WORLD TRADE  
ORGANIZATION  G/SG/N/7/IND/1 
G/SG/N/8/IND/15 15 January 2009 
 
(09-0159) 
Committee on Safeguards Original:   English 
 
 
 
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT ON 
SAFEGUARDS BEFORE TAKING A PROVISIONAL SAFEGUARD  
MEASURE REFERRED TO IN ARTICLE 6 
 
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE  
AGREEMENT ON SAFEGUARDS ON FINDING A SERIOUS INJURY  
OR THREAT THEREOF CAUSED BY INCREASED IMPORTS  
 
INDIA 
 
(Phthalic Anhydride)  
   The following communication, dated 6 January 2009, is being circulated at the request of the Delegation of India.    
_______________  
 
  G S R D - 22011/32/08 dated 1 January 2009 ha ving regard to the Customs Tariff Act, 1975 
and the Customs Tariff (Identification and Assessment  of Safeguard Duty), Rules, 1997 thereof;   
 
1. Procedure 
 
i) The Notice of Initiation of Safeguard investig ation concerning imports of Phthalic Anhydride 
into India was issued on 28 November 2008 and wa s published in the Gazette of India Extraordinary 
on the same day.  A copy of the Notice was also sent to all known interested parties as under:   
 
 Domestic Producers 
 
a. M/s Thirumalai Chemicals Ltd, Ranipet Tamilnadu 
 
b. M/s. SI Group India Ltd, Navi Mumbai Maharashtra 
 
c. M/s. IG Petrochemicals Ltd, Raigad Maharashtra 
 
d. M/s. Mysore Petrochemicals Ltd, Raichur Karnataka 
 
Importers 
 
a. Cray Valley Resins India Ltd. Plot No. D-43 Trans Thane Creek, MIDC Indl. Area, Shirvane Navi Mumbai 410 833, Maharashtra 
 
b. Goodlass Nerolac Paints Ltd Tiruporur Road Perungudi, Chennai 600096 Tamilnadu 
 G/SG/N/7/IND/1 
G/SG/N/8/IND/15 Page 2 
 
 
  c. Gargi Industries (Prop:  Gargi Chem. Pvt Ltd) Unit No. 11, D-161 Ttc Indl. Area 
(Midc) Off. Thane Belapur Road Dist. Thane Navi Mumbai 
 
d. Hindustan Insecticides Limite d (A Government of India Enterprise) P.O. Rasayani, 
Dist. Raigad, Rasayani Maharashtra 
 
e. Kemrock Industries & Exports Ltd, (100 per cent Eou), Survey No. 120/2, Vadodara-Halol, Express Way, Village-Asoj, Vadodara, Gujarat 
 
f. Shalimar Paints Limited, P.O.  Danesh Shaikh Lane, Howrah-711 109 
 
g. U.K. Paints India Pvt. Ltd, Surajpu r-Dadri Road, Village:  Devla. District:  
Goutambudh Nagar Uttar Pradesh 
 
 Exporters 
 
a. Aekyung Petrochemical Co. Ltd, Ulsan, 106-3, Kuro-dong, Kuro-gu Seoul 152-050 
South Korea, Tel:  82/2/851-6100 
 
b. L.G. Petrochemical, Yeochon, LG Twin Towers, 20, Yeouido-dong, Yeongdeungpo-
gu, Seoul,150-721,Korea (REP),Tel:  82-2-3777-1114 
 
c. Petowidada, East Java, Menara BTN 15
th Floor, JL. Gajah Mada No 1, Jakarta 10130, 
Indonesia.  Tel:  (62-21) 633 2622, Fax:  (42-21) 634 2635 
 
d. Nan Ya Plastics Corporation, Mailiao, No . 201, Tung Hwa North Rd. Taipei, Taiwan, 
Tel:  886-2-2901-9141, Fax:  886-2-2902-1243 
 
e. UPC Technology Corporation, Linyuan & Taipei, 5f, 20, Lane 478, Rueiguang Rd, Neihu, Taipei, Taiwan, Tel:  886- 2-26575555, Fax:  886-2-26270707 
 
ii) A Copy of the Notice was also sent to go vernment of exporting countries through their 
embassies in New Delhi.    iii) Questionnaires were also sen t, on the same day, to all known domestic producers and 
importers and they were asked to submit their respon se within 30 days.  Request for an extension of 
time to submit their replies were made by the following parties:   
  M/s Nimir Chemichals, 51-N Industrial area Gulberg II, Lahore, Pakistan and Indian 
Plasticizers Manufacturers Association, New Delhi and Ministry of Foreign Affairs and Trade, 
Republic of Korea have requested to make them interested parties, which have been accepted.  
Further, M/s Aekyung Petrochemical, South Ko rea have requested for extension of time upto 
28 January 2009 which has been accepted.  M/s PT Pe towidada, East Java, Indonesia, have requested 
for extension of time for submission of reply, which has been accepted.   
  The domestic producers have submitted their reply to the questionnaire.    2. View of the Domestic Industry 
 
 The domestic producers viz., Thirumalai Chemicals Ltd., IG Petrochemicals Ltd., Mysore Petrochemicals Ltd. & SI Group India Ltd. who co nstitute 85 per cent of the domestic production of 
PAN have made following major points:    G/SG/N/7/IND/1 
 G/SG/N/8/IND/15 
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i. The product is Phthalic Anhydride falli ng under 8 digit code  29173500 of Harmonized 
System of Nomenclature and 29173500 of the First Schedule to the Customs Tariff Act, 1975 (CTA).   
ii. Imports into India have increased by 60 per cent from the year 2004-05 in the year 2007-08.  
There has been consistent increase in impor t in absolute terms from 2006-07 onwards.   
iii. Customs duty upon importation of PAN into India has come down from 30 per cent in 2002-
03 to 7.5 per cent in 2008-09 exposing domestic industry to international competition.   
iv. The increase in price of import was not co mmensurate with increase in the cost of raw 
material & other conversion cost.   
v. Prices of imported goods were lower as compar ed to the prices of domestic producers.  Prices 
of imported goods consistently undercut the pr ices of domestic producers by 1 per cent to 
19 per cent during 2008-09.   
vi. On account of unforeseen circumstances by way of collapse of domestic market in Korea & 
collapse of traditional export ma rkets like China & US coupled w ith crisis of South Korean 
Banking industry and devaluation of Korean Wan vis-à-vis US$ has led to desperation to offload the piled up stocks.   
vii. The fall in PAN prices from US$ 1580 pmt to US$ 570pmt during the month of July to 
November 2008 has made Indian industry unviable and they were left with no options but to 
shut down their plants.   
viii. In the case of raw materials, supply chain is l ong & a lead period of 2 months is required.  In 
the case of Indigenous purchases a lead time of minimum 1 month is required.  The shutting down of the plants has made raw material s worth over Rs.120 crores lying in stock 
completely unused with no chance of revival of its own.   
ix. The entire plant & machinery worth over Rs.400 crores has turned into non-operating assets.   
x. A large number of employees have been rendered idle due to closure of the plants and more 
than Rs.2 crores a month is being added as cost of salaries alone which has to be born by the domestic industry during closure of the plant.   
xi. During the period September to November 2008 there has been sudden fall in capacity 
utilization as under:   
 
 2005-06 2006-07 2007-08 2008-09 
HY-I 
Installed capacity  
Thirumalai 
Chemicals 87000 100000 110000 62500 
IG Petro 110000 110000 110000 55000 
Mysore Petro 12000 12000 12000 6000 
SI Group 11000 11000 11000 5500 
Total for 
Applicants 220000 233000 243000 129000 
Asian Paints 24000 25200 25200 12600 
Grand Total 244000 258200 268200 141600 
Actual Production  
Applicants  168596 201095 220168 101483 
Asian Paints 23041 21864 24261 12131 
Total Production 191637 222959 244429 113614 
Capacity 
Utilisation Applicants 77%  86%  91%  79%  
 G/SG/N/7/IND/1 
G/SG/N/8/IND/15 Page 4 
 
 
   
xii. The applicants requested for a specific rate of duty at the rate USD 488PMT, USD 302PMT 
and USD 180PMT for the first, second and third year respectively as it is more suitable for this product, that too, under the current ma rket conditions when prices of PAN are highly 
volatile.  Ad valorem rate of duty would imply higher  duty at higher prices and lower duty at 
lower prices.  This would not help the domestic producers.  It will kill the domestic producers as the protection will go down as the import prices go down.   
 
3. Findings of the DG 
 
a) The issue to impose immediate safeguard measu res was examined.  It has been found that a 
total of 168 Safeguard Initiations have been reported to the WTO durin g the period between 
29 March 1995 and 12 November 2008.  It has been  observed that in 15 of these cases provisional 
safeguard measures have been recommended/imposed  within 30 days of initiation of the safeguard 
investigation.  In some cases the provisional saf eguard measures have been recommended on the same 
day as the date of initiation of the investigation.  The Rule 9 of Customs Tariff (Identification And 
Assessment of Safeguard Duty) Rules, 1997 notifie d vide Notification No. 35/97-NT-Customs dated 
29 July 1997 prescribes that the Director General sh all proceed expeditiously with the conduct of the 
investigation and in critical circumstances, he ma y record a preliminary finding regarding serious 
injury or threat of serious injury.  The principles governing investigations have been provided in the 
Rule 6 of the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, which is 
independent to Rule 9.  The Rule 15 of the Cu stoms Tariff (Identifi cation And Assessment of 
Safeguard Duty) Rules provide for refund of di fferential Safeguard duty in case safeguard duty 
imposed after conclusions of the i nvestigations is lower than the provisional duty already imposed and 
collected.  The harmonious reading of Rules 6, 9 and 15 of the said Rules leads to a conclusion that 
the Rules provide for expeditious recommendati on of provisional Safe guard duty based on 
preliminary findings and refund of the differential duty in case it is ascertained that the duty imposed 
after conclusion of investigation following natural ju stice as enshrined in the Rule 6 is lower than the 
provisional Safeguard Duty.  However, in cr itical circumstances any delay in imposition of 
Provisional Safeguard duty may cause damage which woul d be difficult to repair.  Accordingly, it was 
considered prudent to analyze circumstances to assess whether the same falls in the category of 
critical circumstances.   
 b) The product under investigation:   The product under investigation is Phthalic 
Anhydride (PAN) falling under heading 2917.35.00 of the First Schedule to the Customs Tariff Act, 
1975 (CTA).  Phthalic Anhydride (PAN) is a principle commercial form of Phthalic acid.  It is white 
crystalline solid, used to manufacture synthetic resi ns, which act as binders in paint products.  The 
primary use of PAN is a chemical intermediate in the productions of plastics from vinyl chloride. 
Phthalate esters, which function as plasticizers are derived from PAN.  PAN has another major use in the production of poly ester resins and other minor uses in the pr oduction of alkyd resins used in paints 
and lacquers;  certain dyes, insect repellents and polyester polyols for polyurethanes.  The chemical 
formula of PAN is C
8H4O3.  It is produced by the catalytic oxidation of Ortho-xylene (OX) with air or 
by the catalytic oxidation of naphthalene.  Domestic  producers use the OX route.  The process entails 
passing OX through a reactor, which is an arrangement of tubes of clay or porcelain rings coated with a catalyst.  The oxidation process of OX coupled w ith post reactor polishing and flaking yields PAN 
in the form of white or pale yellow crystals.    
c) Domestic Industry:   There are five domestic producers in India who manufacture PAN.  
Four domestic producers namely - 1) Thirumalai chemicals Limited, Ranipet, Tamilnadu 2) IG 
Petrochemicals Ltd, Taloja, Maharashtra, 3) Mysore  Petrochemicals Ltd, Ra ichur, Karnataka and 4) 
S I Group India Ltd, Thane, Mahar ashtra have joined the petition.  The fifth producer namely, Asian 
Paints Ltd has not joined the petition.  Asian Pain ts captively consumes a predominant portion of their  G/SG/N/7/IND/1 
 G/SG/N/8/IND/15 
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  production and sell only a part of their production in the domestic market in India.  Share of the 
four applicants varied from 85 per cent to 90 per cent during the period 2005-06 to 2008-09.    d) Increased Imports:   There has been increasing trend in  import in absolute term from the 
year 2004-05 except in 2006-07.  Taking base year  as 2004-05, the import has increased by 22.92 per 
cent in 2005-06, declined by 27.88 per cent in 2006-07, increased by 60 per cent in 2007-08 and further increased by 128 per cent in 2008-09 (taking annualized figure).  The import figures year wise 
is mentioned below:    
 
    
 
     Similarly, the share of imports in the domestic market has gone up from 7 per cent in 2006-07 
to 12 per cent in 2007-08 and 13 per cent in the firs t half of 2008-09.  The detailed statistics is 
mentioned below:      (Figures in MT)  
 
     
 
    
 
     
 The imports of PAN into India have th us increased in absolute terms.   
 e) Unforeseen Developments:  From the data available with the Directorate it is seen that the 
difference between the import prices of PAN (fina l product) and OX (raw material) have reduced 
from US$ 210 per MT to US$ 50 per MT and in some  cases raw material prices were more than the 
prices of final products.  One of the reasons for the sudden fall in import prices of PAN is collapse of 
domestic market in Korea and collapse of trad itional export market of China and USA and the 
consequent desperate offloading of the piled-up stoc ks.  Korea being the biggest supplier of PAN to 
India and devaluation of Korean Wan by around 41 per cent - from 941 Korean Won per USD in 
January 2008 to 1326 Korean Won per USD in Oc tober 2008 has had its effect on making increased  Quantity 
(MT) Value  
(Rs. in lacs) Price  
(Rs. PMT) 
2004-05 19,599 8,105 41,357 
2005-06 24,092 10,061 41,763 
2006-07 14,133 7,192 50,887 
2007-08 31,441 16,417 52,218 
2008-09 (first five months) 18,665 10,366 55,539 
  2005-06 2006-07 2007-08 2008-09 
(First half) 
Imports 1 24,092 14,133 31,441 22,398 
Domestic production 2 168,596 201,095 220,168 101,483 
Total quantity available 3=(1+2) 192,688 215,228 251,609 127,262 
Share of imports 4=(1/3) 13% 7% 12% 13% 
Share of domestic 
production 5=(2/3) 87% 93% 88% 87% 
Sales by Domestic 
Industry 6 118,308 142,471 153,055 77,540 
Consumption in 
India 7=(1+6) 142,400 156,605 184,496 99,938 
Market share of  - - -  
 Imports 8=1/7 17% 9% 17% 22% 
 Domestic industry 9=(6/7) 83% 91% 83% 78% G/SG/N/7/IND/1 
G/SG/N/8/IND/15 Page 6 
 
 
  import at fallen prices to India.  It has furt her been observed that the unprecedented uneven recession 
in various countries has led to increased import of PAN to India.    f) Serious Injury and Threat of Serious Injury:  The data available with the Directorate 
indicate that the prices of PAN came down to US$ 1330 PMT during August 2008.  It further went 
down to US$ 1180 during September 2008.  It s howed a further down trend and touched UD$ 650 
PMT during October 2008.  As on 7 November 2008, prices of PA are ruling around US$ 570 PMT.  In the past four months, prices of imported PAN have come down from US$ 1580 PMT to US$ 570 PMT – recording a fall of 64 per cent.  Thr ee domestic producers have shut down their plant.  
The production capacity of PAN is 2.5 Lacs MTon in India and 77.5 per cent of capacity is shut 
down.  The statistics relating to producti on and capacity utilization is below:   
 
 2005-06 2006-07 2007-08 2008-09 
HY-I 
Installed capacity  
Thirumalai Chemicals 87000 100000 110000 62500 
IG Petro 110000 110000 110000 55000 
Mysore Petro 12000 12000 12000 6000 
SI Group 11000 11000 11000 5500 
Total for Applicants 220000 233000 243000 129000 
Asian Paints 24000 25200 25200 12600 
Grand Total 244000 258200 268200 141600 
     
Actual Production  
Applicants  168596 201095 220168 101483 
Asian Paints 23041 21864 24261 12131 
Total Production 191637 222959 244429 113614 
Capacity Utilisation 77% 86% 91% 79% 
 
Domestic Producer Date of shut down 
Thirumalai Chemicals 8 October 2008 
S I Group 11 October 2008 
IG Petrochemicals 25 October 2008 
Mysore Petrochemicals 1 November 2008 
 
 Domestic producers had a stock of approximately 9500 MT at the time of closure of their respective plants.  They are not able to sell tho se goods even at cost and funds to the extent of 
Rs. 61.23 crore have been blocked on this account alone .  On the date of closure of plants, more than 
20000 MT of OX – the raw material worth over Rs.120 crores was lying in stock.  Funds to that 
extent may remain blocked un til production is resumed.   
  As various plants are closed, the employed personnel have been re ndered idle and people 
depended on businesses incidental to manufacture of PAN unemployed.     The trend in fall of import prices and cu rrent economic scenario where the demands are 
falling in other countries, gives rise to threat of serious injury to domestic producers.   
 g) Causal Link between Increased Import and Seri ous Injury or Threat of Serious Injury:  
Imports are increasing and taking the share of domestic market.  At the same time the domestic  G/SG/N/7/IND/1 
 G/SG/N/8/IND/15 
 Page 7 
 
 
  industries have cut production and so me of the units are closed.  Th e preliminary determination shows 
that the serious injury and threat of serious in jury is attributable to the increased import.   
 h) Adjustment Plan:   The domestic producers have proposed  measures for reduction in costs of 
manufacture, reduction in selling cost by reductio n in commission and reduction in administrative 
expenses.    i) Critical Circumstances:  The capacity utilization of the domestic producers had been 79 per 
cent compared to 91 per cent during the period 2007- 08.  The capacity utilization has further fallen to 
22 per cent in subsequent months as substantial ca pacity is shut down.  Moreover, the loss of 
production, loss of sales, inventory built up and severe loss of man days along with loss of employment indicate critical circumstances.     In view of the above, critical circumstanc es exist justifying imposition of provisional 
safeguard duties immediately in order to save the domestic producers from dama ge which it would be 
difficult to repair if the application of safeguard measure is delayed.    j) Conclusion and Recommendation 
  On the basis of the above preliminary findings it is seen that increased imports of PAN have 
caused and threatened to cause further serious injury to domestic producers of PAN.  Critical 
circumstances, where any delay in application fo r safeguard measures would cause damage which it 
would be difficult to repair, exist necessitating im mediate application of provisional safeguard duty 
for a period of 200 days, pending a final determination of  serious injury and threat of serious injury.  
Considering the average cost of production of  PAN by the domestic producers (confidential), a 
reasonable return on capital employed, the present level of import duties and the average import 
prices of PAN, safeguard duty at the rate of 25 per cent ad valorem, which is considered to be the 
minimum required to protect the interest of dom estic industry, is recommended to be imposed on 
imports of Phthalic Anhydride falling under 29173 500 of the First Schedule of the Customs Tariff 
Act, 1975    
k) Further Process 
 
I. The information provided by various partie s may be subjected to verification where 
necessary, for which they will be informed separately.   
 
II. A public hearing will be held in due course befo re making a final determination, for which the 
date will be informed separately.   
 
III. Interested parties may make their views known on these preliminary findings to the 
undersigned before 30 January 2009.   
  (S. S. RANA)  Director General (Safeguards) 
 
  
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