DIRECTOR
GENERAL (SAFEGUARDS)
NOTIFICATION
Subject: Safeguard investigation concerning imports of Uncoated Paper and
Copy Paper Preliminary findings.
GSR D-22011/ 27/ 2009 dated
1. Procedure
i.
The
notice of initiation of safeguards investigation concerning imports of Uncoated
Paper and Copy Paper into
Domestic
Producers Association
I.
Indian
Paper Manufacturers Association
PHD House, (4th floor),
4/2 Siri Instituional Area,
(
New Delhi-110 016
Domestic Producers
I.
Ballarpur
Industries Limited.
First
Gurgaon (Haryana) -
122001
II.
JK Paper
Limited
Nehru House, 4 Bafadur
Shah Zafar Marg,
New Delhi-110 002
III.
ITC
Limited
106,
Secunderabad
500003,
Andhra Pradesh.
IV.
M/s The
Andhra Paper Mills Ltd.
501-509,Swapanlok Complex,
92/93,
Secunderabad-500 003
V.
M/s
Tamil Nadu Newsprint and Papers Limited
67,
Guindy,
Chennai-600 032
VI.
Abhishek
Industries Ltd.,
E 212, Kitchlu Nagar,
VII.
Century
Pulp & Paper,
Century Pulp & Paper
Ghanshyamdham, P.O. Lalkua
262 402.
Distt. Nainital,
Uttaranchal
VIII.
Emami
Paper Mills Ltd.,
Emami Paper Mills Ltd.
687
Anandapur e.m. bypass,
Kolkata 700 107.
IX.
Hindustan
Paper Corporation Ltd.
75-C,
Kolkata 700 016.
X.
Khanna
Paper Mills Ltd.,
XI.
The Mysore Paper Mills Ltd.
P.B. No. 112,
Bangalore 560 052.
XII.
Orient
Paper & Industries Ltd.,
9/1,
Kolkata 700 001.
XIII.
Pudumjee Pulp &
Paper Mills Ltd.,
Jatia Chambers,
60,
Dr. V.B. Gandhi Marg,
Mumbai
400 023.
XIV.
Rama
Newsprint and Papers Ltd.,
31,
Kolkata 700 016.
XV.
Seshasayee
paper and paper Board Ltd.
Cauvery R S P O
Erode 638 007.
Tamil Nadu
XVI.
The Sirpur Paper Mills Ltd.,
UCO Bank Building (3rd Floor)
Parliament Street,
XVII.
Star
Paper Mills Ltd.,
Uttar
Pradesh 247 001.
XVIII.
The
west Coast Paper Mills Ltd.
31,
Kolkata 700 016.
XIX.
Yash
Paper Mills Ltd
P.O. Darshannagar,
Distt. Faizabad 224 135
Uttar
Pradesh.
Importers and Users
I
Chimanlal
Fein Paper Pvt. Ltd:
40/42,
293, Dr. D.N. Road Mumbai
II
Infinity INdutries
Pvt. Ltd:
Haroon House, 1st Floor,
294, Parin
Opp RBI Mumbai
III
Paper
Plus Technologies (P) Ltd:
Sn. 592/2/11,
Bhosala Farm, Devachi Urali,
Pune
IV
Akshay Impex:
7,
Second Floor,
Chennai 600003,
Tamil Nadu
V
Amit Impex: New no. 17,
Old no.9,
Chennai 600079
VI
Papers
World Wide (
18,
Prabhu Apartments,
T.
Nagar, Chennai,
Tamil
Nadu - 600017
VII
Plot
no. 61, sector 27- C,
Haryana 121003
VIII
Aero
Exports:
Plot no. 183, Sector IV,
Manesar, Gurgaon, Haryana,
F-80, Khanpur
Extension,
IX
Repro
A-50/2, TTC Industrial Area,
MIDC Mahapa,
New
X
Printhouse
(
6,
Bhandup (West), Mumbai
Exporters &
Foreign Producers
I.
APRIL
fine paper trading,
Jalan Teluk betung No. 31,
II.
Advance
Agro,
187/3 Moo 1, Bangna-Trad
km.42 Road,
Bangwua District,
Amphur Bangpakong,
Chachoengsao, 24180
III.
Stora Enso Oyj
FI-00101
IV.
Sinar
Mass Group APP China
Sinar Mass Paper (
8-9F, Bund Centre, No. 222,
Shanghai, 2000002
V.
Gold
East Trading (HONGKONG) Co Ltd,
Unit 501-504A,
Empire Centre
68 Mody Road,
T SimshaTsui East
Hongkong
VI.
Kowa
Company Ltd,
6-29 Nishiki 3- Chome Naka-Ku
VII.
Vital
Solutions pte Ltd,
VIII.
Daiei
Paper (
3. Shenton way, #
11-08,
Shenton House
IX.
Cellmark
47 Scotts road
# 12-01
X.
International
Paper,
XI.
Glen Allen,
Virgina 23060,
XII.
M-real
corporation,
Metsa 02020,
ii. A copy of the notice was also sent to
Governments of exporting countries through their Embassies in
iii. 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.
iv. 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 Indian
Paper Manufacturers Association, on behalf of (1) ITC Limited (2) Ballarpur Industries Limited, (3) JK Paper Limited, (4) M/s
The Andhra Paper Mills Ltd, (5) M/s Tamil Nadu
Newsprint and Papers Limited , (6) Abhishek
Industries Ltd., (7) Century Pulp & Paper, (8) Emami
Paper Mills Ltd., (9) Hindustan Paper Corporation Ltd. (10) Khanna
Paper Mills Ltd., (11) The Mysore Paper Mills Ltd.
(12) Orient Paper & Industries Ltd., (13) Pudumjee
Pulp & Paper Mills Ltd., (14) Rama Newsprint and
Papers Ltd., (15) Seshasayee paper and paper Board
Ltd. (16) The Sirpur Paper Mills Ltd., (17) Star
Paper Mills Ltd., (18) The west Coast Paper Mills Ltd. and (19) Yash Paper Mills Ltd for imposition of Safeguard Duty on
imports of Uncoated paper and copy paper made primarily from virgin chemical pulp
into India to protect the domestic producers of Uncoated paper and copy paper
against threat of serious injury caused by the increased imports of Uncoated
paper and copy paper made primarily from virgin chemical pulp into India. The
applicants have made following major points:-
ii. The applicants have alleged that the trend
of increased imports of Uncoated paper and copy paper into
i.
The domestic industries manufacture
Uncoated paper and copy paper made primarily from virgin chemical pulp falling
under various headings of chapter heading 4802. The domestic industry has
submitted that their products are directly competing products with imported
products falling under 4802 54 90, 4802 55 10, 4802 55 20, 4802 55 30,
4802 5540, 4802 55 50, 4802 55 90, 4802
5610, 4802 5620, 4802 5630, 4802 5640, 4802 56 50, 4802 5690, 4802 57 10, 4802
57 20, 4802 57 30, 4802 5740, 4802 57 50, 4802 5790, 4802 58 10, 4802 58 20, 4802 58 30, 4802 58 40, and 4802
58 90 of HSN as well as Customs Tariff Act, 1975. The applicants have alleged
threat of serious injury caused to the domestic producer by the increased
imports of Uncoated paper and copy paper made primarily from virgin chemical
pulp into India and falling under above headings at eight digit level.
ii.
Papers 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 Uncoated Paper and copy Paper primarily made with
virgin pulp using chemical process. The domestic industry has argued that the
products falling under the headings mentioned above 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. 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.
iii. They have alleged that surge in imports are
taking place at lower prices making them lose their market share.
iv. 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 uncoated paper and copy paper. 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 uncoated paper and copy paper which they are trying to export at lower
prices to
v. 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 threat of serious injury.
vi. They have requested for imposition of
Safeguard duty to protect the domestic producers of uncoated paper and copy paper
against serious injury in view of current threat of serious injury caused by
the increased imports.
vii. They have alleged that unforeseen
developments are causing increased imports and increased imports have caused
threat of serious injury. There is no other factor which has perceptible
bearing on the threat of serious injury faced by the domestic producer.
viii. The applicants submit that the imposition of
safeguard duty on uncoated paper and copy paper shall not cause harm to public
interest as prices of domestic uncoated paper and copy paper are more or less
stable in
ix. Applicants proposes to adopt an appropriate
strategy to improve upon efficiency and to bring cost effectiveness to compete
with the international players.
x. 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, 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 Uncoated
paper and copy paper into
b.
Papers
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 Uncoated Paper and copy
Paper primarily made with virgin pulp using chemical process. The domestic
industry has argued that the products falling under the headings mentioned
above 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. 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 uncoated paper and copy paper
consisting of the product mentioned above needs to be considered as the
product under consideration.
iii. Domestic
Industry - The application has been filed by Indian Paper Manufacturers
Association, on behalf of (1) ITC Limited (2) Ballarpur
Industries Limited, (3) JK Paper Limited, (4) M/s The Andhra Paper Mills Ltd,
(5) M/s Tamil Nadu Newsprint and Papers Limited , (6)
Abhishek Industries Ltd., (7) Century Pulp &
Paper, (8) Emami Paper Mills Ltd., (9) Hindustan
Paper Corporation Ltd. (10) Khanna Paper Mills Ltd.,
(11) The Mysore Paper Mills Ltd. (12) Orient Paper
& Industries Ltd., (13) Pudumjee Pulp & Paper
Mills Ltd., (14) Rama Newsprint and Papers Ltd., (15)
Seshasayee paper and paper Board Ltd. (16) The Sirpur Paper Mills Ltd., (17) Star Paper Mills Ltd., (18)
The west Coast Paper Mills Ltd. and (19) Yash Paper
Mills Ltd on behalf of domestic producers of Uncoated Paper and copy Paper
made primarily from virgin chemical pulp for imposition of Safeguard Duty on
imports. The application has been supported by more than 80% of domestic
producers of Uncoated Paper and copy Paper made from virgin 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 - Uncoated paper and copy paper is imported into
Table
1
|
|
2006-07 |
2007-08 |
2008-09 (Apr-Dec 2008) |
2008-09 (Jan-March 09) (Estimate ) |
|
Imports (MT) |
11077.00 |
17016.00 |
13504.00 |
5631.00 |
|
Monthly imports (MT) |
923.08 |
1,418.00 |
1,500.44 |
1,877.00 |
|
Monthly imports (indexed) |
100.00 |
153.62 |
162.55 |
203.34 |
The imports
of uncoated paper and copy paper have thus increased in absolute terms as well
as in relative terms. Further there is a sharp and sudden increase in imports
in January March 2009 during which the monthly average import figure has
doubled to 1877 MT from monthly average figure of 923.08 MT of 2006-07 as can
be seen from monthly import figures above. There is a growth in imports of
62.5% in April to Dec 2008 as compared to 2006-07. During Jan-March 2009 there
is a further growth of 25% when compared with first nine months of 2008-09
posing a threat of serious injury. The index of monthly imports also shows the
doubling of imports.
vi. Threat of serious injury
a.
Sales: The share of domestic sales of the product
under investigation has seen 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) |
2008-09 (Jan-March 09) (Estimate ) |
|
Imports (%) |
0.63 |
0.93 |
0.90 |
1.13 |
|
Domestic sales (%) |
99.37 |
99.07 |
99.10 |
98.87 |
However as
discussed in para (d) below the prices of these items
has fallen sharply leading to threat of increased imports and consequent threat
of serious injury.
b.
Market
Share of domestic Industry:
Market share of domestic industry was 99.37% in 2006-07, which declined to
99.07% during 2007-08. With 1877 MT of import in January 2009, the market
share of domestic industry will fall to 98.87% whereas there is a growth in
imports in absolute terms as well as in relative terms. The current trend
of import prices and imports pose a threat of serious injury to domestic producers.
c.
Production:
The share of imports in the
total available material in domestic market has seen a steep increase in recent
period of 2008-09 compared to 2007-08. The share of imports in total available
material will go up to 1.11 % compared to 0.89% of previous year.
Table:
3
|
Share in total available material |
||||
|
|
2006-07 |
2007-08 |
2008-09 (Apr-Dec 2008) |
2008-09 (Jan-March 09)(Estimate ) |
|
Share
of imports (%) |
0.63 |
0.93 |
0.89 |
1.11 |
|
Share
of domestic production (%) |
99.37 |
99.07 |
99.11 |
98.89 |
d.
Trend of Import Prices: With the continuously falling import
prices, the import price to
Table: 4
|
|
Weighted Average CIF
USD/MT |
|
Sep-08 |
817 |
|
Oct-08 |
814 |
|
Nov-08 |
768 |
|
Dec-08 |
773 |
|
Jan-09 |
715 |
|
Feb-09 |
680 |
e.
Profitability and return on capital
employed: The Profitability
and return on capital employed (Confidential) 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. The return on capital employed in
2007-08 was close to 9% which has fallen by 23% in 2008-09 (April-Dec) compared
to 2007-08.
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
threat of serious injury: A
comprehensive evaluation of parameters as above for the period from 2006-07 up
to the financial year 2008-09 demonstrates threat of serious injury and
significant impairment of the Indian producers of uncoated paper and copy
paper. The figures above show that in 2008-09, 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 threat of serious injury to domestic industry. 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 threat
of serious injury faced by the domestic industry. 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 and their profitability.
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: This is a case of threat of serious injury.
The market share of imports is increasing rapidly at the cost of losing share
of domestic industries in 2008-09. The trend of imports in the recent period of
2008-09, if continues will cause irreparable damage to domestic industry. The
capacity utilization of domestic producers is likely to go down substantially
if safeguard measures are not taken immediately. The profitability of domestic
industry has already declined incapacitating them to regain market share, if
immediate safeguard measures are not taken. The return on capital employed has
also fallen significantly. 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 5
|
|
% share in |
|
|
total imports in 2008-09
(Apr-Dec) |
|
|
28.7 |
|
|
9.1 |
|
|
3.2 |
xiii. Conclusion and Recommendation:
On the basis of the above preliminary
findings it is seen that increased imports of uncoated paper and copy paper
have caused threat of serious injury to domestic producers of uncoated paper
and copy paper. 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 threat of
serious injury. Considering
the average cost of production of uncoated paper and copy paper by the domestic
producers (confidential), a reasonable return on capital employed, the interest
of the end users, the present level of import duties and the average import
prices of uncoated paper and copy paper, 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 uncoated paper and copy paper primarily
made from virgin chemical pulp and classified under sub-heading Nos. 4802 54
90, 4802 55 10, 4802 55 20, 4802 55 30, 4802
5540, 4802 55 50, 4802 55 90, 4802 5610, 4802 5620, 4802 5630, 4802
5640, 4802 56 50, 4802 5690, 4802 57 10, 4802 57 20, 4802 57 30, 4802 5740,
4802 57 50, 4802 5790, 4802 58 10, 4802
58 20, 4802 58 30, 4802 58 40, and 4802 58 90 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)