Article XIX of GATT read with Agreement on Safeguard (AOS) provides the ground rules for Safeguard action by countries which face a situation of increased imports of any commodity which causes or threaten to cause serious injury to domestic producers of like or directly competitive products. The safeguard action can include the imposition of tariff over and above the bound rates or Quota Restrictions or Tariff Rate Quota. The domestic regulations are based on Agreement on Safeguards which establishes Rules for application of Safeguard measurers. The domestic regulations and its implementation are wholly consistent with both the letter and spirit of Article XIX of GATT 1994 and Agreement on Safeguards, which has been appropriately reflected in the domestic regulations.
The Customs Tariff Act, 1975 has been amended to include various provisions for giving relief to the domestic producers against injury caused to them by imports in accordance with the Agreement on Anti-dumping (i.e. the Agreement on the Implementation of Article VI of GATT, 1995), the Agreement on Subsidies and Countervailing Measures and the Agreement on Safeguards. These include Section 8B, Section 8C, Section 9A, Section 9B and Section 9C of the Customs Tariff Act, 1975 and the Rules made thereunder. These provisions are aimed at offsetting the adverse effects of increased imports, subsidized imports or dumped imports & imports from Peoples’ Republic of China.
The domestic law to implement the provisions of the Agreement on Safeguards has been enacted under Section 8B and Section 8C of the Customs Tariff Act, 1975. The Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 and Customs Tariff (Transitional Products Specific Safeguard Duty) Rules, 2002 govern the procedural aspects.
The salient features of Section 8B of the Customs Tariff Act, 1975, inter alia, are as under:
If the Central Government, after conducting such enquiry as it deems fit, is satisfied that any article is imported into India in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry, then, it may, by notification in the Official Gazette, impose a safeguard duty on that article.
Provided that no such duty shall be imposed on an article originating from a developing country so long as the share of imports of that article from that country does not exceed three per cent or where the article is originating from more than one developing countries, then, so long as the aggregate of the imports from all such countries taken together does not exceed nine per cent of the total imports of that article into India.
Provided further that the Central Government may, by notification in the Official Gazette, exempt such quantity of any article as it may be specified in the notification, when imported from any country or territory into India, from payment of the whole or part of the safeguard duty leviable thereon.
Section 8C which was introduced in Finance Act, 2002 provides for imposing safeguard duty on any article imported into India from the Peoples’ Republic of China in such increased quantities and under such conditions so as to cause market disruption to domestic industry.
A Director General (Safeguards) / Director General (Specific Safeguard) under the Department of Revenue, Ministry of Finance has been appointed to hear the petitions and conduct investigations for imposition of Safeguard Duty / Specific Safegnard Duty. The duties of Director General include:
to investigate the existence of "serious injury" / "market disruption" or "threat of serious injury" / "threat of market disruption" to domestic industry as a consequence of increased import of an article into India;
to identify the article liable for Safeguard duty / specific Safeguard duty;
to submit his findings provisional or otherwise to the Central Government as to the “serious injury” / “market disruption” or “threat of serious injury” / “threat of market disruption” to domestic industry consequent upon increased import of an article from the specified country / Peoples’ Republic of China.
the amount of duty which if levied would be adequate to remove the injury / market disruption or threat of injury / threat of market disruption to the domestic industry;
the duration of levy of safeguard duty which if levied would be adequate to remove the injury or threat of injury to the domestic industry;
to except such quantity of any article when imported from any country or territory into India, from payment of the whole or part of the safeguard duty leviable thereon.
to review the need for continuance of safeguard duty.
A viable restructuring plan lies at the heart of any safeguard proceeding and the period for which safeguard duty needs to be imposed depends upon the period that may be required by the domestic industry to restructure itself. The question of progressive liberalization of safeguard duty also is linked with the likely benefits that the industry may keep on achieving as it makes progress in that direction.
The Agreement on Safeguards provides for a special and differential treatment for developing countries. Under Article 9 of the Agreement, safeguard measures are not to be applied against products originating in a developing country member as long as its share of imports of the product concerned in the importing member does not exceed 3 percent, provided that developing country members with less than 3 percent import share collectively account for not more than 9 percent of total imports of the product concerned. The Department of Revenue, Ministry of Finance have issued Notifications No. 103/98- Cus dated 14th November, 1998 & 62/99- Cus dated 13th May, 1999 regarding the list of developing countries for the purpose of Article 9 of the Agreement on Safeguards.
An important feature and perhaps the most distinguishing feature of safeguard measures as compared to anti-dumping duties or countervailing is that safeguard measures are applied uniformly on all imports irrespective of their source whereas the anti-dumping duties and Countervailing duties are source specific and may vary in amounts depending upon the source.
In accordance with the provisions of the Safeguard Duty Rules, safeguard duty can be imposed on any product imported into the country, in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten serious injury to the domestic producers of like or directly competitive products, irrespective of the source of origin of the imported product.
The safeguard duties can be imposed for a short duration with the immediate intention of preventing or remedying serious injury to the domestic industry. Such a measure would, however, also require the industry to adjust itself to the new situations of competition offered by the increased imports. A safeguard measure can be imposed only after the Director General arrives at a finding, after due investigation, that the increased imports of particular product(s) are causing or are threatening to cause serious injury to the domestic producers of like or directly competitive articles.
An application for initiation of a safeguard investigation can be made by any aggrieved producer / manufacturer, trade representative body, firm or institution, which is representative of the domestic industry. This application should be made in the format issued by the Director General (Safeguards) a copy of which can be obtained from his office or from Industry Chamber and Association and should include information as detailed in Annex to the Trade Notice, along with all supportive evidence / data / annexes, issued by him.
The Director General shall, on receipt of a written application by or on behalf of the domestic producer of like article or directly competitive article, initiate an investigation to determine the existence of 'serious injury' or 'threat of serious injury' to the domestic industry, caused by the import of an article in such increased quantities, absolute or relative to domestic production. The duty levied shall be only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate positive adjustment and ceases to have effect on the expiry of four years from the date of its imposition. If the Central Government is of the opinion that the domestic industry has taken measures to adjust to such injury or threat thereof and it is necessary that the safeguard duty should continue to be imposed, it may extend the period of such imposition. In no case the safeguard duty shall continue to be imposed beyond a period of ten years from the date on which such duty was first imposed.
If a request is made for provisional safeguard measures, full & detailed information regarding existence of critical circumstances and how delay would cause damage which it would be difficult to repair needs to be considered.
If the safeguard measures are requested to be imposed for more than one year, details of efforts being taken and planned to be taken or both, to make a positive adjustment to import competition with details of progressive adjustment to import competition with details of progressive liberalization a dequate to facilitate positive adjustment of the industry needs to be considered.
Safeguard Duty Rules
The Safeguard Duty Rules require a safeguard investigation to be completed within 8 months of its initiation. The provisions regarding review have been contained in Rule 18 of the Safeguard Duty Rules, 2002 and require any review to be concluded within a period of 8 months, following the provisions of Rules 5,6,7 & 11 of the said Rules which essentially means the procedure of investigation to be mutates mutandis followed in review proceedings also.
The Director General shall, from time to time, review the need for continued imposition of the safeguard duty and shall, if he is satisfied on the basis of the information received by him that (i) safeguard duty 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 continued imposition of duty (ii) there is no justification for the continued imposition of such duty, recommend to the Central Government for its withdrawal. Where the period of imposition of safeguard duty exceeds three years the Director General shall review the situation not later than the mid term of such imposition, and, if appropriate, recommend for withdrawal of such safeguard duty or for the increase of the liberalization of duty.
The safeguard duty levied shall take effect from the date of publication of the notification in the Official Gazette imposing such duty where a provisional duty has been levied 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 that such safeguard duty shall take effect from the date of levy of provisional duty.
There is no appellate remedy available under the Safeguard Duty Rules against the findings of the Director General (Safeguards)