Govt to appeal amid fear that the US and EU may extend it to other products. Exporters of steel and, in turn, the Union ministry of commerce are getting worried at the increased resort by the US of countervailing duty (CVD) to bring down imports from India.

CVD is primarily used to counter the impact of subsidies given by exporting countries to their exporters. It is permissible for use as protection under the World Trade Organisation rules, as is the imposition of anti-dumping duty (AD), used by a country to counter the impact of imports on domestic producers of a particular commodity. If the price of import is lower than the price at which it is normally sold in its own home market, this is termed dumping.

India is itself a liberal user of AD provisions and it has had these imposed by the European Union and the US, on various exports from here. Till 2000, though, the US didn’t use this much; the EU did, but on items such as cotton and pharmaceuticals, not steel. In that year, though, the US imposed both AD and CVD on steel products from here; the EU followed with AD on non-alloy steel some time after. Recently, though, the US has been aggressive in using CVD on Indian steel. In addition to the AD, a 21.95 per cent CVD was put on Essar Steel’s products in 2008. Then, this January, after a review of US steel imports from India, a whopping 586.43 per cent CVD was put on exports of Tata Steel.

OVERARCHING DEFINITION

The problem, say official sources, is that the US government’s definition of CVD is extremely wide. It includes all export incentives given by the central or any state governments under any schemes, the Special Economic Zones (SEZ) Act, any rule on procurement from public sector units or loans from PSU banks. These are all considered subsidies for calculating CVD. The Union government has written to its US counterpart to review the CVD structure in steel, making a point on a particular item in this regard, on sale of high-grade iron ore to steel companies for less than adequate remuneration from government-owned NMDC.

“We are currently studying the legality of eligibility of all schemes for CVD and waiting for US action following our representation. Later, we could go for legal redressal (see box). The only issue which has been represented as of now is sourcing of iron ore from NMDC. While imposing CVD, the US had assumed that since NMDC is a government body, its pricing is also controlled by government, amounting to a subsidy, which has been objected to by the Indian government,” said sources.Concerns

Commerce ministry is evaluating the pricing of various imports into India for levying a similar CVD (as a possible retaliatory tactic) if needed, added officials. At present, India uses AD and safeguard duties in such cases.

Though CVD has been imposed by the US only on steel, the government here is concerned that it might be done for other commodities, too. And, as noted, the method of assessment would make this possible. For instance, in the Essar case the CVD was imposed by assuming benefits from central and state governments to exports through shipment export credit, the Export Promotion Capital Goods Scheme, pricing of NMDC ore, benefits from the SEZ Act of 2005 and the Gujarat SEZ Act.

For Tata Steel, including all these schemes as in Essar’s case, the US administration also levied duty to offset the impact of the Advance Licence programme, the Duty Entitlement Pass Book Scheme, loans guaranteed by the Government of India through State Bank of India, loans from the steel development fund, captive mining of iron ore under the Mines and Minerals Regulation Act and mineral concession rules, captive mining of coal, benefits of the export-oriented programme, income tax exemption under Section 80HHC, market development assistance and market access initiatives of the commerce ministry, duty-free replenishment certificate and much more.

Tata Steel had actually not responded to the US government’s call to defend itself in the review done to examine the case for protection from Indian imports. The CVD was calculated using “adverse inference in applying facts otherwise available”, says the US government. Essar Steel had participated in the review and provided all the required details before the CVD was levied. An official here said: “Such duties may be made applicable to any exports from India because any small or big exporter takes these advantages for exports in the form of duty drawbacks, export promotion schemes or custom or excise benefits or even concessional pre/post shipment credit.” The problem, say officials, is that the US and EU are yet to recover from the global economic slowdown and are keen to see how their industries and jobs could be protected from imports.

WTO to the rescue

In pondering weapons on addressing US use of CVD on Indian exports, the government here has had some good news. This comes from the recent landmark judgement of the WTO Appellate Body last month, favouring China in a case where the US had imposed CVD on certain Chineseexports. WAB overturned a number of key findings of a WTO panel in 2010 which supported the US move, which had argued that loans from state-owned commercial banks and organisations directly implied controlled pricing.

WAB said government control on pricing can only be assumed if the entity is vested with governmental authority in this regard, not merely by being owned or controlled by government. Commerce ministry officials here, for isntance, argue that sourcing of iron ore fom NMDC by any steel company is done at market prices and the government has no role in fixing this price.

WAB also said that while the WTO agreement allows governments to impose AD and CVD on the same commodity, both could not be calculated using the same elements of alleged subsidy; they are supposed to serve different purposes. Also, that both levies together can’t exceed the combined worth of dumping and subsidisation found on a particular product.