PROTECTING THE COUNTRY'S FIBER INDUSTRY

SYED FAZL-E-HAIDER
Aug 18 - 24, 2008

The National Tariff Commission (NTC) of Pakistan is currently carrying out an anti-dumping duty investigation against Chinese exporters involved in selling goods below their cost causing injury to the local industry. The case was filed by domestic producers of polyester staple fibre (PSF) including Dewan Salman Fibre Limited, Ibrahim Fibre Limited and ICI Pakistan against different Chinese exporters, who are allegedly exporting the PSF to Pakistan at dumped prices from China. This is the second case against Chinese exporters, as a final anti-dumping duty had been slapped on Chinese tiles last March.

The NTC will make a preliminary determination after due legal process prescribed in the Ordinance and Anti-Dumping Duties Rules 2001. It will send questionnaires to exporters, foreign producers and importers of the investigated product, asking them to provide information within 37 days. If an affirmative preliminary determination of dumping and injury is made, a provisional antidumping dumping duty may be applied for a period of four months.

Pakistan fiber industry is already running below installed capacity. The surging imports from China have further weakened the industry. Last May, the domestic PSF industry had prepared an anti dumping case against China when around 8,000 tons PSF were imported from China into Pakistan. The NTC had earlier conducted an antidumping investigation of dumped imports of PSF from Indonesia, Korea and Thailand, and antidumping duties were imposed on dumped imports of PSF from theses countries, ranging from zero to 10.26 per cent. Compared with provisional duties decided in February last year, the NTC had also raised most of additional tariffs in its final determination.

PSF is a strategically critical raw material equivalent to 3.9 million bales of cotton. As per last year's statistics, Pakistan consumes 16% PSF as a percentage of total fibre consumption at par with the world average of 17% due to local availability of PSF at highly competitive prices. The textile mills are the major importers and consumers of the imported PSF in the country. All Pakistan Textile Mills Association (APTMA) has been taking the anti-dumping investigation against their interests. Last year, the APTMA had decided to become a party to contest the allegation of dumping of PSF in the country when the NTC issued a notice of initiation of anti-dumping investigation against alleged dumping of the PSF from Indonesia, Korea and Thailand. APTMA had decided to hire a legal expert to contest the dumping allegations and to prove that the PSF was not being dumped into the country. Textile Associations have been suggesting to the NTC that no provisional anti-dumping duty should be imposed on import of polyester staple fibre (PSF). They have even asked NTC for abolition of provisional anti-dumping duty, which prevents Pakistani textile exporters to book some fibre from abroad and the local manufacturers of PSF always find a chance to exploit the situation.

After the imposition of anti-dumping duties on shipments from other Asian suppliers last year, the PSF imports witnessed a surge from China. The local spinners booked large quantities of PSF from China at US$1.20 per kilo to US$1.23 per kilo, or a full cost of Rs. 82 to 84 after accounting for all import expenses. Last February, PSF producers in Pakistan reduced their prices by Rs. 2 per kg to Rs. 85 per kg. The PSF import from China had become very attractive after anti-dumping duties were imposed on PSF imports from Indonesia, Korea, and Thailand for a period of four months, effective from February 2007.

Last year, the former government of Prime Minister Shaukat Aziz had allowed duty-free import of polyester under the Duty and Tax Remission for Export (DTRE) scheme. In 2005, Pakistan had reduced import tariff on PSF from 20% to 6.5% on the request of APTMA. The step was taken to improve the textile sector's performance. Ironically, the textile sector's has been showing a decline in growth rates since then. The country has been taking measures to boost the exports of textile goods by giving R&D support and freight subsidy, but these steps have so far ended in smoke. Any further reduction in import tariff on PSF, according to some analyst, will destroy the local PSF industry, which has been struggling to survive even at 6.5% import tariff.

On the other hand, the local exporters of blended polyester-cotton (PC) yarn and fabrics contend that the 6.5% import duty on PSF has rendered their products uncompetitive on the world markets and demand that import of PSF should be allowed under the DTRE scheme. The exports of blended value-added textile goods have witnessed a decline due to the high cost of PSF, which had been removed in the last budget from DTRE scheme. The exporters of blended PC yarn and fabrics import PSF to re-export it after making value-addition and earn foreign exchange for the country. The imported PSF also includes PSF black dope dyed; optical bright and anti-bacterial type or flame retarded fibers. These specialty fibers are not produced locally. The local manufacturers of blended products import 1,500 tons to 2,000 tons of PSF monthly, which is negligible if compared with local production of around 50,000 tons a month, according to the Pakistan Cloth Merchants' Association (PCMA).

In the budget for the current fiscal year 2008-09, the reduction in the customs duty on the import of PSF from 6.5 % to 4.5 % has given a state of deep shock to the local industry. The reduction in customs duty will not offer any benefit to the textile exporters, who already have the option of importing PSF duty free under the DTRE scheme, according to local PSF Manufacturers Group (PSFMG). The destruction of local PSF industry will close down the local spinners, who cannot afford to import PSF. It would also increase unemployment and reduce the country's manufacturing base. The industry has however been discouraged in the budget for current fiscal year. The local analysts believe that the industry will shut down if import tariff on PSF is not restored to 6.5%.

The PSF is an import-substitution industry, which saves $ 250 million of foreign exchange. For local producers of PSF, the tariff protection is direly needed to compensate the incremental cost of doing business. The anti-dumping duty investigation in case of China was initiated on July 29. The NTC, which has so far imposed antidumping duties in 19 cases, cannot make a preliminary determination sooner than 60 days from the date of initiation of investigation.