Safeguard duties

Why in news?

• The Philippines is imposing temporary duties on imported passenger cars and light commercial vehicles to protect its tiny carmaking industry hit hard by the pandemic.

What are Safeguard duties?

• Safeguard duties are the duties payable on import of goods which are already being manufactured in India, but the cost of their domestic counterparts is higher than the import price.
• For example, solar cells are already being manufactured in India, however, their cost is more than that of imports from China and Malaysia.
• Hence, safeguard duties are imposed on the import of solar cells from China and Malaysia.

Objective:

• Safeguard duties ensure that imports in excessive quantities do not cause injury to the domestic industry.
• They provide domestic producers a period of grace to become more competitive with respect to imports.

How are Safeguard duties applied?

• Safeguard duties are governed by the Agreement of Safeguards of the WTO and India’s Customs Tariff Act, 1975.
• The Central Government is empowered to impose safeguard duties on imports of a particular article through a notification.
• This can be done once it is satisfied that the import of a particular article into India in increased quantities can cause serious injury to domestic industry.
• These safeguard duties imposed shall cease to have effect after four years, unless it is extended.
• They cannot be applied against a product originating in a developing country whose share of imports of that product does not exceed 3 per cent.

Other Protectionist duties:

• Countervailing Duties:
  • Tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country.
  • It is generally equal to the excise duty paid by manufacturers when the same product is produced in the home country.
• Anti-dumping duty:
  • Tariffs imposed by domestic government on foreign imports that it believes are priced below fair market value.
  • Dumping is a process where a company exports a product at a price lower than the price it normally charges on its own home market.

Prelims Question

Consider the following types of Tariffs:
1.Safeguard Duties
2.Countervailing Duties
3.Anti-dumping duties
Which among the above duties can be imposed without violating WTO agreements related to Trade?
(a)1 and 2 only
(b)2 and 3 only
(c)3 only
(d)1,2 and 3

Answer to prelims question