SS16/4, Subang Jaya, 47500, Malaysia b. Chemcross Inc, Aisa, Yongsei Bldg; 4th Floor, Namdaeun Road, 5-KA, Chung-Ku, Seoul, South Korea c. Humade Corporation, Room No. 1505, Master Tower B/D 553, Dowha Dong, Mapo Gu, Seoul, 121-748, South Korea d. M/s Woori Pand Corporation, Rm. 905, Olympia Bldg. No. 196, Jamsilb On Dorg Sorgpa Gu, Seoul, South Korea e. The Normandy Group, S.A., Temple Financial Centre, P.O. Box 228, Leeward Highway, Providenciales, Turks and Cacos Islands, British West Indies, Netherlands f. Gulf Resources Development Corporation, P.O. Box 61283, Jebal Ali, Dubai, U.A.E. g. Petrochem Middle East FZE, P.O. Box 17028, Jabel Ali, Dubai, U.A.E. h. KASB Petroleum FZ Co., P.O. Box 117280, Dubai, U.A.E. i. UPC Technology Corporation, 5F, 20, Lane 478, Rueiguang Rd, Neihu Chiu, Taipei, Taiwan j. Continental Chemical Corp. PTE Ltd., 2 Seraya Plaza, Jurong Island, Sin....
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....stoms Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 by 1st October, 2012. Copy of written submissions filed by one interested party was made available to all the other interested parties. Interested parties were also given an opportunity to file rejoinders, if any, to the written submissions of other interested parties by 4th October, 2012. All the views expressed by the interested parties either in the written submissions or in the rejoinders were examined and have been taken into account in making appropriate determination. The Govt. of Taiwan and the Govt. of Republic of Korea filed post hearing written submissions through emails dated 25/9/12 and 1/10/12 respectively with no hard copies filed. M/s LCPMA also filed hard copy of post hearing written submissions on 5/10/12. M/s LCPMA also filed hard copy of post hearing rejoinder submissions on 5/10/12, i.e. after the due date. However, all these procedural lapse/delay have been considered and are condoned. 9. All the views expressed by the interested parties and other domestic producers either in the written submissions or in the rejoinders and response to the domestic industry submissions were examined a....
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....ant losses. At the same time, the profitability and consequently cash profits and return on investment have started declining in the most recent period, which had actually improved previously. j. Threat of serious injury is established by following factors. i. The price difference between domestic and imported product is significant; ii. The foreign producers are holding significant unutilized capacities. Resultantly, the foreign producers are looking for additional markets to the extent possible; iii. The major Chinese market has clogged for the export oriented producers of Korea and Taiwan, whereas the Indian market is quite strong; iv. There has been restriction in usage of DOP in Europe worsened by the crisis in Europe. Due to such restriction, the producers/exporters started looking for new markets for their products and India with its growing demand offered a better opportunity for them to export which has led to increase in imports from such countries and also pose a threat of further increase in imports. k. Since there is negligible impact on the eventual end product and considering that the survival of the domestic industry is must, the imposition of safeguard shall ....
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....to low capacity utilization of domestic industry which in turn is due to excess built up capacities and imports of domestic industry. f. Being the major users of DOP, its members would be the major affected parties in case of safeguard duty imposition, since its members' product does not get any protection. g. Thus safeguard duty should not be imposed if it is against Public interest as held in Supreme Court in Food Corpn. of India v. Kamdhenu Cattle Feed Industries (1992 Indlaw SC 426), National Buildings Construction Corporation v. S. Raghunathan and Others reported in 1998 (7) SCC 66, United Phosphorous in 1999 for imposition of safeguard duty on white/yellow phosphorous, United Phosphorous v. Director General (Safeguards), 2000 (118) E.L.T. 326 (Del.), Phosphorous Ltd. Versus Director General (Safeguards) 2000 (118) E.L.T. 310 (S.C.), h. There is no unforeseen circumstance which necessitates safeguard duty and further, domestic industry has no adjustment plan. E. Rejoinder by Domestic industry On submissions made by Leather Cloth and Plastics Manufacturers Association a. Safeguard investigations are on altogether different footings and involve a multi-stage proceeding whe....
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....ween the annualized data and the actual data. b. It is reiterated that the imports of Dioctyl Phthalate have increased in absolute terms as also in relation to production and consumption. c. Individual country movements in imports are entirely irrelevant under safeguard investigations. d. As a result of decline in demand for the eventual end product in Europe and coupled with significant additions to capacities in China (for Phthalic Anhydride and DOP), procurement of DOP by the Chinese manufacturers declined very steeply. e. The domestic industry performance is not linked to safeguard duty on Phthalic Anhydride. F. Rejoinder by importers/user industry Leather Cloth and Plastics Manufacturers Association a. Stake of exporters to Indian market is very small and hence they have not participated. Non participation does not make them supporters of the case. b. LCPMA will be highly affected and has been participating from beginning; hence no objection can be raised in this regard. c. Data provided by domestic industry has to be verified by Director General as objections have been raised by interested parties and the burden of proof is on the domestic industry. d. Domestic indu....
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....t has acquired many names and acronyms, including BEHP and di-2-ethyl hexyl phthalate. It is widely used as a plasticizer in manufacturing of articles made of PVC. Plastics may contain 1% to 40% of DEHP. It is also used as a hydraulic fluid and as a dielectric fluid in capacitors. DEHP also finds use as a solvent in glow sticks as it has suitable properties and the low cost. It has been used as a plasticizer in medical devices such as intravenous tubing and bags, catheters, nasogastric tubes, dialysis bags and tubing, and blood bags, transfusion tubing and air tubes. 6. Dioctyl Phthalate (DOP) is classified under Customs sub-heading No. 29173920 under the Customs Tariff Act, 1975. 7. The product under investigation is Dioctyl Phthalate (an organic compound) and abbreviated as 'DOP'. It is also known as Bis (2-ethylhexyl) phthalate (di-2-ethylhexyl phthalate, commonly abbreviated DEHP, also an organic compound with the formula C6H4(C8H17COO)2. The interested parties have not raised any issue with regard to the product under investigation 8. Therefore, domestically produced Dioctyl Phthalate falls under the ambit of like or directly competitive product in all respects to the impor....
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....on except the fact that the relevant investigation period should be sufficiently long to allow conclusion to be drawn on increased imports and serious injury. 13. The applicants in the instant case submitted import and injury data from 2009-10 to 2011-12 (upto Dec 2011) contending that year 2008-09 should be ignored and information should be considered from 2009-10 onwards for the present investigations, as the period 2008-09 was an abnormal period where industries both at domestic and international level, not only in the product under consideration, but in a large number of sectors, suffered due to global recession. The Directorate conducted the verification of data pertaining to injury parameters to the extent possible, starting from 2008-09, and the Notice of Initiation was issued with import and injury data from 2008-09 to 2011-12 (upto Dec 2011). Subsequently, the applicant submitted figure from January to March 2012. The additional information of 3 months was made available to all concerned and kept in the Public File as required under Rule 6(7) of Safeguard Rules 1997. 14. The interested parties claimed that the plea to ignore 2008-09 data should not be allowed as it is a....
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....f the interested party namely Korean Govt against annualization of import data in their post hearing submissions. (b) IBIS data for 2011-12 is available for the whole year and is also transaction wise, which has also been demanded by one of the interested party namely LCPMA in their post hearing submissions. (c) Even the domestic industry has also questioned the accuracy of DGCIS data for the year 2011-12 on the ground that it does not reflect complete transaction wise import of Dioctyl Phthalate in the country which is crucial for the injury analysis. They have submitted transaction wise import data from IBIS for the year 2011-12 along with their letter requesting for considering the same. E. Confidentiality of Information submitted 17. The domestic industry has provided information on confidential basis and sought confidentiality on the information/data submitted. The domestic industry provided non confidential version of all submission including the application for safeguard measure as per the provisions of Safeguard Rules, 1997 and Trade Notice No. SG/TN/1/97 dt. 06.09.1997. 18. Rule 7 of the Safeguards Rules and Article 3.2 of WTO Agreement on Safeguards provide for confi....
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....he increase in imports must be judged in its full context, in particular with regard to its "rate and amount" as required by Article 4.2(a). Thus, considering the changes in import levels over the entire period of investigation, as discussed above, seems unavoidable when making a determination of whether there has been an increase in imports "in such quantities" in the sense of Article 2.1. (emphasis added) 23. With regard to the nature of the increase in imports, the Appellate Body in Argentina--Footwear (EC)3, in contrast to the Panel, held that the increase in imports must have been recent, sudden, sharp and significant enough to cause or threaten to cause serious injury. Relevant extracts are as follows: "131. [T]he determination of whether the requirement of imports 'in such increased quantities' is met is not a merely mathematical or technical determination. In other words, it is not enough for an investigation to show simply that imports of the product this year were more than last year -- or five years ago. Again, and it bears repeating, not just any increased quantities of imports will suffice. There must be 'such increased quantities' as to cause or threaten to cause s....
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....ecent' implies some form of retrospective analysis. It does not imply an analysis of the conditions immediately preceding the authority's decision. Nor does it imply that the analysis must focus exclusively on conditions at the very end of the period of investigation. We consider that an analysis that compares the first semester of 1998 with the first semester of 1999 is not inconsistent with the requirement that the increase in imports be 'recent'." 26. The analysis of the increased imports of Dioctyl Phthalate has been conducted in the light of the above mentioned evaluations. Dioctyl Phthalate is imported into India from a number of countries, and primarily from Republic of Korea, Malaysia and Taiwan. It has been argued by Leather Cloth and Plastic Manufacturers Association (LCPMA) that domestic producers of the product have themselves imported significant volume of the subject material. Therefore, any analysis of imports should be done excluding such imports made by the domestic industry. The domestic industry has also said that the majority of imports now are either by the importers or consumers and they have no objection if the imports made by the domestic industry are....
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....he domestic production and consumption as to cause or threaten to cause serious injury to the domestic industry which is as under: (a) Imports: Description Unit 2008-09 2009-10 2010-11 2011-12 Total Imports MT 40,608 35,210 35,346 41,632 Imports made by DI MT 13,312 13,726 12,798 2,665 Imports(excluding DI imports) MT 27,296 21,484 22,548 38,967 29. There is a surge in import both in absolute and relative terms. Imports declined from 27,296 MT in 2008-09 to 21,484 MT in 2009-10 and thereafter increased to 22,548 MT (2010-11) and 38,967 MT in 2011-12. It is noted that imports were higher in 2008-09 partly due to recessionary effect in this period and therefore declined in 2009-10. The imports however surged thereafter from 21,484 (2009-10) to 38,967 MT (2011-12), i.e. by 81% which is sharp, sudden and recent. (b) Import in relation to production: It is seen that during the POI, imports have also increased in relation to total domestic production, as shown below: Description Unit 2008-09 2009-10 2010-11 2011-12 Total Indian Production MT 63,757 74,221 84,710 76,821 Imports(excluding DI imports) MT 27,296 21,484 22,548 38,967 Imports in ....
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....ons incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession. 35. The Appellate Body in Argentina - Footwear (EC case) held that the phrase unforeseen developments means the developments which were unexpected. 'Unforeseen developments' requires that the developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers must have been 'unexpected'. The Body in the same case noted a GATT panel report which held that the development must have been unforeseen at the time of tariff negotiation. The Appellate Body in Korea-Dairy case held that unforeseen developments a....
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....ea RP, Malaysia and Taiwan remained at significant level and cumulatively increased from 30,270 MT to 40,882 MT over the POI and sharply from 27002 MT in 2010-11 to 40882 MT in 2011-12 i.e. an increase of 34%, which roughly constitutes to about 98 % of the total imports (including that of DI). c) Moreover, the property bubble-burst in China has impacted most in the current DOP and the downstream PVC market. There has been a reverse trend in the housing, construction and real estate market in China leading Chinese Government to take strict regulatory measures which is reflected below: ICIS PRICING (PHTHALIC ANHYDRIDE), 18th November 2011 Producers said that sentiment among Chinese buyers is still cautious because of fears of a property bubble developing in China, as well as rising inflation in the country. ICIS PRICING (PHTHALIC ANHYDRIDE), 28 October 2011 In China, many polyvinyl chloride (PVC) producers, fearing an upcoming strong correction in the Chinese property market, had stopped stocking up on DOP material. PVC is a commonly used polymer in the construction segment for window panels, door frames, leather sofas and pipes. ICIS PRICING (PHTHALIC ANHYDRIDE), 23 December, ....
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....s, it is observed that the imports of product under consideration increased for a number of reasons. Setting up of new plants of phthalic anhydride in China which resulted in increase in production of Phthalic Anhydride, the production of Dioctyl Phthalate has also increased in China thereby reducing the market opportunity to the third countries foreign producers to export Dioctyl Phthalate to China. Exporters from Korea and Taiwan were compelled to search for the growing market for their product and India being the most viable choice was targeted, leading to increased imports in India, All these factors taken together form the unforeseen reasons for the increase in imports of DOP. Therefore, I hold the rise in import of Dioctyl Phthalate from Korea and Taiwan to be an unforeseen development resulting in increase in imports causing serious injury and threat of serious injury to the domestic industry. H. Serious Injury and Threat of Serious Injury: 40. "Serious injury" means an injury causing overall impairment in the performance of the domestic industry; and "threat of serious injury" means a clear and imminent danger of serious injury. 41. The Article 4.2(a) of the Agreement o....
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....a technical examination of whether the competent authorities in a particular case have evaluated all the listed factors and any other relevant factors, we believe that it is essential for a panel to take the definition of 'serious injury' in Article 4.1(a) of the Agreement on Safeguards into account in its review of any determination of 'serious injury'." 43. The Panel on US -- Wheat Gluten7, in a finding upheld by the Appellate Body, elaborated on the meaning of the term "serious injury": "[A] determination as to the existence of such 'significant overall impairment' can be made only on the basis of an evaluation of the overall position of the domestic industry, in light of all the relevant factors having a bearing on the situation of that industry. … [W]e do not consider that a negative trend in every single factor examined is necessary in order for an industry to be in a position of significant overall impairment. Rather, it is the totality of the trends, and their interaction, which must be taken into account in a serious injury determination. Thus, such upturns in a number of factors would not necessarily preclude a determination of serious injury. It is for the inv....
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....t share of imports was high and consequently market share of the domestic industry was low in 2008-09 due to recessionary effect in this period. Market share of the domestic industry increased in 2009-10. The same however declined, thereafter, significantly. c. Production: 49. The production has been determined on the basis of production reported by the Domestic Industry in its excise records. The statistics relating to production pertaining to the domestic industry is shown below. Particulars Unit 2008-09 2009-10 2010-11 2011-12 Total Capacity MT 155,750 155,750 155,750 190,750 Production MT 60,242 69,468 77,492 74,943 50. It is seen that the production of the domestic industry was increasing from 60242 MT (2008-09) to 69468 MT (2009-10) and then to 77492 MT (2010-11). The production however thereafter declined to 74943 MT in 2011-12. Given that the domestic industry further enhanced its capacity in 2011-12, the decline in production despite increase in capacity is quite significant and is clearly adverse situation. d. Domestic sale: 51. The sale of the domestic industry has been determined on the basis of goods cleared by the Domestic Industry from their fa....
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....entories. The levels of average inventories declined in 2009-10 to 823 MT but thereafter increased to 1,223 MT in 2010-11 and 1744 MT in 2011-12. Year Index Average Inventory(MT) 2008-09 100 1066 2009-10 77 823 2010-11 115 1223 2011-12 163 1744 g. Employment and productivity: There is no significant change in the level of employment and in productivity over the injury period. It has shown normal growth over the period. It is observed that these parameters are dependent on a number of other parameters and not reflective of impact of imports on the domestic industry. h. Price undercutting, suppression/depression: 58. It is seen that the landed price of imports is below the selling price of the domestic industry. The imports are available at prices lower than the selling price of domestic industry making it attractive for consumers to switch over to imports. Due to low priced imports, domestic industry is facing decline in production, capacity utilization, profits and return on investment. 59. The trend in cost of production and selling price is also examined. It is seen that whereas both the cost of production and selling price increased, the increase in selling p....
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....port cannot be relied upon. Further Dioctyl Phthalate constitutes 50-60% of the total turnover of the domestic industry over the period considered and therefore the balance sheet, which provides for the overall performance of the domestic industry, cannot be relied upon for the Dioctyl Phthalate performance. 65. Conclusion regarding serious injury -The imports of the product under consideration have increased significantly in absolute terms and in relation to production and consumption in India. It is noted that the imports volume was high in 2008-09, which the domestic industry contended, was due to global recessionary effect. The volume of imports both in absolute terms and in relation to production and consumption declined in 2009-10 after the recessionary effect was subsided. However, the imports surged thereafter significantly both in absolute terms and in relation to production and consumption in India. As a result of significant surge in imports, the domestic industry has suffered serious injury. Performance of the domestic industry improved upto 2010-11 in respect of production, capacity utilization, domestic sales and profits. Production, capacity utilization, domestic sa....
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....rious injury pertains to imminent significant overall impairment, i.e., an event to take place in the immediate future, the same principle should hold true a fortiori for threat determinations compared with present serious injury determinations. This supports the view that the USITC was correct to focus on the most recent data available from the end of the investigation period. We also consider that data from 1997 and interim-1998 cover an adequate and reasonable time-period if complemented by projections extrapolating existing trends into the imminent future so as to ensure the prospective analysis which a threat determination requires. Therefore, we consider that, by basing its determination on events at the end of the investigation period (i.e., one year and nine months) rather than over the course of the entire investigation period, the USITC analysed sufficiently recent data for making a valid evaluation of whether significant overall impairment was "imminent" in the near future. By the same token, we also consider that, by basing its determination at all on data about events from the recent past, rather than relying exclusively on projections for the various industry indicat....
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....company source said on Thursday. UPC will start building the complex early next year said the source. The complex will comprise a 140,000 tonne/year PA plant and a 240,000 tonne/year DOP plant. Source: ICIS PRICING (PHTHALIC ANHYDRIDE), 2nd December 2011 Taiwan's Nan Ya Plastics is aiming to bring its total PA operating rate to 100% of capacity by the middle of December, as the company is expecting PA demand from China and southeast Asia to pick up by the end of the year, a company source said on Friday. The source added that Nan Ya's demand for PA will increase when it restarts its downstream 400,000 tonne/year dioctyl phthalate (DOP) plant at the same site on 5 December. 71. Furthermore, a significant impact on DOP market has been of floods in Thailand which grappled the buying trends in the country at zero level. This resulted in diversion of Chinese inventories to other viable markets. This situation persists in light of already existing capacities with Korean and Taiwanese producers which once were chief exporters of DOP to China. In fact, one Taiwanese producer is in process of starting up its under-construction facility in July 2013, comprising a 140,000 tonne/year Phtha....
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....een the foreign and domestic producers: There is no trade restrictive practice which could have contributed to the injury to the domestic industry. d) Export performance: Applicants have exported small volumes of the product under consideration. However, the claimed injury to the domestic industry is on account of domestic operations. Applicants have provided costing and injury information for domestic operation. Claimed injury to domestic industry cannot be attributed to exports. e) Developments in technology: Technology for production of the product has not undergone any change. Developments in technology are, therefore, not a factor of injury. 75. It is thus noted that possible other factors have not caused injury to the domestic industry. I. Causal Link between Increased Import and Serious injury or Threat of Serious injury: 76. A comprehensive evaluation of parameters as above demonstrates that serious injury and threat of serious injury is being caused by increased imports. For the purpose of determining causation, all relevant factors of an objective and quantifiable nature having a bearing on the situation of the industry have been evaluated. In the instant case, the i....
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....ucers are keen to export leather cloth to India. c) Since all state actions are taken in larger public interest, it is imperative for the government authorities to examine public interest issue. 80. The domestic industry submitted as follows: a) The Plastiziers consumer industry is such that it can and does pass over its cost increases to the downstream products. Further the impact of say 20% safeguard duty on its 3 major users is minimal, as the impact of the same on Leather Cloth is 0.29%, on Copper cable is 0.02% and on PVC flexible pipe is 0.43% which is almost negligible. b) DOP has nil customs duty protection. Two major raw materials namely Phthalic Anhydride and 2EHA used in the production of the product under consideration have the same level of customs duty. However, these two have 2.5% duty protection respectively. c) In the past decade a number of producers have already shut down their operations. Moreover, if the injury to the domestic industry continues, it may lead to the closure of the remaining domestic producers, as a result of which, 'DOP' an important chemical would not be manufactured in the Country thereby leaving the users of the 'DOP' wholly dependent o....
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....e WTO Agreement on Safeguard provides that a member shall apply safeguard measure only to the extent necessary to prevent or remedy serious injury and facilitate adjustment. 88. The purpose of definitive safeguard measure is to provide the domestic producers with a limited period of time in which to restructure so as to more effectively compete with the imports. Section 8B (4) of Customs Tariff Act 1975 and Rule 16(2) of Safeguard Rules 1997 prohibits any possible extension of measure if there is no evidence that the domestic producers are adjusting. 89. Following are the adjustments plan provided by the domestic industry essentially comprising of the following: d. Batch process to continuous process e. Automation of plants f. Waste Recovery g. Reduction in energy cost h. Stringent monitoring of the plant using IT i. Reduction in administrative expenses j. Effective inventory management k. Power saving by modernizing electrical equipments l. Use of better manufacturing practices m. Improvement in management practices 90. The restructuring plan submitted by the domestic industry focuses on cost reduction and optimum utilization of existing production capacity. It is not....
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.... it is seen that a. Imports of the product under consideration have increased over the injury period in absolute terms with a sharp increase in imports in the recent period, b. Increased imports of DOP (Dioctyl Pthalate) from various countries have caused and threatened to cause serious injury to the domestic industry/producers of DOP; and c. It has been established that injury to various economic parameters of the domestic industry like production, sale, inventory etc. has been caused by the increased imports of DOP; and d. It will be in the public interest to impose safeguard duty on imports of DOP from all countries, except originating from developing nations except Malaysia in terms of proviso to Section 8B of the Customs Tariff Act, 1975. N. Recommendation: 95. In terms of Rule 12 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules 1997, after considering the average cost of production of Dioctyl Phthalate by the domestic producers, after allowing a reasonable return on capital employed, a Safeguard Duty on all import of Dioctyl phthalate, an organic compound and abbreviated as DOP falling under Chapter heading 29173920 under the Custom Tariff A....