WORLD TRADE
ORGANIZATIONG/SG/N/8/IND/13
24 November 2003
(03-6242)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE
AGREEMENT ON SAFEGUARDS ON FINDING A SERIOUS INJURY
OR THREAT THEREOF CAUSED BY INCREASED IMPORTS
INDIA
(Bisphenol A)
The following communication, dated 18 November 2003, is being circulated at the request of
the Delegation of India.
_______________
1. Please refer to this Mission's letter dated 12 March 2003 forwarding therewith a copy of
Notice No. SG/INV/1/2003 dated 6 March 2003 issued by the Director General (Safeguards)
concerning initiation of safeguard proceedings against imports of Bisphenol A (BPA) into India.  This
notification under Article 12.1(a) of the Agreement on Safeguards was circulated as a document of the
WTO bearing the symbol G/SG/N/6/IND/15, dated 14 March 2003.
2. Herewith is a copy of the final findings  (Notification No. F.No.SG/INV/1/2003 dated
27 October 2003) of this investigation by the Director-General (Safeguards).G/SG/N/8/IND/13
Page 2
OFFICE OF THE DIRECTOR GENERAL (SAFEGUARDS)
Room No.139, C.R. Building
I.P. ESTATE, NEW DELHI.
NOTIFICATION
F. No. SG/INV/1/2003                      Dated:   27 October 2003Sub: Safeguard investigation concerning import of Bisphenol A (BPA) into India – final
findings
Having regard to the Customs Tariff Act, 1975 and the Customs Tariff (Identification and
Assessment of Safeguard Duty) Rules, 1997 thereof.
A. Procedure
The Notice of Initiation of safeguard investigation concerning imports of Bisphenol A (BPA)
into India was issued on 06.03.2003  and published in the Gazette of India, Extraordinary on
10.03.2003 .  A copy of the Notice along with a copy of non-confidential application and a
questionnaire were sent on the same day to all known domestic producers, exporters and importers
who were asked to submit their response by 21 April 2003 , namely:
Domestic Producer
Kesar Petroproducts Limited, Mumbai (KPL)
Importers & Users Industries
(i) Atul Ltd, Dist. Valsad, Gujarat.
(ii) Petro Araldite Pvt. Ltd., Chennai
(iii) Pragati Chemicals Ltd., Bombay
(iv) Resinova Chemie Unnao (UP)
(v) Bharat General Textile Industries Pvt. Ltd. Calcutta(vi) Bharat Resins Limited, Daman
(vii) Bombay Paints Limited, Mumbai
(viii) Veeyor Polymers Pvt. Ltd., Bangalore
(ix) Finolex Industries Limited, Pune
(x) Chemplast Sanmar Ltd., Chennai(xi) Goodlas Nerolac Paints Limited, Ahmedabad
(xii) Goodlass Nerolac Paints Ltd., Kanpur Dehat.
(xiii) Goodlass Nerolac Paints Ltd., District Ratnagiri, Chiplun
(xiv) Resin & Plastics, Raigarh
(xv) Schnectady Beck India Limited, Ratnagiri, Maharashtra(xvi) Gharda Chemicals Ltd., Mumbai
(xvii) Shree Krishna Paper Mills & Industries Limited, New Delhi
Exporters
(i) Tomen (Shanghai) Co. Ltd., Shanghai – China
(ii) Helm AG, Germany
(iii) Aristech Chemical Corporation, United States
(iv) Dow Chemical Company, United StatesG/SG/N/8/IND/13
Page 3
(v) Dow Deutschland Inc., Germany
(vi) Dow Chemical Rheinwerk GmbH, Germany
(vii) Bayer AG, Germany
(viii) Mitsui & Co., Ltd., Singapore
(ix) Nanya Plastics Corporation, Chinese Taipei(x) Taiwan Prosperity Chemical Corporation, Chinese Taipei
(xi) Kumho Shell Chemical Co., Ltd., Korea
(xii) Mitsubishi Corporation, Japan
2. A copy of the notice along with the application and questionnaire was also sent to the
governments of exporting countries through their High Commissions/Embassies in New Delhi namely
Belgium, China PR, France, Germany, Japan, Korea (RP), the Netherlands, Singapore, Spain,Slovenia, Chinese Taipei, UK, US and The Europe an Union/Delegation of European Commission in
India. In addition, on a request received from Delta  Industrial Resins Pvt. Ltd., Mumbai, to consider
them as an interested party, they were forwarded the necessary documents asking them to file their
response by 9 May 2003 .
3. Replies to the Notice dated 06.03.2003 and to the questionnaire were received from the
following parties:
Domestic Producers
(i) Kesar Petroproducts Limited, Mumbai (KPL)
(ii) Maharashtra Petrochemicals Corporation Limited, Mumbai
Exporters
(i) Mitsui & Co. Ltd., Japan
(ii) Helm AG, Germany*
(iii) Taiwan Prosperity Chemical Corporation, Chinese Taipei*
(iv) Bayer Polymers, Germany
Importers & User Industries
(i) Atul Ltd., Gujarat*
(ii) Petro Araldite Private Ltd., Chennai*
(iii) Pragati Chemicals Limited, Mumbai
(iv) Shree Krishna Paper Mills & Industries Limited, Delhi
*(Through Counsel)
4. Verification of the information considered necessary for the investigation was carried out at
the manufacturing and business premises of the domestic producer and some of the importers. The
outcome of the investigations was conveyed to the domestic producer and a copy of the investigation
report was also placed in Public File.
5. A Public Hearing was given to all interested parties on 29.05.2003 notice for which was sent
on 05.05.2003.  During the Public Hearing the interested parties were requested to file their written
submission of oral arguments made by them by 5
 June 2003, collect replies filed by others on
6 June 2003 and to file rebuttals, if any, by 13 June 2003.
The following parties attended the Public Hearing:G/SG/N/8/IND/13
Page 4
(i) Kesar Petroproducts Limited, Mumbai (KPL) *
(ii) Mitsui & Co. Ltd., Japan*
(iii) Helm AG, Germany*
(iv) Taiwan Prosperity Chemical Corporation, Chinese Taipei*
(v) Bayer (India) Ltd.(vi) German Embassy, New Delhi
(vii) Delegation of European Commission in India, New Delhi
(viii) Resinova Chemie Ltd., Kanpur
(ix) Atul Ltd., Gujarat*
(x) Petro Araldite Private Ltd., Chennai*
*(Through Counsel)
B. Views of the domestic industry
They have mainly stated the following:
(i) Maharashtra Petrochemicals Corporation Limited, Mumbai, has stated that KPL was
promoted by them in 1990 to manufacture BPA in the centrally notified backward area in the
State of Maharashtra.  Initially the project was set up for 5,000 tonnes per annum which has
been increased to 10,000 tonnes per annum to meet the increased domestic demand of BPA.
(ii) Kesar Petroproducts Limited (KPL) is the only producer of Bisphenol-A (BPA) in the
country.  Atul Ltd., Valsad, was manufactu ring BPA by Batch Process in 1991-92 but
discontinued the manufacturing since 1993-94.  There is only a single grade of BPA  which is
manufactured and used in various end use segments either as such or converted to Epoxy
Resins/other intermediates.
(iii) BPA is manufactured in a continuous process.  The raw materials namely Acetone & Phenol
are reacted in a reactor.  The post reaction mixture is then transferred to cooler and
crystallization section.  Post crystallization suspension is centrifuged where BPA adduct is
separated from mother liquor.  Molten pure BPA adduct is heated in evaporator and pure
molten BPA is discharged to the BPA receiver and transported to flaker for finishing.  The
entire process is continuous, controlled and monitored by microprocessor based ProgrammedLogic Control (PLC) and Distributed Contro l System (DCS).  The BPA manufactured by
them is in flake form and conforms to international standards.
(iv) BPA is mainly imported from Belgium, Ch ina PR, France, Germany, Spain, Japan, Korea,
Netherlands, Singapore, Slovenia, Chinese Taipei, UK & the US.
(v) Imports of BPA has gradually and continuously gone up since 1997-98.  At the same time,
domestic sales of BPA, a key raw material for manufacture of Epoxy Resins, has only
improved marginally and more or less remained stagnant.  KPL with an installed capacity of
10,000 MTA are in a position to meet the entire domestic demand including the deriveddemand of imported Epoxy resins.
(vi) They started manufacturing BPA in the year 1992 to provide import substitute to the growing
Epoxy resin industry when the rate of customs duty was 110 per cent.  Since then, there had
been a gradual reduction in import duty as per Government policy of liberalisation ofeconomy.  This reduction in import duty was faced by the Company and the company not
only attained full utilisation of their installed capacity of 5,000 TPA but also increased the
same to 6,000 TPA in the year 1999-2000 and further to 10,000 TPA in the year 2001-02 to
meet the growing demand.G/SG/N/8/IND/13
Page 5
(vii) A sudden surge in imports of BPA in the year 2001-02 and current financial year had caused
serious injury to the company.  The unforeseen developments being imposition of SGD on the
raw materials namely Acetone &Phenol imported into India as a sequel to which the domestic
producers of Phenol & Acetone increased their prices which resulted in increased cost ofproduction of BPA to KPL;  establishment of additional BPA capacity of 6 Lakhs MTs per
annum in Asia by overseas manufacturers which had its adverse impact on KPL both in
domestic market and on their exports and the demand for BPA by the Information
Technology industries declined considerably in European, US market due to outsourcing
resulting in BPA finding its way into India.
(viii) There has been a drastic drop in import duty on BPA.  The duty which was 110 per cent in
1992-93 declined to 35 per cent +10 per cent + SAD 4 per cent in 2000-01 which has been
further reduced by 10 per cent in 2001-02 and again by another 5 per cent in the current year
which is below the WTO stipulated 40 per cent during the last two years resulting in
indiscriminate imports of BPA.
(ix) Exporters of BPA into India have large size plants fully depreciated and follow marginal
pricing policy for exports to liquidate their surplus production and achieve overall economy
of scale.  The ultimate design behind such a policy is to make the operations of the only
manufacturer in India totally unviable which may lead to its closure.
(x) The policy of exporting BPA to India at marginal cost and the continuous reduction in import
duty has forced KPL to match the import prices which fell drastically in the current year.
Apart from low prices the exporters allow long credit period between 90 to 180 days forcing
them to extend similar facilities which affected their liquidity position .
(xi) The prices of raw material for manufacture of BPA namely Acetone and  Phenol are higher in
India vis-à-vis their international prices.  The price of BPA have been falling whereas the
prices of its raw materials have been rising.
(xii) Due to low capacity utilisation and non-viable financial operations number of skilled
employees have left their company.  Their financial performance has been unsatisfactory due
to high level of imports.  The Company had to keep its selling price lower than the cost ofproduction to retain its market share.  In spite of lowering their selling price their market
share which was 70.3 per cent in 1997-98 drastically came down to 50.2 per cent in 2001-02
and further declined to 35 per cent during 2002-03 (Dec).
(xiii) Imports have registered an increase from 898 MT in 1997-98 to 2,055 MTs in 2000-01 and
4,339 MT in 2001-02, a 383 per cent increase over a period of 4 years.  The imports went up
in 2001-02 vis-à-vis 2000-01 by 111 per cent. In the year 2002-03 (April 02- June 02), the
imports were 2,416 MT i.e. 123 per cent higher than the previous year on pro-rata basis.  On
an annualized  basis imports would work out to be 9,664 MT, much more than the trend
witnessed earlier.  The c.i.f. price of imported BPA also declined from Rs. 49154/MT to
Rs. 36,016/MT i.e. fall of about  27 per cent which adversely affected their domestic sales.
(xiv) The total domestic consumption of BPA was 8,709 MT in the year 2001-02 as against
3,023 MT in 1997-98 i.e. it increased by 188 per cent in four years.  However their share in
domestic market declined every year from 1997- 98 onwards.  During the current year their
sale in domestic market declined from 453 MT in April 02 to an average of 253 MT in the
quarter Oct-Dec 02.G/SG/N/8/IND/13
Page 6
(xv) In India cost of interest is much higher compared to other parts of the world.  The interest on
cash credit facility which they have to pay is 15 per cent whereas in the international market
credit of 90 to 80 days is given without any interest or at a very low rate.  Similarly the cost of
electric power is also higher in India as co mpared to developed countries.  Besides higher
duty on imports of raw materials, hazardous nature of Acetone and difficulty in handlingPhenol makes imports of these raw materials very expensive whereas the finished product
Bisphenol A attracting lower duty are bein g imported in a big way by the consumers.
(xvi) The imposition of safeguard duty would be in public interest and it is essentially sought to
provide time to the domestic industry to make positive adjustments to meet with competition
arising from increased imports from developed countries.  The imposition of Safeguard Duty
would be just and would therefore, not only minimize the adverse effect on KPL but wouldalso allow the customers to have a wide choice to source their requirements and at
competitive prices.  They have set up the only BPA unit in the country with huge public
investment which is providing employment to a large number of people directly and indirectly
thus contributing to the national economy.
The co-promoter of KPL is Maharashtra Petrochemicals Corporation Ltd., a Govt. of
Maharashtra undertaking who have invested to encourage establishment of down stream
chemical industry, as a sequel to development of the backward area and generate
employment.  KPL has been very much committed to the downstream industry, particularly
the units which are manufacturing epoxy resins in small scale.  KPL has been meeting therequirements of the customers who require BPA even less than half MT at a time to keep their
units running as these customers are obviously not in a position to import BPA.  The
imposition of Safeguard Duty would enable them to survive and face competition from
increased imports and will therefore be in the long-term interest of the users of  Bisphenol A.
C. Views of the Exporters/ Importers /User Industries
(i) The application filed by the domestic industry is not complete and lacking in several crucial
aspects.  The domestic industry has merely made unsubstantiated statements about their
intention for restructuring but no basis for their assertions have been furnished.
(ii) The application does not fulfil the basic prerequisites of a valid application.  It is a well-
settled position of law that in order to investigate a safeguard case, it must be demonstrated by
the domestic industry that there have been some unforeseen circumstances accompanied by
increased imports.
(iii) Currently BPA is subject to an import duty of 25 per cent (Basic custom duty) plus 4 per cent
SAD. Therefore the effective protection is very high, a level which is not available to BPA
anywhere in the world.  Even in 1992, when KPL started manufacturing BPA, it was already
known that the import duties are going to be reduced in the coming years. In view of this, it
was a wrong business decision to invest in the plant.  Now KPL wants the domestic BPA
users to suffer because of their wrong decision by petitioning for the safeguard duty.  This isan unjustifiable demand and needs to be rejected.  It may be mentioned that for most of the
period since inception the petitioner has also been enjoying the benefit of anti-dumping
duties.
(iv) To build a case for serious injury the applic ant has relied on import statistics for the 6 Digit
HS code No.290723.  The description of this subheading is– 4,4-isopropylidenediphenol (bis-
phenolA, diphenylolpropane) and its salts .  However the product manufactured by KPL is
BPA.  A reading of the two together will show that the coverage of sub-heading 290723 is
much wider (it also includes some other goods apart from BPA ) than the product underG/SG/N/8/IND/13
Page 7
investigation in the current case.  By providing import statistics of a wider category of
product, KPL is trying to mislead and build a case of injury where really no such case exists.
For drawing meaningful conclusions, a decision should be based on import figures of BPA
which KPL has deliberately not provided, particularly when the basic premise of any
safeguard investigation is the trend of imports.  If the premise itself is based on incorrect dataand tenuous assumptions, the process of investigation becomes untenable.
(v) KPL’s plant for manufacture of BPA is not backward integrated into Acetone and Phenol as
most of the viable plants in the world are.  Their specific consumption of raw materials is also
higher due to inferior technology.  The small size, outdated technology, inferior quality and
lack of backward integration is cause of the KPL’s problems and not due to imports.
(vi) Epoxies produced from Bisphenol-A manufactur ed by KPL is inferior in colour (averaging
30-40 APHA) compared to Epoxies produced from imported Bisphenol A (below 10 APHA
of imported BPA).  More and more customers are demanding epoxies based on the high
quality imported BPA because of inherent quality advantages.  Thus, the local producers of
epoxies are left with no alternative but to import BPA despite significantly longer lead timeand procedural matters in imports.  Besides the quality, the BPA manufactured by KPL in
flake form is a safety handling hazard causing dust explosions.  Keeping this in mind, user
industry prefers to import whenever more stringent product quality is to be met.  This fact of
poor quality is also corroborated by the fact that that the petitioner themselves exported their
products at prices much below the international prices.  It is also to be noted that the rupeerealization for exports of BPA by the petitioner is  also lower than what they can realise in the
Indian market.  If they were able to really meet local quality requirements, then there would
not have been a need for such exports .
(vii) KPL started manufacturing Bisphenol-A (BPA) in 1992 and requested for imposition of anti-
dumping duty on import of BPA from Japan in July 1992;  in 1994 asked for anti-dumping
duty against imports from  Brazil and Russia an d in 1997 on imports of BPA from the US.  In
2000, they approached the Designated Authority again for anti-dumping duties against
European Union and Chinese Taipei.  The Designated Authority did not find the existence of
causal link and therefore , no final anti-dumping duties were recommended.  It is in this
background that they are now approaching the safeguard authority for imposition of safeguard
duty on BPA.  Seeking safeguard is totally unju stified as the petitioner has shown in the past
that they want to continue operating only with undue protection and has taken no measures to
become internationally viable.
(viii) KPL do not have adequate stock creating problems for the consumers.  Even with safeguard
duty KPL may not be able to cover up their cost of production.  In the event of imposition ofsafeguard duty the Epoxy consumers will not have any alternative but to import Epoxy resin
leading to closure of manufacturing units  of Epoxy resin. BPA as well as epoxy resins are
globally traded products and their demand is expected to grow.  Any measure intending to
protect the domestic producers shall result in reducing competitiveness and will be
counterproductive in the long run.
(ix) Shree Krishna Paper Mills & Industries Limited, Delhi, have stated that BPA imported by
them is entirely different in quality than the one manufactured by KPL and  the indigenous
BPA does not meet their requirements
D. Findings
1.(a) The case records and the replies filed by and on behalf of the domestic producers,
users/importers and exporters have been carefully examined. The issues raised by variousG/SG/N/8/IND/13
Page 8
interested parties are dealt with at appropriate places in the findings below to the extent
necessary.  However, before proceeding to discuss the merits of the case it is considered
necessary to deal with a preliminary issue most vociferously contended by some of the parties
concerning the maintainability of the proceeding s under Section 8B of the Customs Tariff Act
1975 read with the Customs Tariff (Identifica tion and Assessment of Safeguard Duty) Rules,
1997 (SGD Rules).
(b) The Learned  Counsel for the exporters/importers/user industries  argued at length on certain
conditionalities imposed under Section 8B of the Customs Tariff Act,1975 read with the SGD
Rules and contended that the investigation is cont rary to the principles laid down in the said
Section 8B and the rules.  It was, inter alia , stated that the application by the domestic
industry to the Director General (Safeguards) has to be supported by evidence of increasedimports, serious injury to the domestic industry  and a causal link between the two besides a
statement on the efforts taken or planned to be taken or both to make a positive adjustment to
import competition.  Further, Rule 5(2) of the SGD Rules casts responsibilities upon the
person filing the application to provide evidence with regard to factors mentioned in clauses
(a) and (b) of Rule 5(2).  It was obligatory upon the Authority to examine the adequacy,accuracy and sufficiency of the evidence before any investigation is initiated.
(c) Rule 5 of the SGD rules requires the Director General to examine the accuracy and adequacy
of the evidence provided in the application.  The principles that govern investigations are
provided for in Rule 6 of the said Rules.  What has been proposed by issuing the Notice ofinitiation dated 6 March 2003 is to start the process of investigation for conducting such
enquiries and not to ‘apply or extend’ a safeguard measure.  The fundamental  conditions that
must exist to form an opinion was available with the Director General.  The onus of fulfilment
of conditions precedent for initiation prima facie was found satisfied.  The notice of initiation
cannot be held to be based on surmises and conjectures. The notice of initiation was detailedenough and whatever information was to be considered by the Director General was taken
into account. All concerned parties had every opportunity to raise all matters with the Director
General during Public Hearing and other interactions.  It has been ensured that only such
information is relied upon in this investigation, which passes the test of scrutiny.
(d) In this regard it is observed that the present safeguard investigation has been initiated in
accordance with the domestic Safeguard law which reflects the WTO provisions on thesubject.  Article XIX of the General Agreement on Tariffs and Trade (GATT) deals with
Emergency Action on imports of particular pr oducts and the Agreement on Safeguard (AOS)
clarifies and reinforces the disciplines of GATT 1994 and specially those of its Article XIX.
Article 2 of AOS deals with conditions necessary for imposition of safeguard measures and
stipulates that if increased imports, absolute or relative to domestic production, cause orthreaten to cause serious injury to domestic producers that produces like or directly
competitive products, a safeguard measure can be applied. Since the investigation in the
present case has been initiated in accordance with the provisions of the Indian Safeguard law
which reflect the relevant WTO provisions, it is considered that the requirements in this
regard have been fully met with and the notice of initiation has been correctly issued.
2.  Product under Investigation
(a) The product under investigation is BPA, a basic organic chemical with chemical formula
C
15H16O2  classified under Chapter heading 29072300  of the Customs Tariff Act 1975. The
classification, however, is indicated for the purpose of convenience and in no way restricts the
scope of the coverage of the product under investigation.G/SG/N/8/IND/13
Page 9
(b) A point has been raised by the opposing interested parties about the domestically produced
BPA being a product alike to the imported BPA on the grounds of its quality and physical
characteristics.  It has been stated that the domestic industry is incapable of producing BPA of
colour less than 15 APHA (American Public Health Association) and there is no reason for
inclusion of such variants which are not produced by KPL.  In this connection, strong reliancehas been placed on the decision of the CEGAT in the case of Oxo Alcohols  wherein it was
held that the product not manufactured by the domestic industry vis-à-vis imported product
cannot be considered to have caused injury to the domestic industry.  It was submitted that the
imported BPA was in the form of prills  as against flakes  manufactured by KPL.  The BPA
produced by KPL cannot be considered as ‘like article’ to the imported BPA.  Reliance was
also placed on the CEGAT’s decision  in the case of Videocon Narmada Glass Vs. Ministry
of Finance.
(c) The two decisions of the Honourable CEGAT have been carefully considered. In the case of
Oxo Alcohols the point which arose for consideration before the CEGAT was whether
Normal Hexanol  could be treated as a ‘like article’ to the one manufactured by the domestic
industry that was investigated by the Design ated Authority for Anti-dumping.  The CEGAT
held that in the absence of a conclusive  finding by the Designated Authority that it has the
characteristics closely resembling the product manufactured by the domestic industry and that
Normal Hexanol and other Oxo Alcohols are interchangeable, it cannot be treated as a like
article (emphasised).  In the case of Videocon Narmada  the CEGAT revoked the notification
levying anti dumping duty, inter alia , on the grounds that the imported Strontium Carbonate
in ‘granular’ form was in no commercial co mpetition with the Strontium Carbonate in
‘powder’ form manufactured by the domestic producer and the admission by the domestic
producer that revoking anti-dumping duty would not affect them.  The CEGAT did not give
any finding whether the Strontium Carbonate in granular form and powder form could be
treated as a like article or otherwise (emphasised).
(d) The observations of the CEGAT are not attracted to the facts of the present case.  No
acceptable tangible evidence has been adduced by the opposing parties to indicate that
imported BPA is not substituting the domestically produced BPA either technically or
commercially.  It was only averred that importers prefer BPA in prill form and not that
whatever BPA was imported was in prill form or in powder form.  It is observed that
domestic BPA and the imported BPA have the same chemical formula and end usecharacteristics and they are like articles within  the meaning of the SGD Rules for the purpose
of determination of injury.  Both the imported and domestic BPA compete with each other in
the same market for similar applications i.e. main ly in the manufacture of resins.  In fact both
the imported and the domestically produced BPA are used in the same premises for
manufacture of such finished goods with the same plant and machinery. A mere superiority inquality or in physical form does not ipso facto take away a product out of the scope of like or
directly competing article.
3. Domestic Industry
The application for imposition of safeguard duty on BPA has been filed by Kesar
Petroproducts Limited (KPL).  In India, BPA is manufactured only by KPL and they account for the
entire domestic production.  The application is therefore considered to have been made by the
domestic industry producing BPA.
4.   Increased Imports
(a) BPA is imported into India mainly from Chinese Taipei, the Netherlands, Singapore, Japan,
US, Slovenia, Nigeria, UK, Germany, Belgium and Spain.  The import duty (basic customsG/SG/N/8/IND/13
Page 10
duty + surcharge, if any) on BPA which was 65 per cent ad valorem in 1994-95 was brought
down to 50 per cent in 1995-96, 42 per cent in 1996-97 & 35 per cent in 1997-98.  The duty
was raised to 38.5 per cent in 1999-2000, reduced to 35 per cent in 2001-02 and further to
30 per cent in 2002-03.
(b) Doubts have been expressed by some of the opposing interested parties about the authenticity
of import data provided by the applicants, particularly in respect of imports of BPA for the
period 2002-03 (up to December).  It has been stated that KPL wrongly aggregated imports of
salts of BPA  to exaggerate the quantum of imports and that only such imports of BPA that
are clearly proven to be akin to the one manufactured by the applicant should be considered.
It was stated that to build a case for serious injury KPL has relied on import statistics for the
6 Digit HS code No.290723. The description of this subheading is – 4,4-
isopropylidenediphenol (bis-phenolA, diphenylolpropane) and its salt s.   By providing import
statistics of a wider category of product KPL was trying to mislead to build a case of injury
where really no such case exists.  For drawing meaningful conclusions, a decision should be
based on import figures of BPA which KPL has deliberately not provided, particularly when
the basic premise of any safeguard investigation is the trend of imports .  If the premise itself
is based on incorrect data and tenuous assumptions, the process of investigation becomes
untenable.
(c) The Applicant in this regard has stated that the data for the years1997-98 to 2001-02 has been
furnished by them on the basis of import data published by the DGCIS, Kolkatta andavailable in public domain.  The imports for the period 2002-03 (December) was based on the
published details available up to September which was worked out on a pro- rata basis. In this
connection, the details furnished by the applicant relating to imports of BPA for the period
2002-03 (December) was got selectively verified by the Directorate General  through
Commissionerate of Customs, Chennai, Mu mbai  and JNPT, Nhavasheva. It has been
reported that  a quantity of 2,033.240 MTs and 2,975.069 MTs of BPA have been imported at
Chennai and JNPT respectively during the period 2002-03 (December) excluding salts of
BPA. Mumbai Customs have reported that a quantity of 19.706 MTs of BPA valued at
Rs. 1,921,363 have been imported during 2002-03 (up to December).  In view of the value of
BPA imported at Mumbai per MT being much higher, the same has been considered to be
salts of BPA and excluded while arriving at the total quantity imported into India. The data
has been verified and compiled based on Bills of Entries and the country of Origin asavailable in the Customs record.  The DGCIS have clarified that country wise imports
reflected in their publication, by and large, denotes imports credited to the country of
consignment. In-spite of being asked during the public hearing, details of imports of BPA
salts have not been made available / not furnished by any of the interested parties.
(d) In view of the above, it is observed that th e data provided by the Applicant for the period
from 1998-99 to 2001-02 sourced to DGCIS appears to be authentic though the same may
include some small quantity of salts of BPA.  However, the imports for the period 2002-03
(December) which was furnished on a pro-rata basis has now been corrected on the basis of
data made available by DGCIS; details of impor ts submitted by the importers and verification
carried out by Customs.  I hold in the absence of anything contra furnished by the
exporters/importers/user industries, the imports are quantified to be 5,934 MTs for the period
2002-03 (December) which has been taken as the basis for the present investigations.
(e) It has been argued that the goods imported against advance licenses either for use in export
production or for replenishment should not be considered for determination of injury
parameters as they do not enter into the domestic stream.  This does not appears to be correct
as they do compete with the goods produced domestically in as much as the duty free imports
take away the share of the domestically produced goods which would have normally beenG/SG/N/8/IND/13
Page 11
used in export production if the imports had not taken place.  However, as an export
promotion measure the goods imported against advance licenses are exempted from levy of
safeguard duty ab initio  subject to certain conditions. The domestic producers on demand
were capable of supply of BPA under the Deemed Export Scheme, which are considered as
exports without goods physically leaving the Indian shore.
(f) It has been argued by various parties that imports of BPA cannot be considered to meet with
the requirement of increased imports as required under the law.  In the context of increased
imports it has been averred that the increase in imports is to be considered keeping in mind
the WTO Panel Report in the Argentina Footwear case.  It has been argued that it is necessary
to evaluate whether the increase is as a result of unforeseen developments and of the effect of
obligations incurred by India under the GATT.  In the context of “as a result of unforeseen
developments” this expression was interpreted as under:
“To determine the meaning of the clause “as a result of unforeseen
developments and of the effect of the obligations incurred by a Member
under this Agreement, including tariff concessions…” in sub-paragraph (a)of Article XIX:1, we must examine these words in their ordinary meaning,
in their context and in light of the object and purpose of Article XIX.  We
look first to the ordinary meaning of these words.  As to the meaning of
“unforeseen developments”, we note that the dictionary definition of
“unforeseen”, particularly as it relates to the word “developments”, issynonymous with “unexpected”.  “Unforeseeable”, on the other hand, is
defined in the dictionaries as meaning “unpredictable” or “incapable of
being foreseen, foretold or anticipated” (emphasis added). Thus, it seems to
us that the ordinary meaning of the phrase “ as a result of unforeseen
developments” requires that the developments, which led to a product beingimported in such increased quantities and under such conditions as to cause
or threaten to cause serious injury to domestic producers must have been
“unexpected”.  With respect to the phrase “of the effect of the obligations
incurred by a Member under this Agreement, including tariff concessions”,
we believe that this phrase simply means that it must be demonstrated, as a
matter of fact, that the importing Member has incurred obligations under
the GATT 1994, including tariff concessions (emphasis added).  Here, we
note that the Schedules annexed to the GATT 1994 are made an integral part
of Part-I of that Agreement, pursuant to paragraph 7 of Article II of the
GATT 1994.  Therefore, any concession or commitment in a Member’s
Schedule is subject to the obligations in Article II of the GATT 1994.”
The Appellate Body thus distinguished between ‘unforeseen’ and ‘unforeseeable’.  They have
held ‘unforeseen developments’ to be synonymous with ‘unexpected developments ’.  The
phrase “ which it would not be reasonable to expect that the negotiators of the country making
the concession could and should have foreseen at the time when the concession was
negotiated”, however, appears to set different standard which fall more in the realm of
“unforeseeable”, which the Appellate Body has distinguished from “unforeseen”.
(g) In this connection the domestic producer has stated that a sudden surge in imports of BPA in
the year 2001-02 and 2002-03 (December) had caused serious injury to them. The unforeseen
developments being imposition of SGD on the raw materials namely Phenol & Acetone
imported into India as a sequel to which the domestic producers of Acetone and Phenolincreased their prices which resulted in increased cost of production of BPA to KPL;
establishment of additional BPA capacity of 6 Lakhs TPA in Asia by overseas manufacturers
which had its adverse impact on KPL both in domestic market and on their exports and theG/SG/N/8/IND/13
Page 12
declining demand for BPA by the Informa tion Technology industries considerably in
European and US market due to outsourcing resulting in BPA finding its way into India. The
opposing interested parties, however, have averred that it was a wrong decision to invest in
BPA at a time when Government had already announced its intention of reducing import
duties and when many large scale manufacturers were setting up huge facilities withbackward integration outside India.
(h) In regard to the requirement under the domestic law, it is observed that Section 8B of the
Customs Tariff Act, 1975 empowers the Government to impose safeguard duty on an article,
if it is satisfied that the 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 industry.
Further, the term ‘increased quantity’ has been defined under the Customs Tariff(Identification and Assessment of Safeguard Duty) Rules, 1997 to include increase in imports
whether in absolute terms or relative to domestic production. In the present case, on an end-
point-to-end-point basis, there is undoubtedly an increase in the imports in absolute terms,
compared to any previous years. In the present case, the import trend particularly for the
period from 1997-98 to 2002-03 (December) reflects more realistically upon the current stateof the domestic industry.  Besides, it is a matter of fact that while the domestic industry has
been opened to face competition from global producers, it lacks provision of international
competitive environment for the factors re sponsible for production at internationally
competitive prices.  It is common knowledge that power, fuel and financing could not be
made available in India at prices compared to international levels. The government had alsoexceeded its obligations on Acetone and Phenol which are the principal raw materials for
BPA.  Establishment of additional BPA capacity of 6 Lakhs TPA in Asia by overseas
manufacturers also had its adverse impact on KPL both in domestic market and on their
exports.  The increase in imports clearly is a result of all these unexpected developments.  As
regards the obligations incurred by India in re spect of BPA it is appropriate to mention that
BPA is one of the products in respect of which India has, inter alia , incurred the obligation of
both providing tariff concessions by including it in its Schedule of Concession and
unrestricted importability i.e. allowing imports of BPA without any quantitative restrictions.
The imports have increased as a result of unexpected developments and of the effect of
obligations incurred by India.
5. Threat of serious injury
The increased imports of BPA have caused /threatened to cause serious injury to the domestic
producers and that the domestic industry has suffered a significant overall impairment would be
evident from the following Table.
                                                              (in MTs)
Year Domestic
ProductionDomestic
SalesImports Total
domestic
consump-
tionImports as a
% of
Domestic
Production% Share of
domestic sales
to domestic
consumption
1997-98 4,192 2,125 898 3,023 21.42 70.29
1998-99 5,242 3,222 1,376 4,598 26.25 70.07
1999-00 6,147 3,722 2,253 5,975 36.65 62.29
2000-01 5,313 4,983 2,056 7,039 38.70 70.79
2001-02 6,124 4,370 4,339 8,709 70.85 50.18
2002-03(December)3,834 3,149 5,934 9,083 154.77 34.66
2002-03 4,751* 4,107* 7,912** 12,019** 166.53 34.17
    *Actual      **AnnualisedG/SG/N/8/IND/13
Page 13
(a) Production:  The imports of BPA during the five year period 1997-98 to 2001-02 on an
average which was 2,185 MTs increased to 7,912 MTs in 2002-03 on an annualized (2002-
03) basis, registering an increase by about 262 per cent.  The imports as a percentage
compared to the average domestic production of 5,404 MTs during the said period whichstood at 40 per cent increased to about 155 per cent in 2002-03 (December) and 166 per cent
based on actual production. The imports, thus, have increased both in absolute terms as well
as compared to domestic production during the period under investigation.  The domestic
production of BPA which increased from 4,192MTs in 1997-98 to 6,124 MTs in 2001-02
declined  to 3,834 MTs in the first nine months of 2002-03 showing a decline of 22 per cent
in production.
(b) Sales :  The domestic Sales of BPA which reached a peak of 4,983 MTs in 2000-01 have gone
down to 3,149 MTs in the first nine months of 2002-03 (4,107 MTs during 2002-03).  KPL’s
share in apparent domestic consumption which was about 70 per cent in 2000-01 declined to
34 per cent in April-December 2002 i.e. the domestic producer lost market share by 36 per
cent. KPL has been able to maintain even this  reduced share in the domestic market only at a
reduced sales realizations.
(c) Stocks:  The closing stocks of domestic producer of BPA which decreased from 315.375 MT
in 1999-2000 to 72.625 MT in 2000-2001 increased to 418.575 MT at the end of March 2002.
However, the closing stock at the end of December 2002 was observed on verification  to be60 MTs primarily due to restricted production.
(d) Capacity utilisation : The capacity utilisation of domestic producer which was 83.85 per cent
in 1997-98 and improved to 102.45 in 1999-2000 declined to 61.24 per cent in 2001-02 and
further declined to  about 52 per cent during the period 2002-03 (Up to December).
(e) Surplus capacity set up abroad :  The domestic producer is also facing a threat of further
serious injury to them from large capacity plants set-up closer to India who have access to
raw materials at prices much lower than in India.
From the above analysis, it is observed that the domestic industry which had registered an
improvement in production, capacity utilisation till about 2000-01, lost their market share andsuffered lower sales realizations.
6. Causality
(a) The domestic industry has suffered serious injury as observed above.  However, the crucial
question is whether this sufferance of the domestic industry is on account of increased
imports or is it a self inflicted injury on the domestic industry as argued by some interested
parties. It has been argued by the opposing interested parties that if there has been a capacity
creation, in fact, doubling the capacity by the applicant, which has also been disputed, then it
cannot be said that there is causal link between imports and injury. In the presentinvestigation it is being examined whether the domestic producers have faced a threat of
serious injury/market disruption as evident on comparison of their performance in 2002-03
with that of earlier period.  The case of the domestic producers is that they have faced a
severe set-back in performance in 2002-03 as compared to earlier years.
(b) It has also been argued that if the production and sales have either remained constant or gone
up, no causal link can be claimed with imports.  This is not in accordance with the provisions
of the law which requires determination of injury to be made on an objective evaluation of
various factors and not just upon production and sales.  In fact, in determination of causal linkG/SG/N/8/IND/13
Page 14
between imports and injury, the Annex to the SGD Rules requires the Director General to
evaluate all relevant factors of an objective and quantifiable nature having a bearing on the
situation of that industry, in particular, the rate and amount of the increase in imports of that
article concerned in absolute and relative terms, the share of the domestic market taken by
increased imports, changes in the level of sales, production, capacity utilization, profit &losses etc. If, therefore, the increased imports enter in such condition that despite higher
domestic production and sales, the imports occupy a higher market share and displace the
domestic production, the injury so caused is undoubtedly attributable to increased imports.
(c) It is important to analyse this issue in its ri ght perspective as it lies in the heart of the
determination whether the injury caused to domestic industry is on account of increased
imports or on account of other factors.  The law does not require that for a determination ofincreased imports or serious injury, the domestic production must fall.  A finding of increased
imports is to be arrived at after considering the imports in absolute terms as well as compared
to the domestic production.  In case the domestic production was increasing but if the imports
were increasing still faster, a finding of increased imports can well be made as the imports
increased both absolutely as well as compared to domestic production.  Safeguard protectionwill be available to the domestic industry in such a situation if it could be demonstrated that
the domestic industry suffered serious injury or a threat thereof caused by the increased
imports. In other words, a finding of serious injury does not necessarily require domestic
production to fall.
(d) The serious injury to the domestic industry which started taking place in 2001-02 manifested
itself more prominently in the year 2002-03(December). It has been observed that the
production of KPL registered a decline from 4,426 MTs in 2001-02 (December) to 3,834 MTs
in 2002-03 (December). Similarly the domestic sales also registered a decline from 3,300
MTs to 3,149 MTs during the said period. The sales  made during 2002-03 was at reducedrealizations.
The realization per MT of BPA which was Rs 67,034 during 2001-02 (December) was
observed to have declined to Rs 51,298 in 2002-03 (December) registering a fall of about
24 per cent.  As the domestic producers kept on losing production and sale it had its impact on
fixed cost, thereby increasing their cost of production and reducing the profits. It has been
observed that KPL reportedly suffered huge financial loss of Rs. 411 Lakhs during 1998-99which increased to Rs. 426 Lakhs in 1999-2000 and registered a decline to Rs.  254 Lakhs as
on 31 March 2002 but again rose very sharply to Rs. 779 Lakhs in 2002-03.
The increase in imports which have been enteri ng the Indian markets at declining prices have
threatened the domestic producers of serious injury especially as they appear to have adequatecapacity to cater to Indian demand of BPA substantially.  The imports have entered in such
condition that despite domestic sale at reduced prices, the imports occupied a higher market
share and displaced the domestic production, obviously the injury so caused is undoubtedly
attributed to the increased imports.
(e) It has also been observed that while the prices of both the raw materials Phenol and Acetone
during the period 2002-03 (December) showed an in creasing trend, but the prices of BPA did
not rise commensurate with the increase in its raw material prices .
(f) As regards the cause of injury to the domestic industry, the concerned parties have raised
various issues.  The issue most strongly contended by some of the parties concerns the quality
of domestically produced BPA vis-à-vis the imported BPA.  It has been submitted that the
quality of domestically produced BPA is inferior as compared to the imported BPA and that it
is because of quality considerations that the user industry has favoured use of imported BPA.G/SG/N/8/IND/13
Page 15
Heavy reliance has been placed by them on the fact that KPL are selling their BPA at lower
prices as compared to imported BPA, which according to them is evidence in support of their
contention.  In this regard they have contended that the domestic Epoxy manufacturers pay
more price to the foreign suppliers, which raises a question as to why KPL is not able to get
the same price as the foreign suppliers.  In regard to the domestic selling prices, it is observedthat KPL have categorically stated that they have been consciously keeping their prices to be
competitive as compared to imported BPA.  Besi des, the argument that lower prices indicate
inferior quality does not necessarily hold any ground.  As already mentioned above c.i.f..
import price of BPA have been declining.  Some of the exporters would  have reduced their
prices much more than the others.  If lower prices were linked to quality deficiencies, it would
lead to infer that the quality of imported BPA also has deteriorated during this period which
may not be correct.
(g) KPL have explained that their prices are based on the principle of ‘Expected Landed Price
Parity’.  In a falling price situation, they had to offer BPA at a price based on the anticipated
landed cost.  In respect of Petro Araldite, one of their large volume customers, KPL have
submitted that annual contract prices with such large volume customers get fixed on the pricebased on such import price trends.  The delivery price taken into account for fixing the annual
contract price is based on the expected landed price coupled with the depreciation of Indian
rupee accounted for the difference between the landed price of imported BPA and domestic
sale price of BPA for such large volume customers. Besides, in a falling price situation, the
domestic sale price chase the falling export prices which in turn chase the falling domesticprice and so-on setting thereby a spiralling down of prices.  It may also be appreciated that
spot prices often tend to be significantly lower than the contractual prices which has a direct
bearing in domestic prices.  In view of the above discussion, it may be observed that lower
domestic sale prices as compared to landed prices of imported BPA cannot be construed as
reflection on the quality of domestically produced BPA.
7. Quality and Technical Support
(a) Some of the interested parties have charged that the inferior quality of BPA manufactured by
KPL is the basic cause for loss of their market share, declining sales realizations and loss of
export markets.  They have claimed that the BPA imported is different in quality and in
appearance vis-à-vis the one manufactured by KPL.  In this regard, it is observed that both theimported BPA and the domestic BPA compete with each other in the same market and have
the same usage characteristics.  It is observed that KPL is an ISO 9001 accredited company.
A copy of characteristics of BPA manufactured by KPL and imported product furnished on
confidential  basis shows that KPL’s product is fully comparable with the imported BPA.  As
per ISO 9001 procedures, they keep on receiving feed back from customers and ensure totalcustomer satisfaction and continuously improve upon them.  They have further submitted that
they have large number of small and medium customers of BPA who are totally dependent
upon them for the product as well as the technical support service, as their requirement is in
small quantities of about 100 Kg to 5 MT per month.  Most of the multinational companies
are not interested in catering to their requirem ents.  They have also submitted that, in view of
the continuous business relationship and with a view to preserve and nurture the customer
relationship, they accepted certain claims, with the full knowledge that the claims were not
tenable on any grounds.  It has been observed on perusal of certain  purchase orders placed by
Atul for BPA during the period April 2001 to November 2001 that  requirement of colour has
been described as Max.60 APHA .  It was only in July 2002 that Atul had mentioned that the
colour should be not more than 20 APHA .  Petro Araldite were found regularly buying BPA
from KPL from inception of their plant and their off take was observed to be increasing every
year.  It was noticed that they bought 16 MTs in 1998-99 which increased over a period to
2,874 MTs in 2002-03.G/SG/N/8/IND/13
Page 16
(b) It has been argued by the opposing parties that being an ISO company by itself does not mean
anything except that it is a certification that the company adheres to certain ways and
procedures, even if wrong or inadequate, of doing things.  This, however, does not seem to be
correct as the very certificate of ISO 9001 awarded to KPL by BVQI mentions that the
Quality Management System of KPL has been assessed and found to be in accordance with
the requirements of  ISO 9001:  2000 in respect of BPA. It has also been verified that KPL
have adequate facilities to test their BPA and that they supply only that material to their
buyers which meets with the quality parameters.  They have submitted copies of documents
from their major customers, which bear testimony of the acceptability of their BPA.  To
support the acceptability of their BPA, KPL have also submitted that they have exported to
well known companies like Dow Chemicals,  Thai Epoxy& Allied Products, Daewoo etc.
(c) The issue of quality cannot be considered in isolation.  BPA is a commercial product and one
has to consider the commercial substitutability of BPA taking into account both the quality
and the price at which the product substitutes the competing products. The need to consider
commercial substitutability of the competing pr oducts is also borne out from the fact that
some of the parties, instead of rejecting KPL ’s material, claimed compensation from KPL forhigher batch costs in the manufacture of resins resulting from use of their BPA.  In view of
the foregoing discussion, it is considered that the quality and technical support service
provided by KPL were not the cause of increased imports.
8. Expansion of Capacity
The domestic producers claimed a capacity of 10,000 MT per annum which has been
challenged by some parties and they have requested for examination of documentary evidence in this
regard.   The domestic producers have explained that the plant when built in 1990 was designed with a
capability to produce 10,000 MT per annum but k eeping in view the then existing demand the
capacity was deliberately restricted to 5,000 MTs by deferring installations of certain balancing
equipments.  They have produced documentary evidence in this regard on confidential basis .  They
have further stated that subsequent to the first few years of operation, they have stepped up the plant
capacity by removing the bottlenecks and the on-stream efficiency of the plants indicates that the
capacity of the plant is now 10,000 MT per annum.  From the documents furnished it was seen that
KPL (promoted by Maharashtra Petrochemicals Corporation Ltd) proposed setting up a plant for the
manufacture of 5,000 Tonnes per annum of BPA in technical collaboration with Polibur EngineeringLimited, UK based on the Cation Exchange Technology developed by Institute of Heavy Organic
Synthesis (ICSO), Poland  at an estimated cost of about Rs 32 Crores .  KPL also entered into a buy
back agreement with Polibur for the first three years after the commencement of commercial
production.  The total domestic demand for BPA was estimated at around 7,500 MTs in 1994-95. The
viability of the project depended on the import parity prices. The company had expanded the capacityof its BPA plant from 5,000 TPA to 6,000 TPA in 1999-2000 and further to 10,000 TPA in 2001-02.
This expanded capacity, however, was not utilized since the production was required to be restricted
due to substantial increase in imports which affected their domestic sale.  It has been argued by some
parties that expansion of capacity by the applicant was not a wise decision and that the injury to them
is self-inflicted. In this regard, it is observed that the circumstances under which KPL expanded theircapacity needs to be seen.  The Applicant has stated that Capacity of their  unit at the time of
commencement of commercial production was 5,000 MTs per annum which was increased to 6,000
MTs per annum in 1999-2000  and further to 10,000 MTs per annum in 2001-02 .  The expansion was
considered since the additional capacity could be created with a very nominal addition to the fixed
assets.  The cost of expansion including building was only Rs 450 lakhs  while the initial cost of
setting up the plant was Rs 4500 lakhs. Thus expansion of more than 100 per cent could be achieved
with this nominal additional capital expenditure.  The increase in the capacity would bring down the
cost of fixed overheads for every kg of production and for KPL to survive and to cater to the growing
Indian market.  In view of these developments, it can not be held that KPL did not take a wiseG/SG/N/8/IND/13
Page 17
decision in expanding their capacity or that the injury to them is self-inflicted. . It has also  been
observed that the supporting utility plants installed like boiler, reactors, cooling tower, raw and
finished product storage, waste water treatment plant and the expensive pipe line to pump the effluent,
are of much higher capacity which supports their capacity of 10,000 MTs .  The capacity of the plant
can easily be stepped-up to proposed capacity of 15,000 MT per annum if only sufficient markets areavailable to cater to and in a short span of time with marginal investment, with attractive investment
to turn over ratio, if the opportunity is afforded for the company to expand and run the plant at higher
plant load factor and meet the demand for the country.
9. Pricing
(a) An argument has been raised that price is not a relevant factor for consideration in the
Safeguard investigation.  In this regard it is observed that unlike in the case of anti-dumping
investigation where the price discriminatory practices adopted by the exporters is the root
cause for an anti-dumping action, in the case of Safeguard investigation increased imports is
the fundamental requirement for maintaining a safeguard action.  At what prices the imports
are entering is not so much the relevant factor because it is not the unfair competition which isthe subject matter of safeguard action but it is the competition per se offered by the increased
imports to the domestic producers, even if it is at fair prices.  Only in this context the import
prices are not relevant.  However, when it comes to determination of serious injury or threat
thereof, the law requires an examination of change  in level of sales, profitability etc. of the
domestic producers.  These factors undoubtedly depend upon the prices of competingproducts and in that context import prices do become relevant and require an examination,
specially to assess their effect on the domestic situation.
(b) It has been observed from the details made available by Customs that there has been a
substantial depression in prices (c.i.f.) of imports of BPA during 2002-03 (December), fromRs 48,128 PMT in 2001-02 to Rs 37,064 PMT i.e. decline by about 23 per cent. This led to
reduction in prices by the domestic producer.  It may be mentioned that depression in national
prices is an important indicator of the market disruption and as a sequel thereof the injury
suffered by the domestic producer.  While it may be possible for the domestic producer to
achieve better efficiencies in production and utilization of capacity, the most crucial and
important aspect is the price which they are able to realise or fetch for their product.
Invariably, the depressed prices results in loss of market share for the domestic producers andaffect their profitability.
(c) The domestic producers tried to maintain their share in the apparent domestic consumption by
reducing their sale prices.  In spite of this sharp decline in sales price, the domestic producers
could not retain their market share. It has been argued by some parties that if the cause ofinjury to domestic producers was cheaper imports, it does not hold good any longer as the
import prices of BPA have already moved to US$1,020 and with this price KPL does not need
any protection.  In this, regard, it is observed that the current c.i.f.. prices of BPA cannot be
the basis for arriving at a decision since this is post investigation price having no bearing on
the prices prevailing during the period under consideration.  The import prices may haveincreased due to various factors, which would also influence the domestic cost of production.
It is neither practicable nor desirable to base the findings on post investigation prices.  It is not
possible for any investigation authority to keep analysing price situation in an open ended
manner.  Some cut-off point is necessary for concluding the investigations.
(d) A number of issues have been raised by various parties justifying the increased imports or to
show that the injury caused to the domestic industry was not on account of increased imports
but on account of other factors.  The most important amongst these issues is the supply-
demand gap .  Some of the parties have claimed that the cause of injury to the domesticG/SG/N/8/IND/13
Page 18
industry was not increased imports as the imports were necessitated to meet the gap between
domestic supply and domestic demand.  This aspect has been examined and it has been
observed that KPL went into commercial production in the year 1992 with an installed
capacity of 5,000 TPA.  They expanded their capacity 10,000 TPA  in the year 2001-02.   The
expansion was undertaken primarily to reduce th e cost of production of BPA over a period of
years.  It was gathered from the management that the expansion was part of their financial
restructuring plan.  The company had borrowed term liabilities and working capital from
Indian financial Institutions/Banks on which the interest rate was as high which was
substituted with low cost External Commercial Borrowing (ECB ).  It was verified that they
have sufficient infrastructure, installed certain critical machineries besides have also
contracted  with their collaborators for supply of patented machineries with adequate capacity
ratings and they have the capacity of 10,000 MTs and potential to enhance and manufacture aquantity of approximately15,000 MTs per annum of BPA meeting international standards.  It
was verified from their Central Excise statutory records that they had manufactured a quantity
of 725 MTs during June, 1999 and a quantity of 700 MTs in July 1999.  It was observed that
the company had manufactured around 26 MTs per day during the said two months
consistently.  Moreover, the Applicant has not opposed the imports of BPA into the country.What KPL has sought is only a level playing field for a period of three years to become
competitive vis-à-vis imports.
(e) No ground, therefore, exists to hold that the domestic producers did not have capacity
adequate to meet the domestic demand of BPA or to hold that the imports were necessitatedbecause the domestic producers were not in a position to cater to the domestic demand of
BPA.  In conclusion, it is observed that the imports have grown phenomenally during the
period under investigation.  These increased imports have progressively taken a significant
share in the apparent consumption which increased from about 30 per cent in 1997-98 to
about 65 per cent in 2002-03 (December).  The serious injury to the domestic industry is aconsequence of these increased imports.  Factors other than increased imports do not appear
to have any significant effect on the state of th e industry in so far as the present investigation
is concerned.
10. Injury due to loss of Exports
It has also been claimed by the opposing interested parties that  the reason for the woes of the
domestic producer is loss of its export market that has declined from a level of 2,200 MTs to
1,044 MTs in 2002-03 and not the imports of BPA.  In this regard it is important to keep in mind that
the production line for production of BPA is common both for the domestic consumption and for the
export market.  A domestic industry that was not able to compete in the domestic market could hardly
have been expected to compete in the internatio nal market, especially when the domestic supplies
were the major potential market for the domestic industry and export was a secondary market.  Even
on the export front KPL had to compete with other global BPA producers who were exclusively
catering to exports on a large scale enjoying economies of scale.  KPL has explained the reasons for
venturing into the export market and has stated that it was to keep the production process going in the
light of dedicated investments made in the plant and to improve their capacity utilisation to bringdown the cost of production.  The injury caused to the domestic producer by the increased imports,
therefore, had its effect on the export performance of KPL as well.
11. Re-structuring/Adjustment Plan
(a) In regard to making a positive adjustment to import competition the domestic producers have
categorically stated that they understand that the relief granted as safeguard duty is a short-
term measure.  The applicants have submitted a restructuring plan indicating details of efforts
being taken and planned to be taken to make a positive adjustment to improve theirG/SG/N/8/IND/13
Page 19
competitiveness.  The applicants have stated that they have been regularly upgrading their
technology and de-bottlenecking their manufacturing facilities with the objective of reducing
the operative cost per unit of BPA.  The Applicants have stated that they are making efforts to
reduce the cost of production by optimising plant utilisation and increasing  the capacity of
the plant by further 5,000 MT to achieve economies of scale. They expect to achievesubstantial cost savings to the company through these efforts. The expansion of capacity from
10,000 MT to 15,000 MT will take about three years.  From this expansion, they not only
expect to achieve economies of scale but also improvement in consumption efficiencies for
the raw materials (Phenol, Acetone, Furnace oil) and distribution of fixed costs over larger
volumes.  Power being the major cost factor in the production of BPA, KPL expects to reduce
the cost of generation of power by optimal level utilization of the Coal fired boiler. The
consumption of Phenol which was 0.931 MT per MT of BPA is proposed to be brought down
to 0.900 MT  and the consumption of Acetone from 0.335 MT per MT of BPA to 0.310 MT
by continuous operation at higher load.  The quantity of tar, a by-product   required to be
drained every day remains constant and hence operating plant at higher load helps to improve
the consumption norms of both raw materials viz. Phenol and Acetone.  The company has
installed a coal fired boiler in place of existing oil fired boiler resulting in saving in the cost offuel estimated at Rs. One Crore per annum. The interest on long term loan will be reduced
since the generation of internal resources by higher capacity utilization will enable the
company to repay the loan.  The interest  on working capital will also get reduced due to
increase in internal resources.  There will be an  increase in other income due to sale of by-
product (tar) for which market is being developed.  The company has planned to increaseproduction capacity from 10,000 TPA to 15,000 TPA in two stages i.e. 12,000 TPA in first
stage and 15,000 TPA in second stage at an estimated capital cost of Rs. 891.11 Lakhs .
There is also a proposal to install captive power plant based on coal-fired boiler to use the
drop in pressure of steam for generation of power by installing a steam turbine.  As per the
Adjustment Plan which has been prepared by KPL, the company will be able to achieve asaving of Rs.18,336/-PMT by the end of the year 2005-06 and its operation will be financially
viable after the withdrawal of safeguard duty.
(b) It has been stated by the opposing parties that the adjustment plan of the applicant cannot be
relied upon.  It has been argued by them  that the domestic producers have not procured their
raw materials competitively and is therefore one of the causes of injury to them. Their
restructuring plans furnished in an attempt to reduce their cost of production was examined.The re-structuring plan submitted by the domestic industry, does not appear to be hypothetical
or academic.  They appear to be making sincere efforts to become competitive so as to face
competition offered by the imports.  In order to execute the same KPL has already installed a
coal fired boiler which will stabilize over a period of three to six months and contribute to
cost reduction .  Installation of this coal fired boiler has also  been appreciated by well known
international consultants  who desired KPL to share their expertise. The tar (a by-product)
generated during the process of manufacture of BPA accounts for about 10 per cent of the
quantity of BPA produced.  The State Pollution Control Board has imposed restrictions on its
storage within the manufacturing premises.  It was observed  that KPL has successfully
developed an indigenous system to convert the same to anti corrosive paints for painting theplant & machinery.  They are making efforts and exploring the possibility to market the same
besides for using the tar for substituting the furnace oil and coal to bring down the cost of
operation of the boilers.  KPL is managed by a team of dedicated and highly qualified
professionals.  The company is managed by a Bo ard of Directors which includes a very senior
serving Indian Administrative Service officer, who is the Managing Director of Maharashtra
Petrochemicals Corporation Ltd., (a Government of Maharashtra undertaking) as its
Chairperson and the President of the company was earlier the Chairman & Managing Director
of one of the leading Public Sector Un its Hindustan Organic Chemicals, Mumbai.G/SG/N/8/IND/13
Page 20
It is considered that imposition of safeguard duty would help them in re-structuring and to
become competitive.  It is also observed that the domestic producers have already taken steps
in this direction and the domestic industry would need a period of about two years, to
substantially complete their plans.
12. Inefficiency  of Domestic Producers
It has been averred that KPL requested for imposition of anti-dumping duty on import of BPA
from Japan in July 1992;  in 1994 against imports from  Brazil and Russia; in 1997 on imports of BPA
from the US and in 2000 against European Union and Chinese Taipei.  The Designated Authority did
not find the existence of causal link and therefore , no final anti-dumping duties were recommended.
It is in this background that they are now appr oaching the safeguard authority for imposition of
safeguard duty on BPA.  Seeking safeguard is totally unjustified and KPL wants to continue operating
only with undue protection and no measures to become internationally viable have been taken by
them.  Their financial performance has always remained bad since its inception and KPL is not a
dependable supplier of quality product.  Another issue that has been highlighted in the context of
inefficiency of the domestic producers is the size of their BPA manufacturing capacity whichallegedly did not allow production at economically vi able rate and the high prices of raw materials
which has increased their cost of production.
In this regard, it is observed that the domestic producers obtain their principal raw material
used in the manufacture of BPA, mainly fr om Hindustan Organic Chemicals (HOC) and some
quantities are imported. In this context it is also observed that at the material time the import duty on
the raw materials was quite high making it difficult for any one to conceive the project on the basis of
imported raw materials and as the major ports did not have facility and interest in creating one
because of the congestion and lack of space within the port area to accommodate the hazardous cargo
shipment.  It can not be expected that the domestic producers should have set-up plant capacities farin excess of what is necessary to meet the demand.  The domestic producers have also submitted that
because of the high cost of investment, the technology adopted by them is ideally suited for medium
capacity plants.  Besides, it needs, to be appreciated that the basic objective of imposition of safeguard
duty is to allow time to domestic industry to make positive adjustment to meet with the new situation
of competition offered by the increased imports.  If the domestic industry was fully competitive,
perhaps it needed no safeguard measures for protection.  The question that needs to be answered in
the context of desirability of imposing safeguard duty is whether there is a reasonable possibility ofdomestic industry making positive adjustment and to become competitive.  If the answer is in the
affirmative the domestic industry needs to be protected.  As regards KPL having approached the anti-
dumping authorities time and again seeking protection it may be mentioned that they have availed
only the trade remedial measures available to any domestic industry under the domestic regulations.
13. Other Issues
It has been stated  by some of the opposin g parties through their Ld. Counsel that some
documents have not been made available to enable them to effectively deal with certain issues.
Specific mention has been made with regard to KP L’s balance-sheets, details of plant & machinery,
indexed version of cost of production, non-confidential  version of their adjustment plan, project report
etc.  In this connection, it is suffice to say that while forwarding a copy of notice of initiation together
with a copy of non confidential version of the application & a questionnaire to various interested
parties, a copy of General Instructions were sent clearly mentioning that a Public File containing all
relevant material shall be available for inspection by all interested parties in the office of the DirectorGeneral.  In fact, on a request by the Counsel, copies of Balance Sheets filed by KPL were furnished
and they were also advised to examine and take extracts, if necessary, of whatever information was
available in Public File.G/SG/N/8/IND/13
Page 21
(b) It has also been argued that in the notice of initiation it was shown that domestic sales
included captive consumption of BPA but there is no mention of BPA being consumed
captively in the application.  It was also averred that on this ground alone the proceedings
should be dropped.  This does not appear to be relevant and does not vitiate the proceedings.
(c) Some parties have submitted that in keeping with the growing policy of liberalisation the
import duty on BPA has been reduced over the years but still it is the highest in this region
and, therefore, provides an in built protection and competitive parity to the manufacturers of
BPA in India.  This argument, however, is considered to be irrelevant in the context of
safeguard duty as the level of import duty on a particular product depends upon various
factors some of which are level of import duties on comparable and competitive products and
on inputs, the need to raise revenue and the disadvantages suffered by the domestic producersvis-à-vis international producers etc.  Each country, therefore, decides the level of import
duties according to its needs, which cannot be viewed as a reference point for others.
14. Share of Countries in Exports to India
On the basis of information as verified, in regard to imports of BPA into India during the
period 2002-03 (December), the share of various countries in India’s imports were as under:
Country/Territory Imports (MT) %age share
Chinese Taipei       2,106.000 35.49
Netherlands       1,420.075 23.95
Singapore         858.000 14.46
Japan         524.000 8.83
United States          475.570 8.00
Slovenia          300.000 5.05
Nigeria          166.125 2.80
UK           32.000 0.54
Germany           15.542 0.26
Senegal            15.000 0.25
Belgium           14.000 0.24
Spain            8.000 0.13
           Total          5,934.00 100.00
15.  Provisional Safeguard Duty
In view of the fact that after completing the investigation final findings are being issued in
this case, it is not considered necessary to re cord any preliminary finding for the purposes of
imposition of provisional safeguard duty.
16.  Public interest
It has been argued that imposition of safeguard duty on BPA would not be in public interest
and any measure intending to protect the domestic producers shall result in reducing competitiveness
and will be counterproductive in the long run. This claim has been made on the basis that imposition
of safeguard duty would make the imported BPA costlier in the hands of importers/users which may
result in the increased cost of resultant products particularly the epoxy resin manufacturers and this
would be against consumer interest.  In the light of unrestricted imports and more so when imports
account for a major share of the apparent domestic consumption this presumption does not appear to
be correct.  The law also does not envisage that interest of a single producer should not be protectedG/SG/N/8/IND/13
Page 22
even if it rightly deserves to be protected. Imposition of safeguard duty is not aimed at encouraging
monopolistic practices but at protecting the interests of domestic producers, if increased imports cause
or threaten to cause injury to them so as to al low them time to meet the competition offered by the
increased imports.  KPL has not requested for banning the import of BPA, instead they have requested
for imposition of safeguard duty on the imports of BPA in accordance with the law so as to enablethem to adjust to the new situation of competit ion offered by the increased imports.  The domestic
industry has acted as a catalyst in the development of  a host of downstream industries with the assured
domestic availability.  KPL seems to have made valuable contribution in the development of various
applications of BPA.
In this regard it is also observed that the scope of the term Public Interest is not to be
restricted to cover consumer interest alone.  It is a much wider term which covers in its ambit the
general social welfare taking into account the larger community interest.  While the imposition of
safeguard duty may result in increased cost of imported BPA in the hands of buyers and therefore, it
may also affect the end products manufactured there from, it is important to keep in mind the
objective of imposition of safeguard duty.  The purpose of imposition is to provide time to the
domestic industry within which it may make positiv e adjustments to meet with the new situation of
competition offered by the increased imports.  The imposition of safeguard duty would not only allow
a wider choice to the buyers to source their requirements, but also at competitive price.  The domestic
producers provide employment to a large number of people and make valuable contribution to the
economy.  Safeguard duty would thus enable them to survive in the face of competition offered by the
imports which should also be in the long term interest of the buyers of BPA as well as of theconsumers of products manufactured there from.  In this regard, it is observed that the imposition of
safeguard duty is not likely to have any major impact on the user industry and the consumers thereof
especially as the safeguard duty is proposed to be imposed only to the extent necessary to protect the
domestic producers of BPA.  It is, therefore, considered that imposition of Safeguard Duty on BPA
would be in general public interest.
17. Conclusion  and recommendations
In the light of the  facts and circumstances mentioned above, it is observed that increased
imports of Bisphenol A into India have threatened to cause serious injury to the domestic producers of
Bisphenol A and it will be in the Public interest to impose safeguard duty for a period of two years  on
imports of BPA into India .  Accordingly, it is recommended that safeguard duty be imposed on
imports of BPA into India at the rate of 15 per cent ad valorem basis for the first year of imposition
and at the rate of 10 per cent for the second year being the minimum necessary for the protection of
the domestic industry from the serious injury threatened to be caused by the increased imports of
BPA.
(SRI KRISHNA)
DIRECTOR GENERAL
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