India-ASEAN Trade In Goods Agreement (Safeguard Measures) Rules, 2016

[Mr. M. GOVINDARAJAN]

Section 5(1) of Customs Tariff Act, 1975 gives powers to the Central Government to make rules by means of Notification for determining if any article is the produce or manufacture of such foreign country or territory and for requiring the owner to make a claim at the time of importation, supported by such evidence as may be prescribed in the said rules, for assessment at the appropriate lower rate under such agreement.  Section 25(1) of Customs Act, 1962 gives powers to the Central Government to give exemption generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon by means of Notification, if the Central Government is satisfied that it is necessary in the public interest so to do.

By virtue of Section 5(1) of Customs Tariff Act, 1975 read with Section 25(1) of Customs Act, 1962 the Central Government made the Rules called as ‘India-ASEAN Trade in Goods Agreement (Safeguard Measures) Rules, 2016 vide Notification No. 37/2016-Cus, dated 04.03.2016.  The Rules came into effect from 04.03.2016.

The Rules provides for safeguard measures in order to prevent or remedy serious injury and to facilitate adjustment in respect of the goods.  For this purpose the Rule appoints the Director General to cause investigation.  The Rules prescribe principles governing investigation by the Director General.  The Director General is given power to collect information and to determine the serious injury or threat of serious injury.  In critical situations he may record a preliminary finding on the basis of which the Central Government may take provisional safeguard measures.    On the final findings of Director General the Central Government may apply the safeguard measures.  In this article the provisions relating to this Rules is discussed in detail.

Definition

The definition of some technical terms may be seen.  The term ‘serious injury’ is defined under Rule 2(1)(j) as a significant overall impairment of the domestic industry.  Rule 2(1)(d) defines the term ‘domestic industry’ as the producers-

• as a whole of the like good or a directly competitive good in India; or
• whose collective output of the like good or a directly competitive good in India constitutes a major share of the total production of the said goods in India.

Rule 2(g) defines the term ‘interested party’ which includes-

• any exporter or producer from the Member States of the Association of Southeast Asian Nations or importer of the good subjected to investigation for purposes of taking safeguard measure or a trade or business association, majority of such a good;
• the Governments of the exporting member States of the Association of Southeast Asian Nations; and
• a producer of the like good or directly competitive good in India or a trade or business association, a majority of members of which produce or trade the like good or directly competitive good in India.

Rule 2(k) defines the terms ‘threat of serious injury’ as a clear and imminent danger of serious injury on the basis of facts and not merely on allegation, conjecture or remote possibility.  Rule 2(l) defines the term ‘trade agreement’ as a the Agreement on Tread in goods under the Framework Agreement on Comprehensive Economic Cooperation between the Republic of India and the Association of South East Asian Nations.

Member States of the Association of Southeast Asian Nations

The following are the member States of the Association of Southeast Asian as mentioned in Annexure IV to the Notification No. 189/2009-Customs (NT), dated 31.12.2009 as indicated under Rule 2(1)(i)-

• Malasia;
• The Republic of Singapore;
• The Kingdom of Thailand;
• The Socialist Republic of Vietnam;
• The Union of Myanmar;
• The Republic of Indonesia;
• Brunei Darussalam;
• Lao PDR;
• The Republic of Philippines;
• The Kingdom of Cambodia.

Duties of Director General

The ‘Director General’ for the purpose of these Rules is the Director General (Safeguard) appointed by the Central Government under Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997.  Rule 3 prescribes the duties of Director General which are as follows:

• to investigate the existence of serious injury or threat of serious injury to the domestic industry as a consequence of increased imports of a good into India in terms of the Trade Agreement;
• to identify the good liable for safeguard measure;
• to submit his findings, provisional or otherwise, to the Central Government as to the serious injury or threat of serious injury to domestic industry consequent upon increased imports of a good from one or more member States of the Association of Southeast Asian Nations due to tariff concession under the Trade Agreement;
• to recommend safeguard measure which if adopted would be adequate to prevent or remedy serious injury and to facilitate adjustment;
• to recommend the duration of the safeguard measure and where the period so recommended is more than a year, to recommend progressive liberalization adequate to facilitate adjustment;
• to review the need for continuation of a safeguard measure.

Initiation of investigation

Rule 4 (1) provides the procedure for initiation of investigation by Director General.  The Director General shall initiate an investigation on receipt of a written application by or on behalf of the domestic producer of like good or directly competitive good, to determine the existence of serious injury or threat to serious injury to the domestic industry, caused by increased imports of a good due to tariff concession under the Trade Agreement.

Application

Rule 4(2) provides that the application shall be in the form as specified by the Director General.  The application form shall be supported by-

• evidence of-

• increased imports;
• serious injury or threat of serious injury to the domestic industry;
• a casual link between imports and the alleged serious injury or threat of serious injury;
• the reduction or elimination of a customs duty under the Trade Agreement being a cause which contributes significantly to the increase in imports and such increase in imports alone constitutes a substantial cause of serious injury to domestic industry.The cause of reduction or elimination of a customs duty under the Trade Agreement need not be equal to or greater than any other cause; and

• a statement on the efforts being made, or planned to be made, or both, to make an adjustment to import competition.

Rule 4(3) provides that the Director General shall not initiate an investigation unless he examines the accuracy of the evidence provided in the application and satisfies himself that there is sufficient evidence regarding of increased import, serious injury or threat of serious injury, a casual link between imports and the serious injury or threat of serious injury, the reduction or elimination of a customs duty.

suo motu investigation

Rule 4(4) provides that the Director General may initiate an investigation suo motu if he is satisfied with the information received from any Commissioner of Customs or any other source that sufficient evidence  exists as to the increased imports, serious injury or threat of serious injury etc.,

Principles governing investigation

Rule 5 provides the principles for investigation.  The principles governing investigation are as detailed below:

• The Director General on initiation of investigation under these Rules shall issue a public notice notifying his decision thereto.The public notice shall contain the following information-

• The name of the exporting countries and the good involved;
• The date of initiation of investigation;
• A summary statement of the facts on which the allegation of serious injury or threat of serious injury is based;
• Reasons for initiation of the investigation;
• The address to which representations by interested parties should be directed; and
• The time limits allowed to interested parties for making their views known through appropriate representation.

• The Director General shall forward a copy of the public notice to-

• The Central Government in the Ministry of Commerce and other Ministries concerned, as he deems fit;
• Known exporters of the good, the increased imports of which have been alleged to cause or threaten to cause serious injury to the domestic industry;
• The Governments of the Exporting State and all other member States of the Association of Southeast Asian Nations; and
• Other interested parties, as he deems fit.

• The Director General shall also provide a copy of the application filed to him, to-

• The known exporters or the concerned trade association;
• The Governments of the Exporting State and all other member States of the Association of the Southeast Asian Nations; and
• The Central Government in the Ministry of Commerce;

The Director General shall also make copy available a copy of the application, upon the request in writing, to any other interested party;

• The Director General may issue a notice, calling for any information in such form as may be specified by him from the Exporters, foreign producers and Governments of member States of the Association of the Southeast Asian Nations and such information shall be furnished by such persons and Governments in writing within 30 days from the date of receipt of the notice or within such extended period as he may allow on sufficient cause being shown;
• The Director General may provide an opportunity to the industrial users of the goods and to representative consumer organizations in cases where the good is commonly sold at retail level to furnish information which is relevant to the investigation;
• The Director General may allow an interested party or his representative to present the information orally.The DG shall consider such oral information when it is reduced in writing;
• The Director General shall make available the evidence presented to him by one interested party to the other interested parties, participating in the investigation;
• In case where an interested party refuses access to or otherwise does not provide necessary information within the period or significantly impedes the investigation, the Director General may record his findings on the basis of the facts available to him and make such recommendations to the Central Government as he deems fit;
• Safeguard measure shall not be applied against a good originating in the territory of the member State of the Association of Southeast Asian Nations so long as its share of imports of the good concerned in India does not exceed 3% of the total imports of that good from the other member States of the Association of Southeast Asian Nations.

Confidential Information

Rule 6 provides that any information which is by nature confidential or which is provided on a confidential basis shall be treated as such by the Director General upon cause being shown.   It shall not be disclosed without specific authorization of the party providing such information.   He may require the parties on confidential basis to furnish non confidential summary thereof.   If the in the opinion of the party such information cannot be summarized, such party may submit to the Director General a Statement of reasons why it is not possible. 

If the Director General is satisfied that the request for confidentiality is not warranted or the supplier of the information is unwilling either to make the information public or to authorize its disclosure in a generalized or summary form, he may disregard such information unless it is demonstrated to his satisfaction from appropriate source that such information is correct.

Determination of serious injury or threat of serious injury

Rule 7 provides that the Director General shall determine serious injury or threat of serious injury to the domestic industry taking into account the following principles-

• He shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the good concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses and employment; and
• The determination shall not be made unless the investigation demonstrates, on the basis of objective evidence, the existence of the casual link between increased imports of the goods concerned under the Trade Agreement and serious injury or threat thereof and when factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.

Preliminary findings and provisional safeguard measures

Rule 8(1) provides that the Director General shall proceed expeditiously with the investigation and in critical situations he may record a preliminary finding regarding the investigation.  Rule 8(2) provides that the Director General shall issue a public notice regarding his preliminary findings and send a copy of the public notice to-

• the Central Government in the Ministry of Commerce and in the Ministry of Finance;
• the Governments of the exporting State and all other member States of the Association of Southeast Asian Nations.

Rule 9 provides that the Central Government on the basis of the preliminary findings of the Director General may-

• suspend further reduction of any rate of customs duty on the good provided for under the Trade Agreement; or
• increase the rate of customs duty on the good concerned to a level not to exceed the lesser of the Most Favored Nation applied rate on the good in effect at the time when the safeguard measure is taken, or the Most Favored Nation applied rate on the good in effect on the day immediately preceding the date of entry into force of the Trade Agreement.

The safeguard measure taken as above shall remain in force only for a period not exceeding 200 days from the date on which it was imposed.

Final Findings and safeguard measure

Rule 10 provides that the Director General shall determine, within 8 months from the date of initiation of investigation, or within such extended period as the Central Government may allow, whether-

• the increased imports of the good under investigation has caused or threatened to cause serious injury to the domestic industry; and
• a casual link exists between the increased imports due to tariff concession under the Trade Agreement and serious injury or threat of serious injury.

The Director General shall also give the recommendations regarding safeguard measures that are adequate to prevent or remedy serious injury and to facilitate adjustment and also for the duration of the safeguard measure.   If the period recommended is more than one year, the Director General shall also recommend progressive liberalization adequate to facilitate adjustment.

The final findings, if affirmative, shall contain all information on facts and law and reasons for such conclusion.   The Director General shall issue a public notice regarding his final findings to the Ministry of Commerce and Ministry of Finance and also the Governments of the exporting State and all other member States of the Association of Southeast Asian Nations. 

Rule 11 provides that on receipt of the recommendations from Director General, in order to prevent or remedy serious injury and to facilitate adjustment in respect of the good covered under the final findings, the Central Government may suitably amend the notification, issued under Section 25(1) of the Customs Act to give effect to the provisions of the Trade Agreement, so as to-

• suspend furtherreduction of any rate of customs duty provided for under the Trade Agreement on the good; or
• increase the rate of customs duty on the good concerned to a level not to exceed the lesser of the Most Favored Nation applied rate on the good in effect at the time when the safeguard measure is taken, or the Most Favored Nation applied rate on the good in effect of the day immediately preceding the date of entry into force of the Trade Agreement.

Rule 11(2) provides that no safeguard measure may be imposed in respect of a good which actions are being applied pursuant to Section 8B(1) of Customs Tariff Act, 1975 and in the event of a safeguard duty being imposed in respect of a good under Section 8B(1) of the Customs Tariff Act, 1975, any existing safeguard measure which has been imposed under these rules, in respect of that good shall be terminated prior to the imposition of the action to be applied pursuance to Section 8B(1) of the Customs Tariff Act, 1975.

Rule 11(3) provides that in case, the final finding of the Director General is contrary to the prima facie evidence on whose basis the investigation was initiated and the final finding does not have recommendation for applying safeguard measures, the Central Government shall within 30 days of the publication of final findings by the Director General, withdraw the provisional safeguard measures imposed, if any.

Rule 12 provides that safeguard measures shall be non discriminatory and applicable to the good imported from all other member States of the Association of Southeast Asian Nations.

Rule 13 provides that the safeguard measure shall take effect from the date of publication of the notification in the official gazette, imposing such safeguard measure.   Where a provisional safeguard measure has been imposed and where the Director General has recorded a finding that increased imports have caused or threaten to cause serious injury to domestic industry, it shall be specified in the notification issued that such safeguard measure shall take effect from the date of imposition of the provisional safeguard measure.

Refund of duty

Rule 14 provides that if the safeguard measure taken results in a rate of duty which is lower than the rate of duty resulting from a provisional safeguard measure already taken, the differential duty collected shall be refunded to the importer.

Transition period

Rule 15 provides that the right to initiate a safeguard measure on a good shall be within the transition period for that good and the transition period for a good shall begin from the date of entry into force of the Trade Agreement and end 5 years from the date of completion of tariff reduction or elimination for that good.

Duration

Rule 16 provides that the suspension of the concessions granted under the provisions of the Trade Agreement or the safeguard measure levied shall be only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment.  Unless the safeguard measure is revoked earlier, the same shall cease to have effect after an initial period not exceeding three years.  The Central Government, on receipt of the recommendations of the Director General extend the period of such imposition for a further period of one year.   In no case the safeguard measure shall continue to be imposed beyond a period of four years from the date on which such safeguard measure was first imposed.

No safeguard measure shall be applied again to the import of a good which has been subject to such a measure, for a period of time equal to that during which such measure had been previously applied, provided that the period of non application is at least 2 years.

The safeguard measure with duration of 180 days or less may be applied against to the import of a product, if-

• at least one year has elapsed since the date of introduction of a safeguard measure on the import of that product; and
• such a safeguard measure has not been applied on the same product more than twice in the five year period immediately preceding the date of introduction of the measure.

Liberalization of safeguard measure

Rule 17 provides that if the duration of the safeguard measure levied under Rule 11 exceeds 1 year, the safeguard measure shall be progressively liberalized at regular intervals during the period its imposition.

Review

Rule 18 provides that the Director General may review the need for continued application of the safeguard measure if he is satisfied on the basis of information received by him that-

• the safeguard measure is necessary to prevent or remedy serious injury and there is evidence that the industry is adjusting positively, he may recommend to the Central Government for the continual imposition of safeguard measure;
• there is no justification for the continued imposition of such measure, recommend to the Central Government for its withdrawal.

The provisions of Rule 4, 5, 6 and 10 shall mutatis mutandis apply in respect of review.