TaxTMI 
TaxTMI 
Safeguard investigation concerning imports of Acetylene Black into India — Final Findings
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.... : (i) M/s. Panyam Cements and Mineral Industries Ltd. (ii) M/s. Senka Carbon Pvt. Ltd. (iii) M/s. Tecil & Hydro Power Ltd. (iv) Economic and Commercial Counsellor, Embassy of Peoples Republic of China. Their request was considered and an extension of time up to 24-3-1998 was allowed. 4. Replies to the notice dated 27-1-1998 were received from the following parties :- (a) All the domestic producers through their advocates. (b) All the importers through their advocates. (c) Exporters/Governments of exporting countries : (i) High Commissioner, Republic of Singapore. (ii) Embassy of the Peoples Republic of China. (iii) MCCI Corporation Philippines. (iv) South African High Commission as convenor for six countries involved namely Belgium, Peoples Republic of China, Japan, The Philippines, Singapore and South Africa. (v) M/s. Denki Kagaku Kogyo Kabushiki Kaisha (DENKA). (vi) M/s. Denka Singapore Private Ltd. (DSPL). (vii) Embassy of France. (viii) Embassy of Japan. 5. Verification of information deemed necessary for the investigation was conducte....
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....espite power situation in Kerala and depressed performance of the industry in 1996-97. The domestic industry was more grievously affected in 1997-98 due to heavy importation of AB at unrealistic prices undercutting the local market by the overseas suppliers. (iv) The effect of heavy importation of AB which began in 1996-97 and continued unabated has affected the performance of AB manufacturers particularly in 1997-98 (second half) when the plants were being operated intermittently with reduced production below the economic level of operation. Reduced production and sale of AB at the slashed down prices of procurement offered by Indian Dry Cell Battery Manufacturers (IDCBM) is gravely affecting the industry's financial results. (v) During the quarter Oct.-Dec., 1997 production of AB in Panyam was only 296 MT as against 937 MT during the period Apr.-Sept., 1997. By Sept., 1997 Panyam had a huge unsold stock due to lack of confirmed orders/dispatch instructions. (vi) Despite power problems in Karnataka and Kerala, Panyam whose installed capacity was 1800 TPA and was expected to produce at 80% efficiency, in fact produced as much as 1949 MT in 1996-97 but cou....
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....eturn the material which was found to be perfectly in order and was sold to other customers. They were told that the final finishing of Senka's material was based on low density being the requirement of their main customer M/s INL. Geep had two manufacturing plants, one at Allahabad and the other at Mysore. While Allahabad Plant did not raise any quality problems, towards the end of 1996 Mysore Plant complained about Senka's AB quality as not meeting with their specifications. Thus, it seemed that within the same company, each plant manufactures identical products, albeit with different input acceptance level, which is unlikely. It is more likely that Geep was committed to imports and wanted some excuse for not purchasing from domestic industry. They reduced off-takes due to build up of stocks of imported AB. (xiii) Tecil too had stabilised their quality of production as would be seen from a reference to the book titled 'Technology in India Acetylene Black Industry - a report prepared under the National Register of Foreign Collaborations - Government of India, Department of Scientific and Industrial Research-August 1988' vide Page 22, Page 26, Para 3.5 and page 68, Para 6.....
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....y commenced normal production in 1996 they carried huge stocks as offers made by them in writing were not accepted by the Dry Cell Battery Manufacturers. (xxv) The use of term dumping in the Safeguard application was in a generic sense and not in the technical sense of dumping. (xxvi) The Report of Department of Scientific and Industrial Research on the AB Manufacture in India is a 1988 Report and cannot be entirely relied upon in today's context as many parameters since then have changed. (xxvii) Tecil is a captive producer of Calcium Carbide and would therefore continue to manufacture AB from this route. (xxviii) Calcium Carbide and AB are two different products both manufactured domestically and the issues connected with Calcium Carbide should not be mixed up with the issue concerning AB. (xxix) The domestic producers of AB are not in a position to generate adequate resources to facilitate their restructuring unless Safeguard Duty is imposed on AB. (xxx) CIF pricing of exporters is same irrespective of the method of manufacturing i.e. through Petrochemical or Calcium Carbide route. No distinction on the basis of route, theref....
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....against 206.25 MT in the previous year. Thus three of the four domestic producers of AB showed increase in production in 1996-97. It was only in the case of fourth producer namely Tecil that there was a fall in production from 1031.8 MT to 473.93 MT. The fall in production in Tecil was due to serious power cuts and workers strike. Fall in production in Tecil was, therefore, not due to the alleged increased imports. (v) The fall in capacity utilisation is mainly attributable to the drop in apparent demand in the first half of 1997-98 by 14%, and increase in installed capacity by about 6% and problems of inefficiency power cuts and labour faced by Tecil and not due to increased imports. The increase in the market share of imports from 21.8% in 1996-97 to 22.81% in 1997-98 i.e. 1%, cannot be regarded as serious injury resulting in significant overall impairment of the domestic industry. (vi) Injury to domestic industry is a self inflicted injury as they increased the installed capacity from 5300 MT to 5600 MT inspite of a low capacity utilisation. The causal link between increased imports and serious injury to the domestic industry is absent. (vii) The quali....
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....ncrease of 213 MT and Tecil losing their production of 558 MT, together accounted for 771 MT which explains the increase in quantity imported in 1996-97 over 1995-96. (xiv) There are four domestic producers of AB out of which 3 domestic producers in 1996-97 registered an increase in production and only one domestic producer namely Tecil suffered loss of production, sales etc. for reasons other than increased imports i.e. labour and power problems etc. This domestic producer alone cannot constitute the domestic industry as per the definition of the domestic industry under the Safeguard Law and, therefore, no action need be taken for imposition of Safeguard Duty. (xv) Availability of Acetylene from Hydrocarbon route is doubtful. Two of the domestic producers in the context of anti-dumping petition concerning calcium carbide have mentioned that there are no known manufacturer of acetylene in Petrochemical industry in India. Adjustment plan submitted by some of the domestic producers is, therefore, questionable. (D) VIEWS OF THE EXPORTERS/EXPORTING COUNTRIES 9. The exporters of AB/governments of exporting countries have made the following main points : (a) Ka....
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....o deliberate intention of reducing the prices of AB imported into India and the same is based solely on market prices. Since international prices of AB have gone down MCCI has also reduced its AB price but MCCI prices are fair and reasonable. (iii) Imposition of SG duty on AB will adversely affect the Dry Cell Battery manufacturers by increasing their cost. (c) DENKA & DSPL :- (i) The net increase of import should be taken only after deducting the increase of total consumption in India. The net increase of import of AB is attributable to increased demand of AB by the users of AB specially when domestic producers fail to meet the demand of dry cell battery manufacturers. (ii) Infrastructure problems such as power and labour and inefficiency of the domestic producers cause serious injury or threaten to cause serious injury to the domestic industry. (iii) Rate of provisional duty is unfair and unjustified. (iv) The marginal decrease in price of imported AB from US $ 2280 in 1996 to US $ 1970 in 1997 (CIF) was due to fall in international prices. (d) Embassy of the Peoples' Republic of China did not make any specific submissions except....
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....ave increased their output. It is, therefore, doubtful whether there is serious injury or threat to the domestic industry. (iii) Causal link between increased imports of the product and serious injury or threat thereof should be demonstrated on the basis of objective evidence. Recent increase in the imports of AB is mainly due to Indian domestic problems including failure of electricity supply, labour dispute, loss of competitiveness owing to delayed measures to increase efficiency. (iv) Whether provisional safeguard duty at the rate of Rs. 19,500 per MT would cause the total duty of AB to exceed the level given under Schedule of Concessions? India needs to fulfil its duties of investigation, notification and consultation under the Agreement on Safeguards. (F) FINDINGS OF DG 10. I have gone through the case records and the submissions made by the interested parties. The issues raised by various parties are dealt with at appropriate places in the findings below : Product under investigation The product under Investigation is Acetylene Black (AB). AB is a unique type of Carbon Black. It is fluffy and has a bulk density of 19 kg. per cubic meter. It is th....
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....ifferent from AB. 14. It is observed that product imported through Belgium i.e. Conductive Carbon is imported by the dry cell battery manufacturers and is described in the documents as 'Carbon Black Super P' which is used for the same purpose i.e. in the manufacture of dry cell batteries. It functionally and commercially substitutes AB. Persons dealing with AB do not distinguish between AB and Conductive Carbon which is reflected in the reply to Questionnaires (repro- duced below) filed by Indo National Ltd., the importers of Belgium material. a. Name of the product imported : Acetylene Black b. Description of the product including various grades, sizes, models or type etc. : (a) Acetylene Black (Denka) 50% compressed. (b) Carbon Black - Super "P" (c) Acetylene Black (China) It is evident from the above that the users of Carbon Black Super P, the so-called Conductive Carbon, themselves have described this product as AB. Commercially, functionally and in consumers' perception, Carbon Black Super P, the so called Conductive Carbon is the same as AB which is the subject matter of the present investigation. 15. It is also observed that in th....
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....er investigation. 19. The users/importers have claimed that imports during 1994-95 and 1995-96 were only of small quantities and the first year of real imports was 1996-97 but that was an abnormal year in view of the fact that one of the four domestic producers namely M/s. Tecil was non-operative for a considerable period due to power and labour problems. The imports, thus, were made to meet the shortfall in domestic production as well as to meet the increased domestic demand. 20. In this regard it is observed that the increase in imports is to be considered over a period which under the Trade Notice No. SG/TN/1/97 dated 26th September, 1997 issued by the DG has been specified to be a period of the most recent 3 years (or longer) immediately preceding the commencement of investigation for which data is available. In the current investigation, therefore, the period of investigation has been rightly taken as 1994-95, 1995-96, 1996-97 and the first six months of the year 1997-98 for which data was made available by the applicants and verified by the team of officers. Whether or not there were imports in any of these years is irrelevant specially as the evaluation of imports is t....
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....e level of sales, production, capacity utilisation, employment etc. If on an objective evaluation all the factors taken together as a whole certainly tend to show that some degree of adverse effect has been caused to the domestic industry, it may well result in the finding of serious injury. In the case under investigation it is seen that domestic production which reached a peak of 3570.075 MT in 1995-96 from 3355.43 MT in 1994-95 has drastically fallen in 1996-97 and thereafter in 1997-98. The same trend is exhibited in the capacity utilisation as well as in the domestic sales and the share of the domestic production in the apparent consumption. The domestic industry has also suffered increases in the cost of production coupled with reduction in sales realisation resulting in operating losses, stoppage of production by some of the domestic producers and loss of man-days in the case of others. Panyam had to shut down their plant from 10th April, 1997 to 2nd June, 1997 due to insufficient orders. Similarly Senka did not produce AB in September 1997 as there was no off-take by the customers. All these factors put together certainly tend to show that the domestic producers have suffer....
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....ction of 3274.62 MT. On both these counts Tecil who alone suffered loss of production cannot constitute domestic industry and, therefore, injury suffered by Tecil alone by way of loss of production etc. cannot constitute injury to the domestic industry as a whole. 24. It is important to analyse this issue first as it lies in the heart of the determination whether the injury caused to domestic industry is on account of increased imports or on account of other factors. In the present case the domestic industry comprises of four producers. Admittedly as per the definition of the domestic industry all the four producers taken together or those who account for a major proportion of the domestic production need to be considered as domestic industry. The application has been filed on behalf of all the four domestic producers which account for the entire domestic production and the analyses of serious injury in Paragraph 21 and 22 above also takes into account data for all the four domestic producers taken together. 25. The crux of the argument of AB users/importers is that while three out of the four producers, who accounted for a major proportion of domestic production, achieved hi....
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....Taking account of individual capacities it is observed that Panyam had an installed capacity of 1800 MT and they produced 1949 MT. Senka had an installed capacity of 900 MT and they produced 630 MT in 1996-97. They thus had a scope to further achieve production to meet with the domestic demand. I must hasten to add that availability of Calcium Carbide was not an issue as it was freely importable and perhaps at cheaper prices as is evident from the fact that an anti-dumping petition against Calcium Carbide imported from PR China and Romania has been filed before the Designated Authority. In the case of Oswal, they produced about 220 MT in 1996-97. However, it is seen that although they had an installed capacity of 900 MT they have not produced Acetylene Black beyond 220 MT or so. It is also observed that in the year 1996-97 Tecil had power and labour problem till November 1996 and in November 1996 they informed the Dry Cell Manufacturers that they had commenced their operations at full capacity and that they were in a position to offer Acetylene Black. The domestic producers collectively carried a monthly stock of about 20.99 MT on an average from April, 1996 to October, 1996 which ....
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....ylene Black prices. As against this short supply of 207.5 MT, the domestic producers carried on an inventory of 308.12 MT as compared to 50.17 MT in 1995-96. The domestic producers could have supplied even this quantity of 207.5 MT if it was not for reasons other than availability of AB with the domestic producers. This reason was the inability of the domestic producers to cope with the demand of bringing their prices in line with the imported prices. 29. The Dry Cell Manufacturers imported 1169.42 MT of AB in 1996-97. They have submitted that there was an increase in consumption of 213 MT from 3645 MT in 1995-96 to 3858 MT in 1996-97 which coupled with a shortfall of 558 MT in production of Tecil accounts for 771 MT which was the cause of increase in imports of about 770 MT of AB in 1996-97. This argument is strongly biased in favour of the imports as it claims the entire growth in consumption and shortfall in production of Tecil to be catered by imports and, is therefore, totally unreasonable. As mentioned above, the actual imports in 1996-97 were 1169.42 MT which were 1098.42 MT more than 1995-96. The apparent domestic consumption (domestic sales + imports) increased by about....
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....22,000 PMT to Rs. 95,000 PMT in Sept. 1997, Panyam dropped prices from Rs. 1,04,500 PMT to Rs. 95,000 PMT and Tecil from 1,05,000 PMT to Rs. 94,000 PMT in the same period. Tecil for some time during first half of 1997-98 suffered with power problem and they remained closed from 14th April to 23rd April, 1997 and 6th May to 10th August, 1997. They, however, produced 121.52 MT of Acetylene Black in this period and the other three domestic producers accounted for 1150.48 MT during this period. The production of these three domestic producers which was 2800 MT in 1996-97 fell down by about 17.82% on a pro rata basis. The imports in the first six months of 1997-98 accounted for 49.16% of the domestic production. This happened not because the domestic producers could not cater to the domestic demands as they carried on with an inventory of 308.12 MT in the beginning of the year and 226 MT at the end of the first six months of 1997-98 and they had capacity surplus to cater to the domestic demand including Tecil who did not have sufficient orders to service inspite of a reduced production. A mention has been made about the quality of AB of Senka in 1997. It is observed that Senka manufactu....
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....AB which caused the price-suppression and influenced the decision to source the supplies. 32. An argument has been raised that price is not a relevant factor for consideration in the Safeguard investigation. In this regard it is observed that unlike in the case of anti-dumping investigation where the price discrimina- tory practices adopted by the exporters is the root cause for an anti-dumping action, in the case of Safeguard investigation increased imports is the funda- mental requirement for maintaining a safeguard action. At what prices the imports are entering is not the relevant factor because it is not the unfair competition which is the subject matter of safeguard action but it is the competition per se offered by the increased imports to the domestic producers, even if it is at fair prices. Only in this context the import prices are not relevant. However, when it comes to determination of serious injury or threat thereof, the law requires an examination of change in level of sales, profitability etc. of the domestic producers. These factors undoubtedly depend upon the prices of competing products and in that context import prices do become relevant and require an examin....
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....esic producers of AB. Further, the Safeguard duty is to be liberalised periodically which should further reduce its impact on the user industry. The objective of Safeguard duty being to enable the domestic industry to re-structure itself and make positive adjustments to face the new situation of competition offered by the increased imports, it will be in the larger public interest to impose Safeguard duty as the user industry may then be able to source their requirement from alternative competitive sources. It is, therefore, considered that imposition of Safeguard duty in the present case would not be against consumer interest rather it would serve the general public interest. Price comparability of acetylene black produced through different routes 36. It has been claimed that Acetylene Black produced through Hydrocarbon route is cheaper as compared to the Acetylene Black produced from Calcium Carbide. It has been submitted that Oswal's prices are about Rs. 20,000/- per MT lower than the prices of the other three domestic producers who manufacture Acetylene Black through Calcium Carbide route and the amount of provisional Safeguard duty recommended i.e. Rs. 19,500 PMT is appr....
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....of their Hydro-Power Projects on a confidential basis. It is observed that Tecil have initiated necessary action to re-structure their plant and they are in the process of making a positive adjustment which would enhance their competitiveness. 38. In respect of Senka who are producing Acetylene Black through the Calcium Carbide route, they do not have their own captive Calcium Carbide Unit. They have, therefore, to buy their major raw materials from outside sources. Senka, therefore, submitted that they were discussing with the Petro Chemical Industry for getting Acetylene Gas for converting into AB by cracking the gas. Panyam mentioned that they were also taking steps similar to those proposed by Senka. In this regard, it has been argued that two of the domestic producers have joined in filing an anti-dumping application concerning imports of Calcium Carbide before the Designated Authority in the Ministry of Commerce. In this application it has been mentioned that "in India Union Carbide Ethylene Plant at Chembur, Bombay had been recovering acetylene by solvent extraction of the cracked gases in the Naphtha cracker. (But now there are no known manufacture of Acetylene in the Pe....
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.... that the domestic industry must produce Acetylene Black through Petrochemical route alone. Some of the international manufacturers in South Africa and the Philippines are producing Acetylene Black through Calcium Carbide route and such Acetylene Black is entering into the Indian markets at competitive prices which clearly indicates that it is possible to produce Acetylene Black at competitive prices through the Calcium Carbide route. 39. In view of above, it is observed that the adjustment plan submitted by the domestic industry is not hypothetical or academic. They are making a sincere effort to become competitive so as to face competition offered by the imports. It is considered that imposition of Safeguard duty would help them in re-structuring and to become competitive. It is also observed that some of the domestic producers have already taken steps in this direction and the domestic industry would need a period of about two years to substantially complete their plans. Share of different countries 40. The findings in this regard at Paragraph 5(ix) of the Preliminary Findings are confirmed. CONCLUSION AND RECOMMENDATIONS OF THE DG 41. In view of the findings abov....