What Is Safeguard Duty and Should You Follow It?

The basic idea behind safeguard duty is that whenacountryoragroupofcountries,eitherindividuallyoractingtogether,formalargeenoughshareof the world market in a particular product, then it is possible for them to manipulate the supply of that product and drive uptheprice.Thisisaneffect known as oligopoly power and it can only be countered by governments who canpreventthismanipulationbythreateningtowithdrawproductsfrom themarket. Safeguardduty,alsoknownassafeguardmeasures,isanexampleofsuchprotectionistmeasures.

It is possible to protect domestic industriesfromunfaircompetitionbychargingadditionalimportdutiesorraisingexistingduties.Safeguardmeasures are therefore used as temporary measures so thatimportdutiescanbeincreasediftherearesurgesinthenumberofimportsenteringthecountry Once imports subside, the duties can thenbereducedandremoved.ThiswasthepurposeofsuchameasureinIndia,whichwastakenaftersteelimportshad increased.

The increased demand for steel haspromptedmanycountriestoincreaseexportssothattheycouldbenefitfromthisproduct’shighdemandlevel.Asa result, India had to impose safeguard measures on imported steel as domestic steel players were facing difficulties competing with cheaper imported steelproducts.

WhatexactlyareSafeguardDutyLaws?

Insummary,SafeguardDutyisaspecialimportdutythatisimposedwhenthereisasuddenincreaseinimportsofcertaingoodsintoIndia.

Safeguard Duties are custom duties levied on imported goodsthatenterIndiawhenthereisasuddensurgeintheimportofaparticularitem.Thismay be due to dumping, subsidies being offered by the country of origin, or any othertypeofunfairtradepractice.TheaimofSafeguardDutyistoprotect domesticindustryfromcheaperimports.

TheimpositionofSafeguardDutyisgovernedbytheprovisionsoftheCustomsTariffAct1975.

Under the Customs Tariff Act, whenever imports surge, Customs authorities can initiateaninvestigationtoascertainiftherehasbeendumpingand/or subsidizing of products being imported into India. If it is foundthatimportshaveincreaseddisproportionatelyascomparedtoexports,thenSafeguard Dutycanbeimposedonsuchimports.

The imposition of Safeguard Duty will result in the prices of such goods being raised in theIndianmarket.Thiswillmakethemmoreexpensivethan their domestic counterparts and the Indian manufacturers will then be able to compete on equal grounds with their foreign counterparts and remain profitabledespitethesurgeinimports.

IsSafeguardDutycompulsorytofollow?

Relax, if you have paid Safeguard Duty buthavenotsubmittedthesafeguardbondthenthereisnoneedtopanic.Submitthesafeguardbondbyfilling out the safeguard bond application form and making the payment of safeguard duty. But note that at the time of application if the safeguard duty has beenpaidthensubmitthefull-filledformofsafeguarddutypayment.