India’s quality control order is trade barrier, federation says

Secondary steel producers in India have opposed the quality control order issued by the country’s steel ministry on March 15, 2012, terming it a technical barrier to trade.

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The Confederation of Indian Steel Producers Assn (Cispa) wrote to the ministry asked for the repeal of the Steel and Steel Products (Quality Control) Order, which was to be implemented from September 2012.

Cispa represents secondary producers of long and flat products who account for around 50% of total indigenous production of finished steel, including 70% of bar rods and structurals, and 45% of cold rolled, galvanized, colour coated and electrical sheet.

Cispa’s letter said that the order, if implemented, will lead to enormous national wastage through compulsory scrapping non-BIS (Bureau of Indian Standards) accredited steel – or commercial-grade steel – which has been used for numerous applications over the past several decades in India and other countries.

Barrier to imports
“The implementation of the Steel and Steel Products (Quality Control) Order will be a big barrier to imports. What it implies is that every foreign company will have to register with BIS and pay 1% of the cost of imports towards inspection,” SC Mathur, general secretary of the Cold Rolled Steel Manufacturers Assn (Corsma), told Metal Bulletin.

Corsma is one of the members of Cispa, which also include the Steel Re-rolling Mills Assn, the Iron & Steel Scrap Assn of India and the All India Steel Rerollers Assn.

Most cold rollers import hot rolled coil (HRC), rolling it into cold rolled, galvanized and colour-coated products.

The order, dated March 15, stipulates “No person shall by himself or through any other person on his behalf manufacture or store for sale or distribute any steel products specified in the schedule which do not confirm to the specified standards and does not bear the standard mark of [the] BIS.”

It continues: “Similar conditions will be applicable to all imports included in the schedule of the order and foreign producers exporting to India will have to register with BIS for inspection of products by BIS-appointed inspectors.”

Breach of WTO rules
An official from the world’s largest steel producer, ArcelorMittal, told Metal Bulletin that the order was not in conformity with the rules of the World Trade Organisation (WTO), and that the European Commission has opposed similar trade barriers.

The European Commission’s enterprise and industry directorate general in Brussels had earlier written to India’s ministry of commerce saying that the steel ministry’s order was a technical barrier to trade (TBT) and is in breach of article 5.1.2 of TBT included in the WTO rules.

The ArcelorMittal official pointed out that every product which is exported is given a mill test certificate which details all its properties and technical specifications.

“What is the point in the material being inspected again […] when all the details have already been furnished? If it is not as per specification, the customer will not agree to pay,” he said.

No commercial-grade steel
The order would also affect importers of commercial-grade flat steel products, particularly HRC and plate, besides all long products, as the order stipulates that commercial-grade steel will be scrapped.

More than 50% of the HRC and plate imported into India is commercial grade.

Cispa’s letter to the ministry also pointed out that the quality control order is designed to block competition from secondary producers and importers.

“It is apparent the decision of the ministry of steel was taken on misrepresentation of the facts by vested interests,” Cispa said.

It added: “The proposal for quality control was not initiated by consumers or by BIS, but by some major producers pursuant to repeal of Director General of Foreign Trade Notification No44 stipulating mandatory registration of foreign suppliers by BIS, on the grounds that such conditions could not be imposed on foreign suppliers since, as per the WTO regulations, these conditions were not applicable to Indian producers.”

Considered and rejected
A first draft of the order was considered and rejected by the sector co-ordination committee of the ministry of steel, and the BIS held on September 14, 2004, that it was unnecessary, involved enormous wastage of national resources, and implementation posed insurmountable problems and would breed corruption.

The proposal was rejected in several subsequent meetings but the ministry of steel persisted and a first order was issued in November 2007.

Cispa’s letter said that the second order issued by the ministry set a deadline of September 12, 2012, without considering its deeply adverse effect on the economy.

Apart from the enormous national loss involved in scrapping usable steel, Cispa warned, the order would involve loss of production of around 10 million tonnes, or 30% of total output, from secondary steel producers, resulting in shortages of material and price hikes.

It would also create blockages to essential imports, and foster the creation of cartels and monopolistic pricing.