What Happens if Solar Imports from Vietnam and Thailand Cross the 3% Threshold?

Importers are queasy about signing a provisional bond and declaration when importing solar components from Vietnam and Thailand


Since the implementation of safeguard duty, there has been a rising concern regarding its levy among importers of solar modules and cells from countries like Vietnam and Thailand because these were not included in the final findings of the Directorate General for Trade Remedies (DGTR).

The importers began to be concerned after they were asked to fill provisional bonds for the release of their shipments. Some of these importers were under the assumption that if the imports crossed the demarcated margin of three percent (of installed solar capacity), they would be asked to pay safeguard duty. However, after discussions with various sources, Mercom has found that this is not the case. At least for now.

Mercom’s source at Andhra Pradesh’s Krishnapatnam Port said, “No amount is asked to be paid by the importers. They have been just asked to sign and submit a provisional bond and declaration. This is without any cost. The provisional bond is signed on the directions of the customs authority of India stating that in case there is a levy of duty in the future, the importers would be liable to pay the same.”

An importer of solar modules from Thailand shared with Mercom their frustration saying, “In Chennai port they have informed us that the online software – ICEGATE (Indian Customs Electronic Commerce/Electronic Data interchange (EC/EDI) Gateway) still shows 25 percent safeguard duty applicable for solar modules imported from Thailand and they cannot release our consignment unless we pay the duty which they have assured will be reimbursed once the software is set right. We importers are helpless. We are forced to pay the duty and get the consignment released or we will have to pay detention charges as long as the consignment is held at the port. We are between the devil and the deep blue sea. We are well aware that the reimbursement that the port is reassuring of, will take a long time. We have already faced the issue when Chennai port charged customs duty of 7.5 percent last year by changing the HSN Codes and we are yet to be reimbursed. In fact we are tired of being unable to do business smoothly in India and shifting our operations to Singapore and Taiwan”.

Continuing about their experience, the importer said that “imports from Vietnam require provisional bonds to be signed which state that in case of any levies in the future the signatories of the bond will be liable to pay. We know that we are handing a blank cheque to the port authorities at this point because we don’t know what would the levies amount to or when, and there is no way we will recover this cost from our customers. But like explained earlier, we don’t have a choice but to sign the bond and only hope there is no unpleasant surprises in the future.”

But why is it required to sign a provisional bond for imports from Vietnam and Thailand?

The  Krishnapatnam Port official explained this, saying, “You are aware that each country can only export to three percent of total installed solar capacity (capacity installed in India in MW) in any given year to India. Hence importers have been asked to submit provisional bond and declaration. This will help in the future if a situation arises where another investigation has to be done to ascertain negative effects on Indian market due to imports from other countries. This will also help to stem the flow if it is deemed fit at port level too.”

When asked to elaborate on the issue, a DGTR official said, “For calculation of injury, broadly, injury to domestic industry is a function of various parameters like its share in the domestic market, sales, production, capacity utilization, to name a few.

The official further explained, “Moreover, it is important that any negative parameter must not be a one-off event, but it must display a consistent trend. Despite the rapid expansion in domestic demand, the market share of the domestic industry decreased; the domestic industry had a market share of 8 percent in 2014-15 which declined to 3 percent during 2017-18. During the same period, the market share of imports increased from 90 percent to 93 percent.”

“Domestic demand increased from 1,419 MW in 2014-15 to 10,618 MW in 2017-18 (Annualized), it is clear that the increased imports of the modules have substituted for the domestic production in meeting the domestic demand,” he added.

The DGTR official also said that in the final findings all available information have been shared, therefore it is unclear why the industry still demands a clarification.

Another government official at DGTR stated that safeguard duty cannot be imposed retrospectively. When asked if another country crosses the desired margin of exports to India, what would be the scenario, the official said, “The local industry has to file a petition, and then demarcate injury period, then investigation will be carried out to determine whether injury is there and to what extent.

All the rules regarding levy of safeguard duty starting with 25 percent in the first-year have been clearly demarcated in the final findings.”

To be clear, DGTR which comes under the Ministry of Commerce and Industry is not asking ports to get the provisional bonds signed, it is the customs authority of India that has asked the ports to get the provisional bonds signed. The Customs Authority of India that comes under Central Board of Indirect taxes and Customs (CBIC), a part of the Department of Revenue under the Ministry of Finance.

“Here is yet another situation where the entire industry is thrown into disarray due to a lack of communication and coordination between government agencies after a ruling. Why should companies pay huge amounts to ports not knowing when they will be reimbursed? How can companies/industry function and grow if capital is stuck because government agencies cannot figure out how to execute an order? Some solar companies are still waiting for reimbursement of the 7.5% duty withheld because of HSN code issues, some are waiting for GST reimbursement, and now this,” said Raj Prabhu CEO of Mercom Capital Group.