India’s Safeguard Duty Investigation Draws Criticism at WTO

The European Union and Japan criticized the conduct of the investigation and its initial findings


The recommendation to impose safeguard duty on solar imports to India and the ongoing investigation faced criticism at the recently-held meeting of the World Trade Organization’s (WTO) safeguard committee.

The committee met on April 23, 2018 to discuss India’s ongoing investigation into solar module and cell imports from China PR, Malaysia, and Taiwan. The safeguard duty investigation was initiated by the office of Directorate General (DG) Safeguards, at the behest of the Indian Solar Manufacturers Association (ISMA).

At the meeting, the European Union and Japan criticized the conduct of the safeguard duty investigation and the initial findings. The Indian delegation, however, asserted that India follows WTO rules and regulations on the imposition of safeguard measures.

In a mailed response, a Geneva-based trade official told Mercom, “The European Union recalled that safeguard measures should only be imposed under exceptional circumstances, particularly if the imports causing problems come from predominantly one source.  India’s injury analysis on imported solar cells is inconclusive and its causal analysis doubtful, the European Union charged, adding that the injury to other domestic producers needs to be assessed.”

India’s actions will create serious domestic shortages and even risk the environment, the committee opined. The European Union said it trusts India will refrain from imposing any definitive measure while Japan said an investigation should include reasonable public notice and other appropriate means to ensure interested parties can present evidence.

India noted that a preliminary safeguard duty of 70 percent was followed by a challenge to the measure in the domestic courts, so the matter is sub judice (under consideration by judiciary).

Recently, the Madras High Court dismissed the petition filed against levy of safeguard duty. By August 18, 2018, DG Safeguard will submit its final report after which the Ministry of Commerce will decide whether to levy the safeguard duty or not.

The trade official further added, “If any member has a problem with India’s investigation, they can raise the matter at the WTO – which the European Union and Japan have done at the safeguards committee meeting – or they can initiate WTO dispute settlement proceedings.”

Under the WTO’s Safeguards Agreement, a member may restrict imports of a product temporarily (take “safeguard” actions) through higher tariffs or other measures if its domestic industry is seriously injured, or threatened with serious injury, due to an unforeseen surge in imports.  An import surge justifying safeguard action can be a real increase in imports; or it can be an increase in the imports’ share of a shrinking market, even if the import quantity has not increased.

In principle, safeguard measures apply to all imports and not just those from a particular country (developing countries accounting for less than 3 percent of exports are excluded from a measure) and should not last more than four years.  Because safeguards target fair trade, an exporting country can seek compensation for lost trade through consultations or, if no agreement is reached, it can raise tariffs on exports from the country that is enforcing the safeguard measure.