Engineering goods exports from India to the European Union (EU) is likely to be impacted in the first two months of the new year as 90 per cent of the import quota for steel products fixed by the bloc has got exhausted and a safeguard duty of 25 per cent is set to be imposed on imports beyond the quota.

There is also uncertainty amongst Indian exporters about what is in store for them beyond February 2019 when the 200-day period for the safeguard provisions comes to an end and the EU takes a decision on whether it would be extended, according to R P Sehgal, Chairman, EEPC India.

“India has been taking up the matter bilaterally with the EU and has now also filed a complaint at the World Trade Organisation against the move. But there is no clarity on whether the EU will do away with the safeguard provision or extend it. Our order bookings are already down,” Sehgal said. The EU is one of the biggest buyers of engineering products from India accounting for almost one-fifth of total exports. Last fiscal India’s export of engineering goods to the bloc was $14 billion.

Safeguard duties imposition

The European Commission (EC) imposed provisional safeguard duties on 23 steel products, including 14 engineering goods exported by India, in July 2018, valid for 200 days. The safeguard duty of 25 per cent is to kick-in if the import level for a product crosses the level of the average annual imports recorded between calendar year 2015 and calendar year 2017.

The safeguard duties were imposed by the EU on India, China and six other countries to counter the penal import duties on steel imposed by the US on a handful of countries including the EU. The EU fears that the affected countries that are not able to export to the US could dump their goods in the EU by routing it through India.

“Although the quota amount has not been breached, importers from EU have started taking deposits from Indian exporters as 90 per cent of quotas has been utilised and the safeguard duties will kick in any time. Indian exporters have already started holding on to their export consignments hoping that after February they will be able to again export without paying the safeguard duty,” Sehgal explained.

However, there is no guarantee that the EU will remove the safeguard duties once the 200-day period is over. “Officials from the Steel Ministry and Commerce Ministry are in talks with EU officials trying to convince them that it was not feasible to dump goods into the bloc through India. Also, India wants that for calculating the quota amount, last year’s exports should be the base and not the last three years’ average. That will increase the quota amount considerable as India’s exports of engineering goods to the EU was the highest last year,” the EEPC chief added.

Engineering goods is one of the largest export items from India. In 2017-18, India exported goods worth $303 billion of which engineering goods accounted for $76 billion.

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