WORLD TRADE
ORGANIZATIONG/SG/N/10/IND/6/Suppl.1
14 March 2002
(02-1338)
Committee on Safeguards Original:  English
NOTIFICATIONS PURSUANT TO ARTICLE 12.1(C) AND
ARTICLE 9, FOOTNOTE 2, OF THE AGREEMENT ON SAFEGUARDS
ON TAKING A DECISION TO APPLY A SAFEGUARD MEASURE
INDIA
Supplement
The following communication, dated 8 March 2002, has been received from the Permanent
Mission of India.
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1. Please refer to my communication dated 7 December 2001 forwarding therewith a copy of the
Notice of Review of exemption from imposition of safeguard duty on imports of acetone into India
from notified developing countries (Notificati on No. SG/INV/1/99(REV) dated 21 November 2001),
issued by the Director General (Safeguards). This notification has been circulated as a WTO
document, bearing No.G/SG/N/6/ IND/8/Suppl.1 dated 17 December 2001.
2. I now forward herewith a copy of the final fi ndings concerning the review of exemption from
imposition of safeguard duty on imports of acetone into India from notified developing countries
(SG/INV/1/99 (REV)) dated 4 February 2002.G/SG/N/10/IND/6/Suppl.1
Page 2
OFFICE OF THE DIRECTOR GENERAL (SAFEGUARDS)
5TH FLOOR, 'D' BLOCK, I.P.BHAWAN
NEW DELHI
F.No.SG/INV/1/99
Dated:  4 February 2002
Subject: Review of Safeguard duty imposition on imports of Acetone into India from
notified developing countries under Rule 18 of the Customs Tariff (Identification
and Assessment of Safeguard Duty) Rule s, 1997(hereinafter referred to as the
SGD Rules) read with section 8B of the Customs Tariff Act 1975 - final findings
NOTIFICATION
Having regard to the Customs Tariff Act, 1975 and the Customs Tariff (Identification and
Assessment of Safeguard Duty) Rules, 1997 thereof.
A. INTRODUCTION
1. The notice initiating investigation for levy of safeguard duty concerning imports of Acetone
into India was issued on 16.06.99 under Rule 6 of the SGD Rules.  Final findings were issued under
Rule 11(1) of the said Rules on 07.10.99 and published in the Gazette of India (Extraordinary) Part II-Section-3-Sub-section (i)) on 04.11.99, recommending sa feguard duty to be imposed @ 28 per cent ad
valorem during the first year, @ 21 per cent ad valorem during the second year and @ 9 per cent ad
valorem during the balance six months on imports of Acetone into India being the minimum
necessary for the protection of the domestic industry from the serious injury threatened to be caused
by the increased imports of Acetone.
In exercise of powers conferred by sub secti on (1) of section 8B of the Customs Tariff Act,
1975 (51 of 1975) read with Rules 12 and 14 of the SGD Rules and based on the final findings of the
Director General (Safeguards), the Central Government vide Notification No.7/2000-Customs dated
27.01.2000 imposed on Acetone, falling under sub-heading number 2914.11 of the First Schedule to
the said Customs Tariff Act, when imported into India, a safeguard duty at the rate of;
- 28 per cent ad valorem or Rs.3,000 per metric tonne, whichever is lower, if imported
up to and inclusive of 26.01.2001;
- 21 per cent ad valorem or Rs.2250 per metric tonne, whichever is lower, if imported
on or after 27.01.2001 but not later than 26.01.2002; and
- 9 per cent ad valorem or Rs.965 per metric tonne, whichever is lower, if imported on
or after 27.01.2002 but not later than 26.07.2002.
Further the said notification exempted, inter alia , levy of safeguard duty on imports of
Acetone from notified developing  countries under Clause (a) of sub-section (6) of Section 8B of
Customs Tariff Act 1975, other than South Africa.
2. It has been informed to the Department of Revenue, Ministry of Finance, New Delhi that the
imports of Acetone into India from Singapore, a notified developing country as per notificationNo.103/98-Customs dated 14.12.98, between April 2001 to early September 2001 were 1,000 MT
constituting 9.9 per cent of the total imports of Acetone during this period.  The imports being in
excess of the de minimis  level stipulated under Section 8B of the Customs Tariff Act 1975 make them
ineligible for availing the exemption benefits extended by the aforesaid Notification No. 7/2000-G/SG/N/10/IND/6/Suppl.1
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CUSTOMS dated 27 January 2000.  It has been requested that the exemption from safeguard duty
available to imports originating from Singapore may be revoked.  Further it has also been requested
that the share of imports from various developing countries exporting Acetone to India may be re-
determined for any exemption from safeguard duty to be made available to them on imports of
Acetone.
3. The matter was examined and it appeared prima facie  the imports of Acetone from Singapore
was more than the de minimis  level stipulated under Section 8B of the Customs Tariff Act 1975.
Accordingly it was decided to initiate review proceedings.  The purpose of the review was to
determine the share of imports from various notified developing countries including Singapore
exporting Acetone to India and whether such notified developing countries were eligible to the
exemption from payment of safeguard duty on imports of Acetone from these countries.
B. PROCEDURE1. The Notice of Review to consider whether sa feguard duty on imports of Acetone into India
from notified developing countries should be exempted was issued on 21.11.2001 and was publishedin the Gazette of India, Extraordinary on 29.11.2001.  A copy of the Notice was sent to all known
interested parties to make their views known and submit documentary evidence by 31 December 2001
namely:
Domestic Producers
(i) Hindustan Organic Chem icals Ltd (HOCL), Mumbai
(ii) Herdillia Chemicals Ltd. (HCL), Mumbai
(iii) National Organic Chemical Industries Ltd., Mumbai
(iv) Krishna Sahakari Sakar Karkhana Ltd., Satara(v) Rajarambapu Patil Sahakari Sakar Karkhana, Sakharale
Importers/User Industries
(i) C.J.Shah & Company, Mumbai
(ii) Haresh Kumar & Company, Mumbai
(iii) Vinmar International India Pvt. Ltd., Mumbai(iv) Kesar Petroproducts Ltd., Mumbai
(v) Cresent Organics Ltd./Crescent International, Mumbai
(vi) Samsung Corporation, Mumbai
(vii) Bayer India Ltd., Mumbai
(viii) Ranbaxy Laboratories Ltd., New Delhi(ix) Aurobindo Pharma Ltd., Hyderabad
(x) Gujarat state Fertiliser & Chemicals Ltd., Vadodara
(xi) Kopran Ltd., Mumbai
Exporters
(i) Georgia Gulf Corporation, Atlanta, GA 30348, US
(ii) Mitsui Chemicals,Tokyo-100-6070, Japan
(iii) Mitsui & Co. Ltd., Singapore
(iv) Kumho Chemical Company, Seoul, Korea(v) Merichem Sasol RSA Pty Ltd., South Africa
(vi) Kolmar Petrochemicals AG, Switzerland.
(vii) ICC Chemical Corporation, MumbaiG/SG/N/10/IND/6/Suppl.1
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Overseas Associations
(i) Chemical Safety Management Centre, Japan
(ii) Chemical and Allied Industrie s Association-(CAIA) South Africa
(iii) Korean  Petrochemical Industry Association-(KPIA) Seoul, Korea(iv) Chemical Manufacturers Association (CMA) US
Indian Association
(i) Indian Chemical Manufact urers Association, Mumbai
2. A copy of the notice of review was also sent to the governments of exporting countries
through their High Commissions/Embassies in New Delhi namely Chinese Taipei, Germany, Japan,
Korea DPR, Korea RP, Mexico, Russia, Singapore, South Africa, UK, US and to the European Union,
Delegation of the European Commission in India, New Delhi.
3. Replies  to the Notice dated 21.11.2001 were received from the following parties:-Domestic Producers
(i) Hindustan Organic Chemicals Ltd., Mumbai
(ii) Herdillia Chemicals Ltd., Mumbai
Importers/User Industries
(i) Crescent International, Mumbai
(ii) Kesar Petroproducts Ltd., Mumbai
Exporters
(i) Mitsui Phenol Singapore Pte. Ltd., SingaporeGovernments
(i) Taipei Economic and Cultural Centre, New Delhi.C. VIEWS OF EXPORTERS
The following main points have been made by the exporters:
Mitsui Phenol Singapore PTE. Ltd., Singapore
Acetone is necessary for the overall industry of a country as basic solvent.  Acetone has been
used commercially from the beginning of 20th century and now Acetone is consumed by many
industries around the world.  Acetone demand in India exceeds the total output of the two producers
in India.  They estimate the demand for Acetone in India to be about 5,000 to 6,000 MT per month
while the local production is about 3,000 to 4,000 MT per month.  They do not think the domestic
producers are damaged by imports and in fact the foreign Acetone suppliers cover the shortage at
internationally competitive prices.  The increase  of Acetone imports from Singapore would be in
accordance with the interest of customer in India.G/SG/N/10/IND/6/Suppl.1
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D. VIEWS OF EXPORTING GOVERNMENTS
Taipei Economic & Cultural Centre, New Delhi
They have forwarded official export statistics data on exports of Acetone from Chinese Taipei
during the years 1999, 2000 and 2001(up to September) as under:
Year Quantity (MT)1999                   38.4
2000                    25.6
2001                115.2(up to Sept)
E. VIEWS OF IMPORTERS(i) M/s. Crescent International, Mumbai
Information available with them indicates that imports of Acetone originating from Singapore
were more than 1,000 MT constituting more than 9.9 per cent of the total imports between April 2001
to early September 2001.  Exemption from Safeguard duty extended by Notification No.7/2000-
Customs dated 27.01.2000 to imports originating from Singapore should be revoked.
(ii) Kesar Petroproducts Ltd., Mumbai
(a) As per the notice, the purpose of the review  is stated to be to determine whether such
notified developing countries are eligible to the exemption for payment of safeguardduty on imports of Acetone from these countries.  In their view it is necessary to
redefine the scope of the review and to widen it to determine ab initio  whether
basically there is proper justification for continuing the safeguard duty protection on
imports of Acetone in future.
(b) There is a basic change in the status of one of the manufacturers of Acetone namely
Herdillia Chemicals Limited due to its management and control being taken over by aMulti-national Corporation, Schenectady Corporation, US which is a major consumer
of Acetone in India and outside India. 45.84 per cent of the country's Acetone
manufacturing capacity has become captive to the multinational and gone out of
reach of other Acetone consumers in the country.
(c) The most important component of manufacturing cost of Acetone namely the cost of
its raw materials has undergone a major change which is favourable to the Acetone
manufacturers.  The prices of raw materials and furnace oil have substantially come
down.
(d) Both the manufacturers of Acetone are c ontinuing to make high profits and covering
up losses in their other product lines at the cost of consumers of Acetone who are
facing a serious threat of closure of their operations.
(e) Herdillia finds it worthwhile to import Acetone rather than use its own production
which means that the margin on its own production is more than the cost on ocean
freight, clearance charges etc.G/SG/N/10/IND/6/Suppl.1
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(f) There is no justification at all for removing the exemption granted to imports of
Acetone made from developing countries since imports of Acetone were higher due
to less production of Acetone in the country.  Thus the Acetone consumers would
have suffered a major set back if the benefit of importing from developing countries
would not have been there.
F. VIEWS OF DOMESTIC PRODUCERS(i) The purpose of the Safeguard Duty was to keep in check the level of imports of Acetone that
had caused Serious Injury to the domestic Acetone producing industry in 1998-99.  However,
despite the Safeguard Duty being in force, contrary has happened especially so far in the
present fiscal year.  Imports have increased significantly. The imports during the first sevenmonths of the present fiscal year (i.e. 2001-02) have been 15,222 MT (i.e.  26,095 MT on
annualised basis as against imports of 23,929 MT in the year 1999-2000 and 24,782 MT in
the year 2000-01).  If additional imports in November 2001 only at Mumbai port were to be
considered and added to the figure of April to October 2001, the total import figure so far in
2001-02 works out to 17,101 MT.  If imports at Kandla (during November 2001) were to beadded, the import figure would be still higher.
(ii) A significant portion of these imports i.e. 12,091.611 MT (during 1
 April 2001-
28 November 2001) has come in from 'developing  countries' such as Singapore and South
Africa.  No Safeguard Duty is being levie d, due to the exemption granted, on imports of
Acetone from Singapore despite the share of Singapore being individually more than 3 per
cent.  It is therefore all the more necessary that Acetone imports from Singapore should
immediately attract Safeguard Duty.
(iii) When Safeguard Duty was levied in January 2000, there was no major active producer of
Acetone in Singapore, even though M/s. Exxon Mobil offered some quantities.  However,
Mitsui (a large Japanese company) has set up a large capacity for manufacture of Acetone in
Singapore and production at this facility started reportedly in July 2001.  There is no
significant local market for Acetone in Singapore.  The nearest market for this Mitsui facility
is India.  Exports from this country to India have therefore started coming in at drastically low
prices and in large quantities.
(iv) The new capacity of Mitsui at Singapore has resulted in share of imports rising to over 18 per
cent during the period April 2001 to 28 November 2001.  When the share of imports from
Singapore is computed for the period after commissioning of Mitsui facility i.e. from
July 2001 to 28 November 2001, the same works out to over 30 per cent.
(v) Safeguard Duty should be levied on imports  of Acetone from Singapore immediately and
with retrospective effect from end August/1 September 2001, when large parcels started
arriving on Indian shores from Singapore (t he very first parcel being of 1,600 MT i.e.
constituting significantly more than 3 per cent of the total imports).  Such levy of Safeguard
Duty on imports of Acetone from South Africa also should extend at least for the remainingfull period of Safeguard Duty i.e. till July 2002 without any further review.
(vi) Imports of Acetone have come in at lower prices than the prices prevailing during the year
2000-01.  Both the Indian Acetone manufacturing companies have therefore had to reduce
their Acetone prices.
(vii) Safeguard Duty on imports of Acetone from  Singapore should be levied on a provisional
basis and with retrospective effect.G/SG/N/10/IND/6/Suppl.1
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G. FINDINGS
I have carefully gone through the case records and replies filed by all the interested parties
including the domestic producers, users/importers and exporters.  A number of issues have been
raised by various parties which have no direct bearing on the scope of present proceedings which hasbeen made amply clear in the notice of review.  It was clearly mentioned that it appeared prima facie
the imports of Acetone from the notified developing countries were more than the de minimis  level
stipulated under Section 8B of the Customs Tariff Act 1975 and the interested parties were asked to
make their views known and submit documentary evidence.  The purpose of the review was to
determine the share of  developing countries in the total imports of Acetone eligible to the exemption
from payment of safeguard duty on imports of Acetone from these countries.
As regards the imports of Acetone into India during the period 1998-99, 1999-2000 ,2000-01
and 2001-02 (up to October 2001) it is observed that the following countries exported Acetone to
India during the said period.  The data for the period 1998-99 is based on the verification carried out
by this Directorate General and as stated in the Final Findings dated 7 October 1999.  The data for
period 1999-2000, and 2000-01 have been taken from DGCIS Calcutta and for the period 2001-02 (upto October 2001) are based on the data furnished by the applicants which was duly verified by the
Directorate.  Accordingly their share in India's import of Acetone during the said period is as under:
(Imports in MT)
1998-99 1999-2000 2000-2001 2001-2002 (10/01) Country/
territory Quantity %age share Quantity %age share Quantity %age share Quantity %age share
Australia 12.328 0.07 0.100 - -
Belgium 59.400 0.97 - -
China 25.600 0.15 48.650 0.80 - -
Chinese Taipei 1,005 3.44 14.000 0.08 12.800 0.21 - -
Ecuador 12.420 0.20 - -
France 24.980 0.41 - -
Germany 1.603 5.49 423.200 2.40 6.275 0.10 - -
Italy 30.400 0.50 884.657 5.29
Japan 583 2.00 28.800 0.16 32.026 0.52 666.621 3.99
Korea, Rep. of 2.975 10.19 100.000 1.64 - -
Malaysia --
Mexico --
Netherlands 2.572 8.81 2,631.400 14.93 130.000 2.13 - -
Russia 2.040 6.99 1,221.573 6.93 - -
South Africa 16.384 56.15 11,589.348 65.77 4,161.700 68.14 10,086.004 60.33
Spain 1,315.754 7.47 297.000 4.86 - -
Singapore 0.200 50.000 0.82 1,906.732 11.40
Switzerland --
Saudi Arabia 455.416 2.73
United Kingdom 8.000 0.05 23.314 0.38 - -
United States 1,480 5.07 350.649 1.99 1,118.478 18.32 1,544.100 9.24
Others
*Europe540 1.86 *1,173.733 7.02
Total 29,182 100.00 17,620.852 100.00 6,107.543 100.00 16,717.263 100.00
It is pertinent here to reproduce the provisions of Section 8B of the Customs Tariff Act 1975
which empowers the Government to impose Safeguard du ty in accordance with the provisions of the
said section.
"If the Central Government after conducting such en quiry 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 i ndustry, then it may, by notification in the Official
Gazette, impose a safeguard duty on that article.G/SG/N/10/IND/6/Suppl.1
Page 8
Provided that no such duty shall be imposed on article originating from a developing country
so long as the share of imports of that article from that country does not exceed 3 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 9 per cent of the total imports of that
article into India."
It is observed from the above tabulation that the share of following developing countries
(notified under Notification No.103/98-Cus dated 14.12.1998 as amended by Notification No.62/99
dated 13.5.99) in the import of Acetone into India during the period 2001-02 (April-October) has been
3 per cent or more:
South Africa and SingaporeAccordingly, it is recommended that imports of Acetone into India from these notified
developing countries be subjected to safeguard duty leviable thereon.
The total share of notified developing countries, having individual share of less than 3 per
cent in the import of Acetone into India, does not account for 9 per cent or more collectively and
accordingly it is recommended that imports of Acetone from such notified developing countries may
not be subject to safeguard duty.
(R.K.GUPTA)
DIRECTOR GENERAL
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