India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

<strong>India</strong> also reportedly raises its applied tariff rates on products in isolated instances to
increase market prices. The <strong>India</strong>n government raised tariff rates on at least 30
agricultural products between 2002 <strong>and</strong> 2008. 37 In some cases tariffs were raised to
protect growing industries. For example, the tariff rate on cut flowers was increased from
30 percent to 60 percent in the FY 2005/06 budget, reportedly to protect an infant
industry with exp<strong>and</strong>ing employment <strong>and</strong> export potential. 38 Other examples <strong>of</strong> tariff-rate
increases during 2002–08 involve natural honey, margarine, garlic, c<strong>of</strong>fee, cigars, <strong>and</strong>
pepper.
Tariff Adjustment Process
Not only does the <strong>India</strong>n government adjust tariff rates frequently, but the rates are
adjusted under two different methods, which adds complexity <strong>and</strong> confusion to the tariff
system. 39 The first method involves changes made annually through the budgetary
process, under which tariff revenues still represent a significant source <strong>of</strong> revenue for the
<strong>India</strong>n government. During February <strong>of</strong> each year, the Minister <strong>of</strong> Finance presents the
government’s budget to the <strong>India</strong>n Parliament for the new fiscal year, which begins
April 1. 40 The budget is enacted after parliamentary review <strong>and</strong> approval. The proposed
budget, which is released to the public, may propose changes to any number <strong>of</strong> applied
tariff rates. The budget approved for FY 2008/09, for example, adjusted tariff rates on
four agricultural products: tariffs on two were reduced (unworked corals <strong>and</strong> feed
additives), <strong>and</strong> tariffs on two were increased (cigars <strong>and</strong> cigarillos). 41
The second <strong>and</strong> more common method is for tariffs to be changed on an ad hoc basis by
the <strong>India</strong>n Ministry <strong>of</strong> Finance’s Central Board <strong>of</strong> Excise <strong>and</strong> Customs in notifications
published in the Gazette <strong>of</strong> <strong>India</strong>, the national government’s <strong>of</strong>ficial publication. During
2008, the <strong>India</strong>n government issued 138 tariff-rate amendment notifications. 42
Because tariff-rate adjustments can be made frequently <strong>and</strong> through more than one
government process, <strong>and</strong> because they may be effective for either a set period <strong>of</strong> time or
an indefinite period, exporters to the <strong>India</strong>n market generally describe the process as
lacking transparency <strong>and</strong> certainty. 43 Other complications compound the difficulties. For
example, tariff-rate changes in many notifications are referenced by serial numbers
established <strong>and</strong> designated to goods in previous notifications, rather than providing
37 WTO, <strong>India</strong> Trade Policy Review, July 24, 2007, 32 (documenting 27 tariff increases); Government <strong>of</strong>
<strong>India</strong>, Ministry <strong>of</strong> Finance, Union Budget 2002–2008, 2008.
38 Acharya, Keya, “Thorns in <strong>India</strong>’s Cut-Rose Industry,” Asia Times Online, December 6, 2007. In
addition to the duty increase, the government has supported commercial cultivation through tax holidays <strong>and</strong>
subsidies for cold storage facilities, greenhouse construction, improved packaging material, <strong>and</strong>
transportation. Saffron, “<strong>India</strong>n Flowers! Backward Flip,” Issue 1, October 8, 2008.
39 Industry representative, telephone interview by Commission staff, May 20, 2009.
40 The <strong>India</strong>n parliament <strong>of</strong>ten does not pass the budget until May. As a result <strong>of</strong> the gap between the
when the fiscal year begins <strong>and</strong> when budget passes, the government typically seeks an interim budget that
authorizes expenditures until the budget has been approved.
41 Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance, Union Budget 2008–2009, 2008, 1.
42 The 138 notifications include changes to both agricultural <strong>and</strong> nonagricultural tariffs. A notification
can amend the duties on one or many tariff lines. Notifications also amend previous changes <strong>and</strong> announce
tariff changes due to rulings in antidumping cases. Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance, <strong>India</strong>n Central
Board <strong>of</strong> Excise <strong>and</strong> Customs, Tariff Notifications <strong>of</strong> Customs in Year 2008.
43 Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 28, 2009; industry
representative, telephone interview by Commission staff, May 20, 2009; <strong>and</strong> industry representative,
telephone interview by Commission staff, June 18, 2009.
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