DIRECTOR
GENERAL (SAFEGUARDS)
NOTIFICATION
Subject: Safeguard investigation concerning imports of Coated Paper and
Paper Board Preliminary findings.
GSR D-22011/ 25/ 2009 dated
1. Procedure
The
notice of initiation of safeguards investigation concerning imports of Coated
Paper and Paper Board into
Domestic
Producers
I.
ITC Limited -Paperboards and Specialty Papers
Division
106,
Secunderabad 500003,
Andhra Pradesh.
II.
Ballarpur
Industries Limited.
First
Gurgaon
(Haryana) - 122001
III.
JK Paper Limited
Nehru
House, 4 Bafadur Shah Zafar
Marg,
New
Delhi-110 002
Domestic Producers Association
I.
Indian Paper Manufacturers Association
PHD
House, (4th floor),
4/2 Siri Instituional Area,
(
New
Delhi-110 016
Importers and Users
I.
Chimanlal Fein Paper Pvt. Ltd
40/42,
293,
Mumbai
II.
Infinity Industries Pvt.
Ltd
Haroon House, 1st
Floor,
294, Parin
Mumbai
III.
Plot
no. 61, Sector 27- C,
Haryana 121003
IV.
Aero Exports
Plot
no. 183, Sector IV,
Manesar, Gurgaon, Haryana,
V.
Nutech Photolithograohic
C-74,
Okhla Indutrial Area, Phase
I,
VI.
Replika
Press Private Limited
310
& 311, HSIDC, Kindli, Haryana
131028
VII.
Brijbasi Printers
E-46/11,
Okhla Industrial Area, Phase II,
VIII.
Rajaram
2396 Chatta Shahji,
Chawri Bazar,
IX.
Shoba Cards
Global House,
4800/24,
Darya Ganj,
X.
Suneja Sons
423- Chilta Gate,
Chawri Bazar,
Exporters
& Foreign Producers
I.
Gold East
Paper (
Dagang,
II.
APP
Pt. Pindo Deli Pulp and Paper Mills,
Plaza
B11- Menara II
9th
Floor, JL MH Thamrin no. 51
III.
SAPPI : M/s Sappi
Deutschland
GMBH
Berliner allee
14 D-
30175
C/o Sappi
IV.
Stora Enso Oyj
V.
Chenming
Paper Co. Ltd
Nanchan Changbei Economic and Technical Development zone
VI.
M/s. Stora Enso Suzhou Paper Co. Ltd
Sozhou New
District
VII.
M-real corporation
VIII.
Moorim
Paper Co.
281
1 Sangyong dong ,
Jinju sl ,
660903,
IX.
Hong Wong Paper Mfg. Co. Ltd,
#14,Imgwang
Bldg ,
Migeun
dong ,
X.
Hansol
Paper Co. Limited ,
22nd
floor , Hansol Bldg,
736-1
,Yeoksam dong
Gangnam gu
135
080 ,
XI.
Gold East Trading (HONGKONG) Co
Ltd,
Unit
501-504A,
Empire
Centre 68 Mody Road,
T SimshaTsui East,
Hongkong
XII.
Kowa
Company Ltd,
6-29 Nishiki 3- Chome Naka-Ku
XIII.
Vital Solutions pte
Ltd,
XIV.
Daiei Paper (
3. Shenton way,
# 11-08,Shenton
House
XV.
Cellmark
47
Scotts road
#
12-01
i.
A copy of the notice was also sent to
Governments of exporting countries through their Embassies in
ii. Questionnaires
were also sent, on the same day, to all known domestic producers, exporters and
importers and they were asked to submit their response within 30 days.
iii. All
non confidential versions of the application, response and additional
submissions have been kept in the Public Folder.
2. View of the Domestic Industry
i.
The
application has been filed by (1) ITC Limited -Paperboards and Specialty Papers
Division, 106, Sardar Patel Road, Secunderabad
500003, Andhra Pradesh, (2) Ballarpur Industries
Limited, First India Place, Tower C, Mehrauli Gurgaon Road, Gurgaon (Haryana) 122001 and
(3) JK Paper Limited, Nehru House, 4 Bafadur Shah Zafar Marg, New Delhi-110 002
Supported by Indian Paper Manufacturers Association, PHD House, (4th floor),
4/2 Siri Instituional Area
(Opp. Asian Games Village), New Delhi-110 016 for
imposition of Safeguard Duty on imports of Coated Paper and Paper Board made
primarily from virgin chemical pulp into India to protect the domestic
producers of Coated Paper and Paper Board against serious injury and continued
threat of serious injury caused by the increased imports of Coated Paper and
Paper Board made primarily from virgin chemical pulp into India. The applicants
have made following major points:-
ii. The
applicants have alleged that increased imports of Coated
Paper and Paper Board into
iii. The
domestic industries manufacture Coated Paper and Paper Board made primarily
from virgin chemical pulp falling under various headings of chapter heading
4810. The domestic industry has submitted that their products are directly
competing products with imported products falling under 48101310, 48101320,
48101330, 48101390, 48101410, 48101420, 48101430, 48101490, 48101910, 48101920,
48101930, 48101990, 48102900, 48103100, 48103200, 48109200 and 48109900 of HSN
as well as Customs Tariff Act, 1975. The applicants have alleged serious injury
caused to the domestic producer by the increased imports of Coated Paper and
Paper Board made primarily from virgin chemical pulp into India and falling
under above headings at eight digit level. Papers and paperboards are made
using pulp obtained by chemical or mechanical process or a combination of both.
Further the pulp can be obtained either using fresh plant sources or from
recycled paper. The present application covers coated paper and paperboard
primarily made with virgin pulp using chemical process. The coating may be
either on one side or both sides. Blade coating technology is most common for
coating these papers and paperboards. The domestic industry has argued that the
products falling under the headings mentioned above at eight digit level are
same as far as their technical characteristics, chemical composition and other
basic features are concerned. The products of all these headings find similar
uses. Therefore these products are like and directly competing products.
Despite possible minor superficial differences,
in terms of quality, these products have the similar basic physical
characteristics and similar end uses. These are sold via similar or identical
sales channel. These products compete mainly on price. Imposition of safeguard
duty on one heading at eight digit level in isolation will not serve any
purpose as importers will start importing other directly competing products.
Thus the domestic industry has argued that in view of above, for the purposes
of safeguard investigation the product basket consisting of products mentioned
above needs to be considered as the product under consideration.
iv. They
have alleged that surge in imports are taking place at lower prices making them
lose their market share.
v. The
increased imports at lower prices are on account of unforeseen developments as mentioned
below:
Fall
in demand in exporting countries has forced manufacturers in those countries to
get rid of their surplus inventories through excessive discounts of export and
this is a cause for sudden increase in imports. The major players have very
small domestic demand compared to their respective production capacities. The
far East paper producers created huge capacity of coated paper and paperboard.
Out of this capacity major portion was meant for developed countries. On
account of sudden decline in demand in developed countries, the importers of
developed countries stopped buying paper from these countries which resulted
into huge stock built up with the companies of Exporting Countries. The result
is that these units are left with piled stock of coated paper and paperboard
which they are trying to export at lower prices to
vi. The
Profitability and return on capital employed of domestic industry has gone
down. The difference in landed price of imports and domestic selling price has
gone up during the period of investigation and has caused serious injury and
posing a continued threat of serious injury.
vii. They
have requested for imposition of Safeguard duty to protect the domestic
producers of coated paper and paperboard against serious injury as well as
threat of continuing serious injury caused by the increased imports.
viii. They
have alleged that unforeseen development has caused increased in imports and
increased in imports has caused serious injury. There is no other factor which
has perceptible bearing on the serious injury /threat of serious injury faced
by the domestic producer.
ix. The
applicants submit that the imposition of safeguard duty on Coated Paper and
Paper Board shall not cause harm to public interest as prices of domestic
Coated Paper and Paper Board are more or less stable in
x. Applicants
proposes to adopt an appropriate strategy to improve upon efficiency and to
bring cost effectiveness to compete with the international players.
xi. They
have also requested for imposition of provisional Safeguard duty in light of
critical circumstances, leading to damage which would be difficult to repair.
3.
Findings of D.G.
i.
The issue
to impose immediate safeguard measures is examined. It has been found that a
total of 168 Safeguard Initiations have been reported to the WTO during the
period between 29.03.1995 and 12.11.2008. It is observed that in several of
these cases provisional safeguard measures have been recommended/ imposed
immediately after initiation of the safeguard investigation. In several cases
the provisional safeguard measures have been recommended on the same day as the
date of initiation of the investigation. The Rule 9 of Customs Tariff
(Identification And Assessment of Safeguard Duty) Rules, 1997 notified vide
Notification No. 35/97-NT-Customs dated 29.07.1997 prescribes that the Director
General shall proceed expeditiously with the conduct of the investigation and
in critical circumstances, he may record a preliminary finding regarding
serious injury or threat of serious injury. The principles governing
investigations have been provided in the Rule 6 of the Customs Tariff
(Identification and Assessment of Safeguard Duty) Rules, 1997 which is
independent to Rule 9. The Rule 15 of the Customs Tariff (Identification And
Assessment of Safeguard Duty) Rules provide for refund of differential
Safeguard duty in case safeguard duty imposed after conclusions of the investigations
is lower than the provisional duty already imposed and collected. The
harmonious reading of Rules 6, 9 and 15 of the said Rules leads to a conclusion
that the Rules provide for expeditious recommendation of provisional Safeguard
duty based on preliminary findings and refund of the differential duty in case
it is ascertained that the duty imposed after conclusion of investigation
following natural justice as enshrined in the Rule 6 is lower than the
provisional Safeguard Duty. However, in critical circumstances any delay in
imposition of provisional Safeguard duty may cause damage which would be
difficult to repair. Accordingly, it was considered prudent to analyze
circumstances to assess whether the same falls in the category of critical
circumstances.
ii. The
product under investigation
a.
The applicants have alleged that increased imports of Coated Paper and Paper Board into
b.
Papers and paperboards are made using
pulp obtained by chemical or mechanical process or a combination of both.
Further the pulp can be obtained either using fresh plant sources or from
recycled paper. The present application covers coated paper and paperboard
primarily made with virgin pulp using chemical process. The coating may be
either on one side or both sides. Blade coating technology is most common for
coating these papers and paperboards. The domestic industry has argued that the
products falling under the headings mentioned above at eight digit level are
same as far as their technical characteristics, chemical composition and other
basic features are concerned. The products of all these headings find similar
uses. Therefore these products are like and directly competing products. Despite
possible minor superficial differences, in terms of quality, these products
have the similar basic physical characteristics and similar end uses. These are
sold via similar or identical sales channel. These products compete mainly on
price. Imposition of safeguard duty on one heading at eight digit level in
isolation will not serve any purpose as importers will start importing other
directly competing products. Thus the domestic industry has argued that in view
of above, for the purposes of safeguard investigation the product basket
consisting of products mentioned above needs to be considered as the product
under consideration.
c.
The products falling under these headings
at eight digit level are similar as far as their technical characteristics,
chemical composition and other basic features are concerned. The products of
all these headings find similar uses in printing industry. These products are
technically and commercially like and directly competing products. Despite
possible minor superficial differences, in terms of quality, these products
have the similar basic physical characteristics and the similar end uses. These
are sold via similar or identical sales channel. These products compete mainly
on price. Imposition of safeguard duty on one heading at eight digit level in
isolation will not serve any purpose as importers will start importing other
directly competing products. The domestic industry manufactures all the
products in question. In view of above, for the purposes of safeguard investigation
the product basket consisting of coated paper and paperboard consisting of the
product mentioned above needs to be considered as the product under
consideration.
iii. Domestic Industry - The application has
been filed by (1) ITC Limited -Paperboards and Specialty Papers Division, (2) Ballarpur Industries Limited, and (3) JK Paper Limited on
behalf of domestic producers of Coated Paper and Paper Board made primarily
from virgin chemical pulp for imposition of Safeguard Duty on imports of Coated
Paper and Paper Board and supported by Indian Paper Manufacturers Association.
The application has been supported by all the known domestic producers of
Coated Paper and Paper Board made from virgin chemical pulp in
iv. Unforeseen
Developments: As a result of current unforeseen and
unexpected economic melt down and recession, some of the countries are faced
with fall in export to their normal markets, idling of production capacities in
those countries. Exporters of these
countries are resorting to export of their products in increased quantities at
low prices to Indian market, which still continues to enjoy growth.
v. Increased Imports - Coated Paper and
Paper Board is imported into
Table
I
|
Year |
Imports
(MT) |
Import (Indexed) |
|
2006-07 |
106993 |
100.00 |
|
2007-08 |
132684 |
124.01 |
|
2008-09 (First
nine months) |
151848 |
189.23 |
The
imports of coated paper and paperboard have thus increased in absolute terms as
well as in relative terms compared to total domestic market. Further there is a
sharp and sudden increase in first nine months of 2008-09 compared to 2007-08.
vi. Serious
injury and Threat of serious injury
a. Sales: The
share of domestic sales of the product under investigation has seen sudden and
sharp decline during the year 2008-09 compared to the preceding year as
apparent from the Table below.
Table: 2
|
Market share
in total consumption |
|||
|
|
2006-07
|
2007-08
|
2008-09
(Apr-Dec 2008) |
|
% Share of imports |
30 |
33 |
39 |
|
% Share of domestic Sales |
70 |
67 |
61 |
b. Market
Share of domestic Industry: Market share of domestic industry was
70% in 2006-07, which declined to 67% during 2007-08. In the first nine months
of 2008-09, market share of domestic industry saw significant fall to 61%
whereas there is a growth in imports in absolute terms as well as relative
terms.
c. Production:
The
share of domestic production in the total available material in domestic market
has also seen a steep decline in recent period of 2008-09(April-Dec 2008)
compared to 2007-08. The share of domestic production in total available
material has gone down to 61 % compared to 67% of previous year.
Table: 3
|
Share in total available
material |
|||
|
|
2006-07
|
2007-08
|
2008-09
(Apr-Dec 2008) |
|
% Share of imports |
30 |
33 |
39 |
|
% Share of domestic production |
70 |
67 |
61 |
d. Trend of Import Prices: The
Export price to
Table: 4
|
|
Weighted
Average CIF USD/MT |
|
September 2008 |
940 |
|
October 2008 |
932 |
|
November 2008 |
913 |
|
December 2008 |
867 |
|
January 2009 |
740 |
|
February 2009 |
700 |
|
March 2009 |
680 |
e. Profitability and return on capital
employed: The Profitability and return on capital employed of domestic
industry has gone down. The difference in landed price of imports and domestic
selling price has gone up during the period of investigation.
Table:
5
|
Coated
Paper and Paperboard |
Weighted
average |
||
|
Year |
2006-07 |
2007-08 |
2008-09 (up to Dec) |
|
PBT per MT |
4187.26 |
1378.28 |
317.69 |
|
ROCE
% (EBIT/Capital Employed) |
14.06 % |
7.34 % |
4.27 % |
f.
Productivity: The preliminary investigation shows no indication to
suggest that the injury is on account of loss of productivity.
vii. Causal
link between increased import and serious injury or threat of serious injury: A
comprehensive evaluation of parameters as above for the period from 2006-07 up
to the first nine months of the financial year 2008-09 demonstrates serious
injury and significant impairment of the Indian producers of coated paper and
paperboard. The figures above show that in Apr-Dec 2008, Imports in absolute
terms as well as Share of Imports has gone up when compared to 2007-08. In the
same period when imports have gone up, domestic industry is injured as Share of
domestic Industry and Return on Capital employed has gone down. Therefore in
the recent period there is a surge in import and as a result of which there is
a serious injury to domestic industry during the same period. The huge loss of
profitability during the current financial year compared to the previous years
profit also coincides with significant increase in share of imports. This
clearly depicts a direct correlation between the increase in imports at lower
prices and serious injury suffered by the domestic industry and the increase in
imports has had injurious effects in terms of pressure on prices and a
reduction in share of the domestic industry in sales.
viii. Adjustment
plan The domestic producer has submitted detailed adjustment
plan to cut cost, which includes social
forestry measures to cut raw material costs, Power saving by modernizing
electrical equipments, Use of better manufacturing practices, Improvement in
management practices, enhanced use of Information Technology (IT) and IT
enabled services in every day management at all the levels, Reduction of administrative expenses,
Effective Inventory Management, increasing power generation, vendor development
and R&D efforts apart from capacity expansion.
ix. Public
Interest: The industry generates employment to lakhs of people directly and indirectly. The industry is
backward linked to the farmers community in rural
x. Critical
Circumstances: The market share of domestic
industries has fallen from 70% in 2006-07 to 61% in 2008-09. The trend of imports
in the recent period of first nine months of 2008-09, if continues will cause
irreparable damage to domestic industry. The capacity utilization of domestic
producers is likely to go down substantially further if safeguard measures are
not taken immediately. The profitability of domestic industry is already all
time low incapacitating them to regain market share, if immediate safeguard
measures are not taken. The return on capital employed is also all-time low.
Accordingly, the preliminary determination shows that critical circumstances
exist in which delay in imposing provisional safeguard duty cause would damage
which it would be difficult to repair.
xi. Other
Issues: The provisional
examination of the interests of the domestic producers, users, importers and
other economic operators indicate that the domestic producers have
technologically competitive plants, trained manpower and enjoyed high level of
productivity and are able to meet quality and service concern of their
customers. Any delay in imposition of provisional safeguard duty would
seriously jeopardize their viability. It is prudent to have a healthy and
competitive industry in the interest of all. It is apparent that if no
safeguard measures are taken, both the prices and the market share of the domestic
producers will further deteriorate resulting in increased inventories reduced
production, increased losses and loss of employment.
xii. Developing
Nations: There have been imports from
Table
6
|
|
% share in |
|
|
total imports in 2008-09 (Apr-Dec) |
|
|
40% |
|
|
12% |
xiii. Conclusion
and Recommendation: On the basis of the above preliminary
findings it is seen that increased imports of coated paper and paperboard have
caused serious injury to domestic producers of coated paper and paperboard.
There exist critical circumstances, where any delay in application for
safeguard measures would cause damage which it would be difficult to repair,
necessitating immediate application of provisional safeguard duty for a period
of 200 days, pending a
final determination of serious injury and threat
of serious injury. Considering the average cost of
production of coated paper and paperboard by the domestic producers
(confidential), a reasonable return on capital employed, the interest of end
users, the present level of import duties and the average import prices of
Coated Paper and Paper Board, safeguard
duty at the rate of 20% (twenty percent)
ad-valorem is considered to be the minimum
required safeguard duty to
protect
the interest of domestic industry and is recommended to be imposed on imports
of coated paper and paperboard made primarily from virgin chemical pulp and
classified under sub-heading Nos. 48101310, 48101320, 48101330, 48101390,
48101410, 48101420, 48101430, 48101490, 48101910, 48101920, 48101930, 48101990,
48102900, 48103100, 48103200, 48109200 and 48109900 of Schedule I of the
Customs Tariff Act 1975 into India.
xiv.
Further Process:
(a) The information provided by various parties may be subject to
verification wherever necessary for which they will be informed separately.
(b)
A public
hearing will be held in due course before making a final determination, for
which the date will be informed separately.
(c) Interested
parties may make their views known to the DG on this preliminary findings on or
before 25.05.2009
Sd/
(S. S. RANA)
Director General (Safeguards)