By Hansa Sinha
A: India-ASEAN Trade in Goods Agreement (Safeguard Measures) Rules, 2016
A:Notified on 4th March, 2016 by the Ministry of Finance. They are already in force now.
Q. What do these rules enable?
A: They enable the Indian domestic industry to file petitions requesting Safeguard Duty on ASEAN countries?
Q. Which are the ASEAN countries and why were we not able to request Safeguard measures on these countries earlier?
A: ASEAN comprises of ten members, namely, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. To answer the second part of the question, India-ASEAN Trade in Goods Agreement provided that a country can invoke Safeguard measures only when it has adopted rules to that effect. Even when the Agreement itself was signed in 2009 and came into force in 2010, India had not notified the rules till date. This prevented any Safeguard measures being invoked as such against these countries.
The relevant extract of the agreement reads as follows:
In applying an AIFTA safeguard measure, the Parties shall adopt and apply, mutatis mutandis, the rules for the application of safeguard measures, including provisional measures, as provided under the Agreement on Safeguards, with the exception of the quantitative restriction measures set out in Articles 5 and 7, and also, Articles 9, 13 and 14 of the Agreement on Safeguards.
Q. Who is the relevant authority to conduct such investigations?
A: It is the DG Safeguards.
Q. What is a safeguard action?
A: Sorry. Probably should have answered this one earlier. In a nutshell a WTO Member can take a safeguard action that restricts the imports of a particular product from all WTO member countries temporarily. The threshold is that the increase in imports should be sharp, sudden and significant. Basically it should be a shocking amount of goods suddenly coming in India. The second leg of the threshold is that it causes a ‘serious injury’ to the Indian industry or ‘domestic industry. You can read more on this on my earlier blog post distinguishing the three trade remedy measures.
Q. What is the need for these rules at all?
A: The need arises as under the ‘regular’ Safeguard Rules any safeguard duty that is imposed does not apply to partners who signed any agreement outside WTO with India. India ASEAN FTA is exactly that. An agreement signed with India outside WTO.
Q. On whom will the safeguard measures apply?
A: Any safeguard measures undertaken under these rules will apply to the goods imported from all other member States of the Association of Southeast Asian Nations.
Q. What are the differences between the Safeguard Rules and India ASEAN Safeguard Measures Rules, 2016?
- The definition of ‘critical circumstances’ under 1997 Rules says ‘imports that have taken place in such increased quantities’ and under 2016 Rules it says ‘the increased imports have caused or threatening…’. Therefore, the former stresses on the quantity of imports and the latter simply say increase in imports.
- It is to be noted that the 2016 Rules define ‘increased imports’ separately in 2(f) unlike the Safeguard Rules.
- While the 1997 Rules define ‘like article’, the 2016 rules provide the exact same definition for ‘like good’.
- The 2016 Rules provide various other definitions like “member State of the Association of Southeast Asian Nations”, “serious injury”, “threat of serious injury” and “Trade Agreement”.
- Since the 2016 Rules provide for the definition of DG Safeguards as that under Safeguard Rules, 1997, it doesn’t provide for a provision referring to appointment of DG as under the Safeguard rules.
- The 1997 rules provide for the review of safeguard ‘duties’ while the 2016 rules provides for the review of safeguard ‘measure’. The reason for different terms becomes clear when we look at Rule 10 and Rule 9 of the two set of Rules respectively.
- There is an added requirement and logically so, under the 2016 rules for evidence required to initiate investigation. It provides that there should be a ‘reduction’ or ‘elimination’ customs duty under Trade Agreement. This should be a big cause for increase in imports.
- In case of 2016 Rules the copy of public notice of initiation of investigation is to be forwarded additionally to all other member states of the Association of Southeast Asian Nations. Further in the previous rules it says that the public notice can be sent to ‘other interested parties’ while in the 2016 Rules, it mentions ‘other interested parties as he deems fit’ pronouncing further the discretion of DG.
- Under principles governing investigation 6(8) of 1997 Rules refer to ‘a reasonable period’ while the 2016 rules 5(8) refer to ‘the period specified by the Director General’, therefore restricting the interpretation of a ‘reasonable’ time period.
- As far as principles governing the determination of serious injury or threat of serious injury, the 2016 rules omit an entire line as given under the 1997 rules. This line is:
In such cases, the Director General may refer the complaint to the authority for anti dumping or countervailing duty investigations; as appropriate.
Therefore, under the 2016 rules such recourse to other trade remedy measures at the discretion of the DG is not available in case the injury is not due to increase in imports.
- The 2016 rules additionally requires that the notice of preliminary finding be also sent to the Governments of the exporting State and all other member States of the Association of Southeast Asian Nations. This can be said to be a recurring theme throughout the Rules and therefore will not be repeated here from.
- A major difference is in Rule 10 (levy of provisional duty) of the 1997 Rules and Rule 9 (Application of provisional safeguard measures) of the 2016 Rules. On the basis of preliminary findings under 2016 Rules the Central Government can do following:
- Not allow any reduction to already existing custom duty.
- Increase the rate of custom duty. This should be in conformity with MFN applied rate.
- There is an additional provision of ‘Transition period’ under the 2016 Rules.
- The expiry of duty under 1997 Rules is after four years while under the 2016 rules it is after three years. In case of 1997 rules it can be further extended for any period up to 10 years. While under 2016 rules it can be extended only for one more year which is subject to various other qualifications such as the transition period of the good, previous measures, period of non-application etc.
So that was in ‘brief’ about these rules. You can read them yourself here. Do let me know if there are any further confusions, clarifications etc. I would be happy to discuss.
As always, thank you for reading!