29 July 2010 07:18 [Source: ICIS news]
By Malini Hariharan and John Richardson
MUMBAI (ICIS)--Saudi polypropylene (PP) producers could potentially be hit by anti-dumping (ADD) and other duties from more countries if an Indian ruling on an ADD petition sets a legal precedent, a senior trade lawyer said on Thursday.
The Indian authorities have ruled – in response to the petition lodged by local PP producers – that the Saudi formula for pricing propane, feedstock for polypropylene, provides an ‘unfair advantage’ over other international producers.
The ruling came in a disclosure statement released last week as part of ?xml:namespace>
This is the first time that the Saudi price formula for propane and butane, which is linked to naphtha and gives local buyers a discount of around 30% on the Japan CFR (cost and freight) naphtha price, has been termed as unfair by another country.
“We have seen cases before where countries have made claims against non-market economy countries over government control of raw-material pricing. But we have never before seen a case where one market economy, in this case India, has made this allegation against another – Saudi Arabia,” said Ed Sim, partner in the Singapore branch of international law firm, Appleton Luff.
He pointed out that Saudi exporters had defended their case on the grounds that the mechanism for propane and butane pricing was allowed as part of the country’s accession agreement to the WTO (World Trade Organization).
“But the Indian counter-claim is that when this has been put into practice in the case of PP it constitutes dumping – and this is, of course, not allowed under the WTO rules,” he added.
To ensure a fair comparison, the Indian commerce ministry has adjusted the Saudi propane prices upwards to international levels to arrive at the cost of production of PP and determined that dumping had taken place, said a source close to an Indian PP producer.
Sources close to the affected Saudi PP producers, which include Advanced Polypropylene Co, Saudi Polyolefins Co, SABIC and its affiliates said that the companies were lobbying the Saudi government to raise the issue at a diplomatic level with India, and if that failed to go to the WTO.
“The Indian government decision could set a precedent and open the door for other countries to pursue trade action against
The Indians have gone after Saudi Arabia on anti-dumping instead of countervailing (anti-subsidy) duties as the latter would have opened the door for counter-claims against Indian subsidies in other industries, he pointed out.
If the WTO rules in favour of the Indian case, it would set the scene for action by other countries for both anti-dumping and countervailing duties, Kim said.
“This Indian decision is clearly a very big deal and other countries will watch the eventual outcome very closely,” he added.
The Indian commerce ministry also said in its disclosure statement that while Saudi PP producers had contended that feedstock propane was priced lower due to inherent benefits such as cost savings in infrastructure, marketing and commercial advantage associated with long-term contracts, no positive evidence was provided.
A source close to one Saudi producer said that the company was reluctant to disclose full details. “They are worried and do not want to get into the cost issue,” he added.
The Indian commerce ministry is expected to announce final anti-dumping duties after reviewing responses by the affected producers, which are due to be submitted by 2 August.
This marks the final stage of Indian investigations into dumping of PP by
($1 = €0.77)
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