The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has submitted a formal representation to the Ministry of Steel demanding the immediate exclusion of Chapter 72 steel products from Free Trade Agreements (FTAs) signed with Japan and South Korea, citing severe market distortion caused by low-duty imports.
Overview of Tariff Concessions Under Indo-Japan and Indo-Korea CEPA
India signed Economic Partnership Agreements (CEPA) with South Korea and Japan to expand bilateral commercial ties and encourage trade integration across industrial sectors. Under these trade pacts, tariff concessions were granted on various manufacturing categories, including steel items falling under Chapter 72 of the International Trade Centre (ITC) code. However, domestic steel manufacturers have increasingly reported that these concessional import duties are being utilized by surplus foreign producers to flood the Indian domestic market with low-cost steel exports.
The ASSOCHAM trade association highlighted that global steel demand contractions coupled with massive excess production capacity in both East Asian nations have driven foreign exporters to dump excess production into India. Rather than facilitating mutual economic complementarity, the current trade structure allows foreign steelmakers to resolve their inventory surpluses while severely undercutting Indian steel producers who face higher capital costs, raw material levies, and domestic logistics overheads.
Chapter 72 of the ITC code covers a wide range of essential steel categories, including hot-rolled coils, cold-rolled sheets, alloy steel, stainless steel products, and structural steel items. Under standard trade tariffs, these items carry basic customs duties designed to protect domestic manufacturers from unfair global price shocks. However, under the phased tariff reduction schedules of the CEPA agreements signed between 2009 and 2011, import duties on many of these Chapter 72 items were gradually reduced toward zero or near-zero rates. This progressive tariff reduction created an artificial cost advantage for foreign exporters, allowing them to capture significant market share in India even when domestic production capacity was fully capable of meeting national demand.
Key Submissions by ASSOCHAM Leadership
In a direct communication addressed to the Union Minister of Steel, ASSOCHAM Secretary General D.S. Rawat voiced growing industry anxiety regarding unabated steel inflows. The industry body urged the Central Government to reinstate standard prevailing import duty rates for all exports of steel products originating from Japan and the Republic of Korea under Chapter 72 of the ITC code. Rawat stated that bilateral trade agreements must reflect the genuine economic necessities of both partner nations rather than serving as unilateral outlets for salvaging surplus production from abroad.
Furthermore, ASSOCHAM pointed out that while the existing CEPA trade frameworks extensively address trade concessions for foreign manufactured and engineering goods, they contain no firm commitments regarding capital investment into India's domestic manufacturing or infrastructure sectors. The chamber emphasized that future trade policy must prioritize inbound foreign direct investment into domestic infrastructure and manufacturing capability rather than encouraging the unrestricted import of manufactured commodities.
Indian steel mills operate under significant structural disadvantages compared to East Asian competitors. Indian producers bear heavy freight tariffs, high electricity tariffs, mineral royalty fees, and steep interest rates on capital loans. In contrast, steel manufacturers in Japan and South Korea benefit from lower capital costs, highly automated port infrastructure, and state-supported industrial subsidies. When concessional FTA tariffs are superimposed on these structural disparities, domestic producers find it increasingly difficult to maintain operational viability, leading to reduced capacity utilization and financial distress across domestic manufacturing hubs.
Policy Recommendations for Ongoing FTA Negotiations
In addition to seeking urgent tariff relief regarding the South Korean and Japanese trade agreements, ASSOCHAM recommended a proactive stance for all pending trade negotiations. Specifically, the chamber urged the Ministry of Commerce and Industry to explicitly exclude Chapter 72 steel products from the ensuing Indo-Australia Free Trade Agreement and any other under-discussion trade proposals involving economies with floating surplus steel capacity.
Legal scholars and trade analysts reviewing regulatory frameworks note that statutory compliance and administrative recourse are critical when industry sectors face sudden market shifts. Students reviewing fundamental legal principles in class notes on law of torts will recognize how statutory duties and administrative remedies intersect with trade policy. Similarly, corporate compliance standards examined in financial litigation, such as the financial institution recovery precedent, highlight the necessity of predictable contractual and statutory governance in capital-intensive sectors like steel manufacturing.
Trade policy experts suggest that India should adopt flexible safeguard clauses in all future trade agreements. Safeguard mechanisms allow a signatory nation to temporarily suspend tariff concessions or impose quota restrictions if a sudden surge in imports causes or threatens serious injury to domestic producers. Incorporating clear trigger thresholds based on import volumes and price depression metrics would provide necessary emergency relief without violating broader international trade commitments.
Evaluating Trade Remedies and Economic Impact
The Indian steel sector represents a fundamental pillar of national infrastructure and economic growth. Unchecked concessional imports diminish domestic capacity utilization, discourage fresh capital investment, and jeopardize employment across major industrial belts in Jharkhand, Odisha, Chhattisgarh, and Karnataka. While trade agreements aim to enhance competitive efficiency, trade experts argue that safeguard mechanisms, anti-dumping investigations, and tariff quota adjustments are legitimate economic instruments under World Trade Organization rules when domestic industries face structural harm.
ASSOCHAM has requested the Ministry of Commerce and Industry to review its previous representations submitted on May 5 and August 6 of the preceding year, along with oral submissions presented to senior trade officials. As global economic conditions continue to fluctuate, aligning tariff policies with domestic industrial sustainability remains a top priority for Indian policymakers and trade leaders.
Industry experts emphasize that a strong domestic steel industry is essential for national security, infrastructure expansion, and industrial self-reliance. By taking decisive action to modify trade concessions under Chapter 72, the Ministry of Steel can ensure a level playing field for domestic steelmakers while promoting sustainable economic growth across all manufacturing sectors.