Import of Alloy Steel with lower Customs Duty

[JAMES PG]

STEEL plays a pivotal role in the development of any modern economy. The per capita consumption of steel is generally accepted as a yardstick to measure the level of socio-economic development and living standards of the people. Hence the importance of steel industry cannot be ignored by any developing economy.

India imports around six million tonne steel a year. The steel industry had been demanding an increase in the import duty of Hot Rolled and Cold Rolled Coils for a long time. In the pre Budget memorandum, domestic steel manufacturers had urged Finance Ministry requesting to double the import duty to 10 per cent.

It was hoped and expected that a potential  duty hike would help protecting the interests of the domestic steel industry and putting a brake on growing imports from China, Russia, Korea and Brazil among other countries.

In the Union Budget 2012-13, Basic Customs duty on flat-rolled products of non-alloy steel whether or not clad, plated or coated falling in Chapter headings 7208, 7209, 7210, 7211, and 7212 is being increased from 5% to 7.5% vide S. No 334 of Notification No. 12/2012-Customs dated 17.03.2012.  This has been done with the noble objective of protecting the domestic steel producers.  

The Basic Customs duty of flat-rolled products of alloy steel is retained at the rate 5% and the gap of rate between the two products entails scope for massive import of alloy steel products into India and will hamper the growth of indigenous industries

The tariff description of Non alloy steel as per Chapter headings 7208, 7209, 7210, 7211, and 7212 is given below:

7208—Flat-rolled products of iron or non-alloy steel of a width 600 mm or more hot rolled , not clad, plated or coated.

7209-- Flat-rolled products of iron or non-alloy steel of a width 600 mm or more cold rolled, not clad, plated or coated.

7210-- Flat-rolled products of iron or non-alloy steel of a width 600 mm or more clad, plated or coated.

7211-- Flat-rolled products of iron or non-alloy steel of a width less than 600 mm or more not clad, plated or coated.

7212-- Flat-rolled products of iron or non-alloy steel of a width less than 600 mm or more clad, plated or coated.

Alloy Steel is defined under Customs Tariff under Notes of Chapter 72 as Steel not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown:

-          0.30% or more of aluminium

-          0.0008% or more of boron

-          0.3% or more of chromium

-          0.3% or more of cobalt

-          0.4% or more of copper

-          0.4% or more of lead

-          1.65% or more of manganese

-          0.010% or more of molybdenum

-          + + ………

Constituent proportion of Boron in alloy steel is only miniscule percentage of 0.0008% and the price of which is around $ 4000 per MT. As per the metallurgical properties of alloy or non alloy steel, the presence or other wise of boron does not make much qualitative differences. By the addition of small percentage of low valued boron, the classification of the product gets converted into alloy steel and thereby large scale importation at the lower rate of customs duty is rendered easy.

It is learnt that import of Flat Rolled products of iron and steel falling under chapter 7225 and 7226 are being imported in large quantities so as to take advantage of the normal rate of Customs duty @ 5%. This would pave the way for massive import and would badly affect Indian Steel industry and also cause diversion of scarce foreign exchange out of the country

Lured by the tax advantage on import and also due to the   firm demand from automobile, consumer durables etc Indian Steel imports surged by 68.47 percent to 1.528 MT’s in April-May period of the current financial year as compared to 0.907 MT  in the same period last fiscal. The total imports in 2011 stood at 8.2 MT. China was the lead contributor comprising 30 % of the total imports during April-May followed by South Korea (19 %) and Japan (14 %)

Meanwhile, India's production for sale of total finished steel registered a mere growth of 4.4 percent during the same period.

It was estimated that when one tonne of steel is manufactured in India, it generates direct and indirect employment to 18 people whereas when it is imported, employment is restricted only to 4

The anomaly in the Customs Tariff on account of Boron content was observed by Hon CESTAT in the case of SUMANGALA STEELS PVT LTD & Others Versus COMMISSIONER OF CUSTOMS, CHENNAI - 2012 (4) TMI 446 (Tri)

In view of the above precarious situation, urgent measures are to be initiated to protect domestic industries by increasing basic customs duty to 7.5% to all variants of alloy and non-alloy steel. 

Discussions to this article

[JAMES PG]

Not 45/12( Customs) has been issued so as to amend Not 12/12 by which Customs duty of alloy steel falling under Ch 7225 is increased from 5% to 7.5%. Now the anomaly is partially rectified

P.G.James