In a bid to increase the import duty on select chemicals and petrochemicals from the United States, the government of India sought opinions from the industry stakeholders, including various associations and trade bodies.
The increase in duties however, was being considered in lieu of agricultural commodities on which the Indian government had raised import duty exponentially in early 2020, in response to a United States’ decision to raise duties on import of steel and aluminium from India.
Currently, a standard duty of 10 percent is levied on the import of chemicals and petrochemical products from across the world including the United States, but other than the countries with which India has signed a special trade agreement. So, the current import duty structure on chemicals and petrochemicals products varies from ‘nil’ – 10 percent.
The associations and trade bodies, meanwhile, have sought opinions from their members on the potential impact of such levies. The letter does not mention any deadline, though.
“We have just received an email from the Department of Chemicals and Petrochemicals (DCPC) under the Ministry of Chemicals and Fertilizers, seeking our inputs about the implications on the possible increase in import duty on chemicals and petrochemical products from the United States. The Department of Commerce (DoC) has informed that, in the past, additional customs duties had been imposed on 28 products against imports from the United States as retaliatory measures subsequent to the US imposing additional duties allegedly as safeguard measures on imports of steel and aluminum from India. After the internal assessment, DoC has sought suggestions for alternative items in lieu of existing items for imposing customs duties on imports from the US,” reads one such association’s letter to its members.
“In view of this, we have to provide details of all the items from chemical and petrochemical tariff lines along with justification for which India may consider to impose additional customs duties on imports from the US. Justification for the items should cover details such as India import quantity/value, the US share in overall imports (quantity and value), India’s domestic capacity, domestic requirements, impact on domestic industry and other relevant details,” the letter further said.
The issue started with the United States in March 2019 having levied a duty of 25 percent on steel and 10 percent on aluminium products imported from India. There was no import duty prior to March 2019, since India is one of the major suppliers of these products. The revenue implication of these import duty levies was estimated at $240 million.
Furthermore, the United States on June 5, 2020, rolled back tax incentives granted to Indian exporters under the Generalised System of Preferences (GSP) programme (a kind of tax incentive offered to the partner countries). This rollback impacted India’s total export of merchandized products to the United States to the tune of $5.5 billion.
Reacting to these US measures, India hiked import duty on a number of agricultural commodities, but the implementation was deferred eight times before its levy in the first week of April 2020 amid expectations of a rollback in US actions. Unfortunately, the US derailed negotiations. As a consequence, India imposed higher import duty on 28 agricultural products in April 2020. The revenue implication of this levy was assessed at $217 million as additional income on such imports.
Amending its June 30, 2017 notification, the Central Board of Indirect Taxes and Customs (CBIC), said, “The new notification will implement the imposition of retaliatory duties on 28 specified goods originating in or exported from the US and preserving the existing most Favoured Nation (MFN) status rate for all these goods for all countries other than the US.”
Additionally, India had also dragged the United States to the World Trade Organization (WTO) dispute settlement mechanism over the imposition of import duties on steel and aluminium. India’s annual exports of steel and aluminium stand worth $1.5 billion.
Now, experts believe that an import duty hike on chemicals and petrochemicals products would make a negligible impact as India imports an insignificant quantity of specialty chemicals and polymers from the United States. Even though the United States is one of the largest producers of specialty chemicals and polymers, Indian importers prefer to import from the Middle East, South East Asia (SEA), and European countries due to the shorert delivery period compared to the United States.
“The impact of the proposed hike in import duty may not have any impact on India’s chemicals and petrochemicals products,” said a senior industry official.
Data compiled by the Department of Chemicals and Petrochemicals showed India’s total annual import to the tune of $56 billion of chemicals and $41 billion petrochemicals for the financial year 2019-20. Specialty chemicals, especially agrochemicals, dyes, and pigments accounted for over 50 percent. India’s imports of chemicals and petrochemicals have increased significantly in the last few years.
But, overall chemicals and petrochemicals imported from the United States is estimated at $1.41 billion which works out to a little over 1 percent.
“Most importantly, the chemicals and petrochemicals products that we import from the United States have a cheaper substitute available in China, South East Asia and some other regoins including the Middle East. Hence, higher import duty will prompt us to import from alternative sources,” said Sharad Kedia, Proprietor, Siddhi Chem, a city-based chemicals importer.
For years, the United States has had a persistent trade deficit with India. India imported goods to the value of $23.8 billion against exports worth $77 billion in 2019-20.
Source : Polymer Update
