India update: anti-dumping probe into China, Russia, Saudi Arabia and Taiwan

17 May 2023

In a move that could have an impact on India’s domestic producers of paints, the country’s Directorate General of Trade Remedies (DGTR) has initiated an anti-dumping investigation into import of pentaerythritol, a key input used for manufacture of surface coating products, particularly from China, Russia, Saudi Arabia and Taiwan.

Kolkata-based Kanoria Chemicals & Industries Limited had filed a petition alleging dumping of pentaerythritol from these countries and demanding imposition of anti-dumping duties on this surface coating industry input.

India had earlier imposed anti-dumping duty on this organic compound imported from China in 2011, but the levy expired last June. Paints industry major Asian Paints is among the users of this key input and the company produces it locally for captive consumption.

Pentaerythritol is used in the manufacturing of derivatives deployed as a drying agent in paint, varnishes, printing ink and other surface coating industries, according to the DGTR notification initiating anti-dumping investigation on the basis of the complaint from Kanoria Chemicals & Industries Limited that is promoted by the Kanoria family.

It is mostly used in the manufacture of alkyd resins, resins, resin esters, plasticisers, printing inks, synthetic rubber, stabilisers for plastics, modified drying oils, detonators, explosives, pharmaceuticals, core oils and synthetic lubricants, etc.

The investigation was formally notified last Friday (May 12). The product under consideration in the investigation is pentaerythritol – an organic compound produced using electrodialysis separation technology or fractional crystallisation technology having molecular formula of C5H12O4 and molecular weight of 136.15, said the DGTR notification.

In 2018, India has imposed an anti-dumping duty of $664/t on pentaerythritol imported from Taiwan. In the case of China, an anti-dumping duty of $185/t was imposed in 2017 after a sunset review of the earlier levy imposed by India.

Exporters to respond within 15 days

Exporters from China, Russia, Saudi Arabia and Taiwan have been given 15 days to respond to the probe and provide their rejoinder. Kanoria Chemicals & Industries had proposed China, Russia, Saudi Arabia and Taiwan as the subject countries for the investigation. However, data from the Directorate General of Commercial Intelligence and Statistics (DGCI&S) showed that the import volume from Russia during the period of investigation is negligible.

Therefore, DGTR has considered China, Saudi Arabia and Taiwan as the subject countries for the purpose of this investigation.

Kanoria Chemicals & Industries has furnished prima facie evidence regarding the injury resulting from the alleged dumping of subject imports, further said the DGTR notification.

The notification also added that it has been claimed that the subject goods were previously subjected to anti-dumping measures from various countries. However, no extension was sought on subject countries as the applicant’s performance improved and the industry considered that imports are no longer likely to enter the market at dumped prices.

“The imports from the subject countries have, however, increased in absolute and relative terms. The price depression caused by the dumped imports have led to losses, cash losses, and negative return on capital employed. The market share of subject countries has increased whereas that of the domestic industry and other countries have declined,” said the notification.

There is sufficient prima facie evidence of material injury being caused to the domestic industry by dumped imports of the subject goods from the subject countries, the DGTR has stated. Kanoria Chemicals & Industries and Asian Paints are the two major producers of pentaerythritol.

The period of investigation for this investigation has been fixed as July-December 2022.

“The petitioner has proposed POI (a) excluding the period during which duties on China were in force, and the period for which data/information is not available, (b) considering urgency in undertaking investigations, having regard to irreparable loss and damage that is occurring to the domestic industry. The applicant proposed July 1, 2022 to December 31, 2022 (six months, as the period of investigation after excluding the period during which anti-dumping duties were in force on China, which expired in June 2022),” said the notification issued by DGTR.

Elusive pricing details and the China puzzle

Kanoria Chemicals and Industries has informed DGTR that efforts were made to collect the data relating to price of the product in the domestic market of Saudi Arabia and Taiwan, but the details were not available.

“Further, no reasonable, authentic and accurate information could be obtained from published sources about the actual transaction (selling) price of the product in the domestic markets of Saudi Arabia and Taiwan,” said the notification.

“Therefore, for purpose of initiation (of anti-dumping probe), the normal value has been calculated based on the cost of production of the applicant – duly adjusted with selling, general and administrative expenses, along with a reasonable profit margin,” it has been stated.

The DGTR will further examine the evidence provided by the interested parties and the applicant for the determination of normal value during the investigation.

In the case of China, the non-market economy issue has cropped up once again. “The applicant has claimed the producers in China PR must be asked to demonstrate that market economy conditions prevail in the industry producing the subject goods in terms of Para 8(3) of (WTO) Annexure I of the Rules with regard to the manufacture, production and sale of the product under consideration. It has been stated by the applicant that in case the responding Chinese producers are not able to demonstrate that their costs and price information are market driven, the normal value should be calculated in terms of provisions of para 7 and 8 of Annexure I to the Rules,” said the notification.

Chinese government subsidies and hidden incentives are often cited in trade disputes, with domestic manufacturers contending that export sops continued in China in violation of norms laid down by the World Trade Organization, even after Beijing joined WTO.

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