TMI BlogSafeguard Investigation concerning Imports of “Unwrought Aluminium (Aluminium not alloyed and Aluminium alloys)” into India- Preliminary FindingsX X X X Extracts X X X X X X X X Extracts X X X X ..... , Mumbai 400030 for imposition of Safeguard Duty on imports of Unwrought Aluminium ( Aluminium not alloyed and Aluminium alloys) into India to protect the domestic producers of Unwrought Aluminium ( Aluminium not alloyed and Aluminium alloys) against serious injury /threat of serious injury caused by the increased imports of Unwrought Aluminium ( Aluminium not alloyed and Aluminium alloys) . The domestic industry has also requested for imposition of provisional safeguard duty in view of steep deterioration in performance of the domestic industry as a result of increased imports of Unwrought Aluminium ( Aluminium not alloyed and Aluminium alloys) . 2. In order to satisfy the requirements under Rule 5 of the said Safeguard Rules , the information presented by the applicant was verified to the extent considered necessary. The non-confidential version of verification report is kept in the public file. Having been satisfied that the requirements of Rule 5 were met with, safeguard investigation against imports of Unwrought Aluminium ( Aluminium not alloyed and Aluminium alloys) into India was initiated vide Notice of Initiation dated 19th April, 2016 and published in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 9. The Customs Tariff Act, 1975 , the Customs Tariff (Identification and Assessment of Safeguard duty) Rules, 1997 , the Agreement on Safeguards and the Article XIX of GATT do not specifically define what the Period of Investigation should be. From several case laws on safeguard measures, it is clear that neither the domestic laws on Safeguard nor Agreement on Safeguards and Article XIX of GATT provide specific guidelines on the period of investigation except the fact that the relevant investigation period should be sufficiently long to allow conclusion to be drawn on increased import and serious injury. The period of investigation in this case has been taken from 2011-12 to 2015-16 which is long enough to take into consideration the market conditions and to ascertain the need, if any, for imposition of Safeguard Duty. (IV) Source of Information: 10. The import data till January, 2016 for the PUC has been taken from Export Import data bank, Ministry of Commerce (http://www.commerce.nic.in/eidb/icomq.asp) and the domestic data from 2011-12 to 2015-16 has been submitted by the applicant and the same has been verified by the department on the basis of excise records an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e smelters continue to operate and feed the already over supplied world Aluminium market. Since China has export tax on Ingots and tax rebate on value added products, the exports from China is taking place on value added products of Aluminium. Some of the value added products also known as fake semis are exported with a view to avail the export rebate and avoid export tax. These fake semis are ultimately meant for re-melting into Ingots at the place of destination. All this was unforeseen by the Domestic Industry (ii) On the other hand in the Middle East, a very significant increase in production capacity of Aluminium in the recent past, backed by very low energy cost, have resulted in surplus capacities at their end. With the already existing glut of Aluminium due to the excessive Chinese export to the world market, the Middle East producers have focussed their attention on the nearby freight friendly market of India. 14. It is observed that the above circumstances are unforeseen which has lead to significant increase in the imports of the PUC into India. (VII) Increased Imports: 15. Imports of PUC into India are as detailed below: Financial Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction (MT) % of import with respect to all India production 2011-12 2,42,533 19,27,464 13 2012-13 3,08,279 20,73,367 15 2013-14 3,48,889 20,88,900 17 2014-15 3,43,428 25,49,372 13 2015-16 4,32,370(Annualised) 28,18,978 15 The Imports have increased from 242533 MT in 2011-12 to 432370 MT in 2015-16 (Annualised) which shows an increase of 78%. It may be seen that import in the recent year 2015-16 has increased by 26% when compared to immediate preceding year 2014-15 which in my view is sudden, sharp and significant . c) Market Share Changes in levels of Sales: (MT in 000 s) Financial Year Import Sales of DI Captive Consumption Sales of other Indian Producers Total Demand % of Market Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,900 2014-15 29,04,841 13,53,271 47 27,54,114 2015-16 32,58,465 15,63,639 48 29,27,819 e) Profit/loss The profitability of the DI has steeply deteriorated in 2015-16 and the DI has recorded losses as can be seen from the table below:- Financial Year Domestic profit/loss (Rs/Kg) (Indexed) 2011-12 100 2012-13 11 2013-14 (4) 2014-15 154 2015-16 (Up to Dec,15) (231) f) Inventories The table below depicts the inventory levels during the POI. Financial Year Inventory (in MT) Indexed 2011-12 100 2012-13 53 2013-14 46 2014-15 97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. There are a number of parameters on which the DI is showing positive trends, however, the most significant and the most dominant factor is profitability of the DI which has shown a serious downturn in the recent past due to increased imports arriving at depressed prices. In view of the above, it is seen that there is a deterioration in the financial parameters of the domestic industry causing losses to the DI due to which the domestic industry has suffered serious injury and immediate protection is required in the form of safeguard duty with a view to save the domestic industry from further injury. 18. Besides, threat of serious injury is also present in the current investigation. The imports of the PUC have increased significantly in absolute terms and in relation to production. As a result of significant surge in imports, the Domestic Industry has suffered serious injury and in all likelihood, the imports of the PUC will further increase and continue to threaten the domestic industry with serious injury. (IX) Causal Link between Increased Import and Serious injury or Threat of Serious injury: 19. The Panel on Korea - Dairy (Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16. 21. In view of the above I find that there is a direct correlation between the increase in imports and serious injury suffered by the domestic industry as imports increased by 78% during the year 2015-16(annualised) as compared to the base year 2011-12. This has affected the overall performance of the domestic industry which resulted in severe losses in the year 2015-16. It is therefore, evident that the injury suffered by DI is caused by increased imports. (X) Developing Nations: 22. The percentages of imports from developing nations have also been examined for the year 2015-16. Except Malaysia, South Africa and Thailand other developing nations individually and collectively have less than 3% and 9% share respectively of total imports into India. Therefore, in terms of Notification No.19/2016-Cus dated 05.02.2016 imports of the product under consideration originating from developing nations except Malaysia, South Africa and Thailand will not attract Safeguard Duty in terms of proviso to Section 8B (1) of the Customs Tariff Act, 1975. (XI) Critical Circumstances: 23. As per Rule 2(b) of Custom Tariff (Identification and Assessment of Safeguard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caused serious injury or threat of serious injury to the domestic industry. It is therefore considered appropriate to arrest the surge in imports in order to prevent further damage to the domestic industry. (XII) Conclusion and recommendation: 28. On the basis of the preliminary findings above, I observe that increased imports of PUC have caused serious injury and threat of serious injury to domestic industry. As a result, the domestic industry has incurred financial losses in recent period 2015-16. The extent of financial losses may lead to a situation where it may make the DI, under the burden of financial liabilities, unviable in future. Thus, I find that critical circumstances exist where delay in imposition of safeguard measure would cause irreparable damage to the domestic industry, thus, necessitating immediate imposition of provisional Safeguard duty for a period of 200 days pending final determination of serious injury and threat of serious injury. Considering the average cost of sales of PUC by the domestic producers (confidential), a reasonable return on cost of sales excluding interest, the present level of import duties and present average import prices of PUC, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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