WORLD TRADE
ORGANIZATIONG/SG/N/6/IND/7
16 February 1999
(99-0610)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(A) OF THE
AGREEMENT ON SAFEGUARDS ON INITIATION OF
AN INVESTIGATION AND THE REASONS FOR IT
INDIA
The following communication, dated 11 February 1999, has been received from the
Permanent Mission of India.
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Attached herewith is a copy of the Notice of Initiation of a Safeguard Investigation
(No. SG/INV/2/98 dated 2 February 1999) by the Di rector General (Safeguards) concerning imports
of 'Phenol' into India.G/SG/N/6/IND/7
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OFFICE OF THE DIRECTOR GENERAL (SAFEGUARDS)
'D' BLOCK, I.P. ESTATE
NEW DELHI
NOTICE OF INITIATION OF A SAFEGUARD INVESTIGATION
(Under Rule 6 of the Customs Tariff (Identification and Assessment
of Safeguard Duty) Rules, 1997)
New Delhi, 2 February 1999
No. SG/INV/2/98
Initiation of Safeguard Investigation Concerning Imports of Phenol into India
1. An application has been filed before me under rule 5 of the Customs Tariff (Identification and
Assessment of Safeguard Duty) Rules, 1997 by  Hindustan Organics Ch emicals Ltd. (HOC) and
Herdillia Chemicals Ltd. (HCL) for imposition of safeguard duty on imports of Phenol into India to
protect the domestic producers of Phenol against serious injury caused by the increased imports of
Phenol into India.
2. Domestic industry.  The application has been filed by the Hindustan Organics Chemicals Ltd.
(HOC) and Herdillia Chemicals Ltd. (HCL) on behalf  of the domestic producers of Phenol for
imposition of safeguard duty on imports of Phenol.  There are only two domestic producers of Phenol
through synthetic route accounting for almost the entire domestic production of Phenol.  Neyveli
Lignite Corp. Ltd (NCL) also produce Phenol throug h the destructive distillation of lignite/coal.
They, however, account for a very small quantity as compared to the total domestic production ofPhenol, their capacity being 1,500 MT per annum.
3. Product involved.  The applicants have alleged serious injury caused to the domestic
producers by the increased imports of Phenol into India.  Phenol classified under sub-heading
No. 2907.11 of the First Schedule to the Customs Tariff Act, 1975 and under 29071101 and 29071102
of the Indian Trade Classification (ITC) is a basic organic chemical with chemical formula C6H5OH.
Synthetically, Phenol is produced by the oxidation of cumene using air at elevated temperatures andpressures.  Cumene is produced by the reaction between propylene and benzene.  Phenol is available
in two forms viz. crystal form and hydrated form.  Hydrated Phenol, however, is sold on the basis of
Phenol content.  Phenol is used in the manufacture of phenol formaldehyde resins, laminates,
plywood, particle boards, bisphenol-A, alkyl phenols, pharmaceuticals, etc.
4. Increased imports.  Phenol is imported into India from China, Chinese Taipei, Germany,
Indonesia, Italy, Japan, Korea DPR, Korea Rep. of , Kuwait, Malaysia, the Netherlands, New Zealand,
Russia, Saudi Arabia, Singapore, South Africa, Spain, United Kingdom and the United States.  The
imports have shown an increasing trend in absolute terms as well as compared to domestic
production.  The imports and domestic production of Phenol during 1994-95 to 1998-99 (up toDecember 1998) have been as under:G/SG/N/6/IND/7
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Year Domestic production
MTImports MT Imports as a percentage
of domestic production
1994-95 57,780 6,664 11.53
1995-96 63,719 21,752 34.14
1996-97 57,466 19,545 34.01
1997-98 69,281 15,352 22.16
1998-99
(up to Dec.)48,703 25,048 51.43
5. Injury.  The increased imports of Phenol have threatened to cause serious injury to the
domestic producers of Phenol as indicated by the following factors:
(a) Production.  The domestic production which increased from 57,466 MT in 1996-97 to
59,281 MT in 1997-98 has declined to 48,703 MT (up to December) in 1998-99.
(b) Capacity utilization.  The capacity utilization of domestic producers to meet with the
domestic demand which increased from 85 per cent in 1996-97 to 86 per cent in
1997-98 declined to 83 per cent in the first three-quarters of 1998-99.
(c) Stocks.  The closing stocks of domestic producers of Phenol which decreased from
3,248 MT in 1996-97 to 2,464 MT in 1997-98 has increased to 2,743 MT at the end
of December 1998.
(d) Share of domestic producers in domestic consumption:
The market share of domestic producers of Phenol in the total domestic consumption
of Phenol, which increased from 74.3 per cent in 1996-97 to 80.25 per cent in 1997-
98 has declined to 65.88 per cent in the first three-quarters of 1998-99 as indicatedfrom the table below.  The domestic producers have been able to retain this reduced
market share only at the cost of reduction of their average sales price from Re 37 per
kg. in January 1998 to Re 28 per kg. in December 1998, i.e. a decline of about 24 per
cent in the sale price, which has seriously affected their profitability.
(Figures in metric tonnes)
Year OB Production CB Exports Domestic sales
(2)+(3) – (4)-(5)
(including captive
consumption)Total
domestic
consumption
including
importsShare of
domestic
production in
domestic
consumption
(6/7 x 100)
%
12 34 5 6 7 8
1995-96 3,448 63,719 3,323 2,354 61,490 83,242 73.86
1996-97 3,323 57,466 3,248 1,006 56,535 76,081 74.30
1997-98 3,248 69,281 2,464 7,675 62,390 77,742 80.25
1998-99(12/98)2,464 48,703 2,743 52 48,372 73,420 65.88
6. The domestic producers have requested the imposition of safeguard duty on imports of Phenol
for a period of two years.  They have also requested for the immediate imposition of provisional
safeguard duty.G/SG/N/6/IND/7
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7. The application has been examined and it is found that prima facie  increased imports of
Phenol have threatened to cause serious injury to the domestic producers of Phenol and accordingly it
has been decided to initiate an investigation through this notice.
8. All interested parties may make their views known by 12 March 1999 to:
The Director General (Safeguards)
5th Floor, 'D' Block
Indraprastha Bhawan, I.P. Estate
New Delhi – 110 002
India
9. All known interested parties are also being addressed separately.
10. Any other party to the investigation who wishes to be considered as an interested party may
submit its representation so as to reach the Director General (Safeguards) within 21 days from the
date of this notice.
(Signed)
(R.K. Gupta)
Director General (Safeguards)
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