Nepal, China steel may face duty evasion probe

The Directorate of Revenue Intelligence could initiate a probe into steel imports from Nepal and China, a move aimed at protecting the domestic industry from cheap, substandard imports, said people familiar with the development.

It comes after Nepal emerged as one of the top three steel exporters to India despite the absence of significant manufacturing facilities, they said.

"In some instances, a Nepal-based company was exporting steel many times over its nameplate capacity," an official told ET on condition of anonymity.


This triggered apprehensions of Chinese steel being routed through Nepal, as alleged by the Indian industry.

Nepal has unilateral duty-free access to the Indian market, allowing its exporters to send steel products to India without paying any duty. On the contrary, direct exports from China attract at least 12% safeguard duty.

Nepal's share in India's finished steel imports during the first three months of this financial year averaged 15.93%, making the neighbouring country the third largest steel exporter to India during this period.

In another instance, China's Shangyang Steel wrote to India's Directorate General of Foreign Trade alleging that other Chinese companies were falsifying documents affirming quality compliance. Shangyang Steel holds a certificate issued by the Bureau of Indian Standards (BIS).

"The company alleged that other Chinese companies were misrepresenting the BIS certificate issued to Shangyang Steel and lying while exporting to India," the official said.

Last month, the steel ministry issued a clarification saying that not only are finished and semi-finished steel imports required to adhere to quality control orders (QCOs) but also the raw material used as input needs to comply with the quality regime.

Officials also found that some Indian importers with a BIS certificate were importing substandard steel products from China or Nepal and doing just cosmetic value addition to them.

"The QCO norms require importers not only to comply with the coating part for which it has certification, but also to ensure that the base material also sticks to quality norms," the official said.

A BIS certificate is enforced through QCO, which the government issues.

The order mainly affects the traders who act as middlemen in importing steel without adding any value to the steel. "MSMEs (micro, small and medium enterprises) are not affected by this order; it hurts the middle parties, and they are the ones who are creating a furore over this," the official added.