India has recently faced disputes at the World Trade Organization (WTO) regarding its tariff treatment on certain goods in the Information and Communications Technology (ICT) sector. The European Union (EU), Japan, and Chinese Taipei have alleged that India’s imposed duties on specific ICT products violate the provisions of the General Agreement on Tariffs and Trade 1994 (GATT 1994). This article explores the details of the dispute and its potential impact on India’s ICT sector.
Allegations of Excessive Duties on ICT Products
The complainantcountries (EU, Japan, and Chinese Taipei) have levelled allegations that India has applied duties of up to 20% on imports of certain ICT products. This rate exceeds India’s bound rate of 0% as outlined in its Schedule of Concessions, which is based on the HS 2007 tariff lines. The contested products include mobile phones (including components and accessories), line telephone handsets, base stations, static converters, electric conductors and cables.
Brazil, Canada, China, Indonesia, Korea, Norway, Pakistan, Russian Federation, Singapore, Thailand, Turkey, Ukraine and the United States have also joined as third parties in these disputes.
India’s Defense and the Information Technology Agreement -1 (ITA-1)
India has defended its measures, arguing that the duties on the aforementioned products are legally valid since these products do not fall under the scope of the Information Technology Agreement -1 (ITA-1), which India is a signatory to. As a result, India has amended its Schedule of Concessions submitted to the WTO in accordance with its commitments under ITA-1.
WTO member countries must update and transpose all tariff codes and descriptions under their Schedule of Concessions when new HS nomenclatures are introduced, including those related to tariff quotas and export subsidies. The World Customs Organization (WCO) updates HS nomenclatures every five to six years. Due to a transposition error during the HS 2007 process, India inadvertently certified the contested products under its Scope of Concessions, despite not being obliged to do so as a signatory to ITA-1. To rectify this, India has invoked the 1980’s procedure for modifying and rectifying its Schedule of Concessions.
WTO Panel’s Final Report and Recommendations
The WTO Panel has overruled India’s arguments concerning ITA-1 in its final report, issued to all WTO members on April 17, 2023. The Panel has recommended that India should bring the disputed measures in line with its GATT 1994 obligations.
In response, India is taking the necessary steps and exploring options available in light of its WTO rights and obligations. It is anticipated that the Panel’s report will not have an immediate impact on India’s ICT products.
Implications for India’s ICT Sector
In 2022, the EU’s share of total imports of the contested ICT products into India was estimated at 3.03% (USD 550 million), while Japan’s and Chinese Taipei’s shares were at 0.33% (USD 24 million) and 2.86% (USD 235 million), respectively. Furthermore, since February 2022, India has reduced its duty rates to 0% for two of the contested products, namely headphones/earphones and electric converters.
In conclusion, while the WTO Panel’s report may not have an immediate impact on India’s ICT products, it has shed light on the need for transparency and adherence to international agreements. As India takes necessary steps to align its practices with its WTO rights and obligations, it remains crucial for the country to maintain a balance between protecting domestic industries and fostering healthy international trade relations.
Ref: MoC&I Update dated 25/04/2023