MINISTRY OF COMMERCE AND INDUSTRY
(Department of Commerce)
(Directorate General of Trade Remedies)
New Delhi, the 21st August, 2020
Case No. (SG) 05/2019
Subject: Safeguard investigation concerning imports of “Single Mode Optical fibre” in to India – Final Findings – Proceedings under Customs Tariff Act, 1975 and the Custom Tariff (identification and Assessment of Safeguard) Rules, 1997- Reg.
F. No. 22/5/2019-DGTR.—A. Introduction
1. An application dated 18.07.2019 has been filed before the Director General (Safeguard) under Rule 5 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 (hereinafter also referred to as the “said Rules”) by M/s Sterlite Technologies Limited (‘STL’) and M/s Birla Furukawa Fibre Optics Private Limited (‘BFL’) (hereinafter also referred to as the “Applicants”) in terms of Section 8B of Customs Tariff Act, 1975 (for brevity, “the Act”) read with Rule 5 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 (for brevity, “the Rules”), seeking imposition of Safeguard Duty on imports of “Single Mode Optical Fibre” (hereinafter also referred to as the “product under consideration” or “PUC”) into India to safeguard the Domestic Industry (‘DI’) of like or, directly competitive products from serious injury or threat of serious injury caused by increased imports. The applicants have submitted that imports of subject goods has increased significantly in 2018-19and has continued to be at increased levels in the most recent period, i.e. January’ 2019 to June’ 2019. The applicants have claimed that they are not able to compete with the imports and regain their market share, thereby forcing them to close down or keep part of their production facilities idle,and requested for imposition of provisional Safeguard Duty to mitigate their injury. The Authority also issued Preliminary Findings dated 6th November, 2019 which was not notified by the Central Government.
B. Procedure Followed
2. An examination of the application and the evidence/details/documents submitted therewith led to the conclusion that the application satisfies the requirements of Rule 5 of the said Rules. Therefore, a Safeguard investigation against imports of the PUC into India was initiated vide notification published in the Gazette of India, Extraordinary dated 23.09.2019 vide GSR No.293 (E).
3. In accordance with sub-rules (2) and (3) of Rule 6 of the said Rules, a copy of the initiation notification dated 23.09.2019 and a copy of a Non-confidential Version (NCV) of the application filed by the Domestic Industry were forwarded to the Central Government in the Ministry of Commerce & Industry and Ministry of Finance, the Governments of major exporting countries through their Embassies in India, and the interested parties mentioned in the said application. Further, the questionnaire to be answered by the exporters/importers/domestic producers, as prescribed under Rule 6(4) of the said Rules, was forwarded to the known interested parties with a request to make their views known in writing within 30 days from the date of issue of the NOI.
4. In the meantime, the request made by the Applicants for imposition of provisional safeguard duty was examined and it was primafacie found that there existed critical circumstances wherein delay in imposition of Provisional Safeguard duty would cause irreparable damage to the domestic industry. The submissions of other interested parties filed till date was also taken into consideration.
5. Accordingly, the Preliminary Findings for Provisional safeguard duty was issued under Rule 9 (2) of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 on 6th November, 2019 and was published in the Gazette of India on the same day. However, the recommended Provisional Safeguard duty was not been notified by the Central Government.
6. Subsequently, on the request made by some of the interested parties, the time limit for filing Questionnaire Response was extended till 15th November, 2019. The submissions and questionnaire responses were received from the following interested parties:
i. Corning Technologies India Pvt. Ltd.
ii. Corning Finolex Optical Fibre Pvt. Ltd.
iii. Finolex Cable Ltd.
iv. HFCL Ltd., India
vi. Fibrehome India Pvt. Ltd.
vii. Sumitomo Electric Industries Ltd. (‘SEI’), Japan
viii. SWCC Showa Cable Systems Co. Ltd., Japan
ix. Fujikura Ltd., Japan
x. Pt. ZTT Cable, Indonesia
xi. Pt. Supreme Cable Manufacturing and Commerce Tbk, Indonesia
xii. Pt. Voksel Electric Tbk., Indonesia
xiii. Pt. Yangtze Optical Fibre, Indonesia
xiv. Pt. Communication Cable Systems, Indonesia
7. In addition to the above, Paramount Cables Limited, Orient Cables India Pvt. Ltd. and Om Optel Industries Pvt. Ltd had also filed their submissions subsequently after the expiry of the extended time period. However the same submissions were given by them during the first oral hearing. The submissions made by all interested parties either in public hearing or otherwise have been appropriately examined and addressed under relevant paras. As many issues are repetitive, they have been collectively addressed.
8. In view of the travel restrictions imposed because of Covid-19 pandemic and consequent lockdown, the Public hearing was held through Digital Video Conferencing on 12.05.2020. In the meantime there was a change in Director General (Safeguards), therefore, a second Public hearing was held by the present Director General through Digital Video Conference on 17.07.2020.
9. During both the public hearings, the interested parties, along with the Domestic Industry were given adequate opportunity to make their oral submissions. In terms of sub rule (6) of rule 6 of the Custom Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997, all the interested parties who participated in the public hearing were requested to file written submission of the views presented orally.
10. Copies of written submissions filed subsequent to both the Public hearings by the domestic Industry as also other interested parties were made available to all the interested parties. Interested parties were also given an opportunity to file rejoinders, if any, to the written submissions of other interested parties.
11. All the views expressed by the interested parties in their written submissions, pursuant to the public hearings held on 12.05.2020 and 17.07.2020 were examined and have been taken into account in making appropriate determination. The non-confidential version of the information received or acquired has been kept in the public file. Thereafter, rejoinders to the written submissions filed subsequent to both hearings by DI and other interested parties were also considered.
12. The desk verification of the data submitted by the DI was carried out through digital video conferencing wherein DI shared their system’s screen displaying relevant data for verification.
Post initiation submissions
13. The submissions received in response to the initiation notice but prior to the Public Hearing are summarized as under:
13.1 Finolex Cables Ltd.
Finolex Cables Ltd. is one of the six producers of PUC in India. They have supported the DI’s petition for levy of safeguard duty on imports of PUC into India. They have submitted their Products, Sales, Capacity utilization and Inventory information for the POI. Accordingly, they have claimed that the sudden surge in imports have caused and is threatening to cause serious injury to domestic producers.
13.2 Corning Technologies India Pvt. Ltd. and Corning Finolex Optical Fibre Pvt. Ltd.
13.2.1 Technologies India Pvt. Ltd. is a producer of PUC in India and Corning Finolex Optical Fibre Pvt. Ltd. is a joint venture between Corning SAS and Finolex Cables Ltd., engaged in sales of products manufactured by Corning Technologies India Pvt. Ltd. (hereinafter collectively referred to as “Corning”). Corning has supported the petition filed by the domestic industry for levy of safeguard duty.
13.2.2 They have submitted that the recent, sudden, significant, and sharp increase in imports has caused and is threatening to cause serious injury to domestic producers.It was also submitted that they have faced significant price depression and price suppression, particularly in January – June’ 2019, due to low priced imports.
13.2.3 Corning has not been able maintain its Selling price commensurately with the change in cost of sales during the POI.
13.2.4 They had also shared the concern raised by Domestic industry that the actual price of imported goods is significantly lower than the prices reflected in import statistics, on account of considerable postinvoicing discounts given by exporters.
13.2.5 They have also submitted that the following “unforeseen developments” have led to sudden surge in imports:
a. Decline in demand in the Chinese Optical Fibre market
b. Anti-dumping duty imposed by China PR on optical fibre imported from US and Japan
c. Global overcapacity
d. Investment in Optical Fibre preform
e. Tariff imposed by US on optical fibreimports from China
13.3 HFCL Ltd.
They are one of the importers of PUC in India. They have mainly objected to the inclusion of grades other than grade G652 under the scope of PUC. It has been submitted by them that Indian demand is primarily of Non dispersion Shifted Fibre i.e. G 652 grade. Fibre Cable and other products manufactured using grades other than G652are majorly exported out of India rather than being used in India because of lack of demand and market. Thus, there is no adverse impact on the domestic industry from imports of grades other than G652, therefore, all such grades should be excluded from the scope of Product under investigation.
13.4 Government of Mexico
There has not been any imports of PUC from Mexico to India during January 1, 2016 to June 30, 2019.Therefore, in terms of Article 9.1 of the Agreement on Safeguards of the World Trade Organization and due to the fact that Mexico is a developing country member of the WTO, the exports of PUC from Mexico to India should be excluded from the purview of any safeguard measure derived from the present investigation.
14. Post preliminary findings submissions
The following submissions have been received from interested parties after issuance of Preliminary findings:
14.1 Sumitomo Electric Industries Ltd., Japan
14.1.1 There are no critical circumstances warranting imposition of Preliminary Safeguard Duty. They have submitted that while there was a surge in imports in Quarter 2’ 2018-19, the imports thereafter have substantially declined.
14.1.2 The computation of profit and loss of DI has been made by comparing cost of sales of Domestic Industry with the selling price to independent customer. Exclusion of selling price to related/captive parties has distorted the figures.
14.1.3 Annualised data for January – June’ 2019 cannot be used for analysis of injury parameters in absence of any explanation of the need for such annualisation. In this regard, they have placed reliance on the findings of Panel in India- Steel Safeguards.
14.1.4 Insufficiency in showing increased imports, as imports from all countries including Japan does not show an increasing trend. The injury, if any, being caused to the Domestic industry is only on account of surge in imports from China.
14.1.5 It is submitted that exclusion of imports of only STL (DI) on account of being imported under advance licensing scheme is unfair in data analysis as a similar exclusion should have been done for all the import of the PUC undertaken under advance licensing scheme.
14.1.6 Analysis of the DI’s data does not indicate existence of serious injury. Further analysis carried out after excluding captive/related party sales does not give the correct picture of the condition of the domestic industry.
14.1.7 Further, it was submitted that the increase in imports was not on account of any “unforeseen developments”, as such the requirement of Article XIX of GATT is not met in the present case.
a. In this regard, it has submitted that global overcapacity should have resulted in the PUC being imported in increased quantity from all sources. However, in the present case the majority of imports (approx. 84%) has come from China and imports from other countries such as Japan is minor (8% in 2018-19).
b. Imposition of trade remedies by China should have resulted in increased imports from those countries.
c. It is undisputed that low priced imports of the PUC from China PR have led to price undercutting in India. In this light, they have submitted that the only source of injury, albeit not ‘serious injury’, to the DI is on account of low priced imports from China.
14.1.8 DI is suffering from an unfair trade practice like low priced imports from China, and therefore the remedy lies under the anti-dumping provisions and not safeguard provisions. Accordingly, the present investigations ought to be terminated in terms of paragraph 2 of Annexure to the said Rules.
14.1.9 The DI has failed to make a claim with respect of the “obligation incurred under GATT 1994” as required under Article XIX, in their petition and moreover, even in the preliminary findings there has been no analysis on this issue.
14.1.10 The exporter has further claimed that grade G654 should be excluded from the scope of PUC as it is not produced by the Domestic Industry.
14.1.11 Grades G652, G655 and G657 manufactured by the Exporter should also be excluded as there is significant difference between the products manufactured by the DI and those of SEI, in terms of quality, time delivery, customer support and packaging etc.
14.1.12 DI has claimed excessive confidentiality without giving any meaningful summarization of various factors in their Petition.
14.2 Paramount Cable Limited, Orient Cable Industries Ltd. and Om Optel Industries Pvt. Ltd.
14.2.1 Even though the aforesaid parties have not registered as “interested parties” during the extended time limited provided, their submissions have been taken on record for consideration.
14.2.2 The said parties are importers of the subject goods. They have objected to the initiation of the investigation, and have submitted that no injury has been caused to the domestic producers of PUC.
14.2.3 It has been submitted by them that all Indian producers of PUC, other than STL, merely convert imported Preform into Optical Fibre and therefore, they cannot be considered as a manufacturing industry.
14.2.4 Imposition of Safeguard duty would result in significant increase in prices of PUC, thereby forcing MSME Cabling industry to closure.
14.2.5 Further, imposition of Safeguard duty on Optical Fibre would result in significant increase in import Optical Fibre Cable, leading to closure of cable manufacturing units who would not be able to compete with imports.
14.2.6 Imports of the DI has substantially increased in 2018-19 as compared to the previous years. The claims made by STL that imports made by them are of grades which are not ordinarily manufactured by them appears to be false. The DI be put on strict proof of their claims regarding imports made by them.
14.3 Opti Fibre Systems JSC, Russia
14.3.1 They are the sole producers of Optical Fibre in Russian Federation with an installed capacity of about 7-8% of India’s total installed capacity. As such, there sales to India is insignificant.
14.3.2 Thus, imports from Russian Federation has never caused any damage to Indian producers, as such, no Safeguard duty should be levied on exports from Russian Federation.