WORLD TRADE
ORGANIZATIONG/SG/N/6/IND/11
20 July 2000
(00-2998)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(A) OF THE
AGREEMENT ON SAFEGUARDS ON INITIATION OF
AN INVESTIGATION AND THE REASONS FOR IT
INDIA
The following communication, dated 19 July 2000, has been received from the Permanent
Mission of India.
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Attached herewith is a copy of the Notice of Initiation of a Safeguard Investigation
(No. SG/INV/2/2000 dated 17 July 2000) by the Director General (Safeguards) concerning imports of
Methylene Chloride into India.G/SG/N/6/IND/11
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OFFICE OF THE DIRECTOR GENERAL (SAFEGUARDS)
I.P. BHAWAN, 'D' BLOCK
NEW DELHI
NOTICE OF INITIATION OF A SAFEGUARD INVESTIGATION
(Under Rule 6 of the Customs Tariff (Identification and Assessment
of Safeguard Duty) Rules, 1997)
F. No. SG/INV/2/2000           Dated:  17 July 2000
Sub: Initiation of Safeguard Investigation Concerning Imports of Methylene Chloride
1. An application has been filed before me under Rule 5 of the Customs Tariff (Identification
and Assessment of Safeguard Duty) Rules, 1997 by Gujarat Alkalies and Chemicals Ltd., Gujarat
(GACL) and Chemplast Sanmar Ltd., Chennai (CSL) for imposition of safeguard duty on imports of
Methylene Chloride into India to protect the domestic producers of Methylene Chloride and
Chloroform against serious injury caused by the increased imports of Methylene Chloride into India.
2. Domestic industry
The application has been filed by GACL and CSL on behalf of the domestic producers of
Methylene Chloride for imposition of safeguard duty on imports of Methylene Chloride.  There are
three domestic producers including SRF Ltd., New Delhi of Methylene Chloride accounting for a total
production capacity of 27,210 MT of Methylene Chloride in 1999-2000, out of which the applicants
account for 22,410 MT, i.e. 82 per cent.  The applicant accounted for a total production of 22,872 MTin 1999-2000.  The application is, therefore, considered to have been made on behalf of the domestic
industry.
3. Product involved
The applicants have alleged serious injury caused to the domestic producers by the increased
imports of Methylene Chloride.  Methylene Chloride is a basic organic chemical with chemicalformula CH
2CI2 and classified under 2903.12 of the Customs Tariff Act, 1975 and under 29031200 of
the Indian Trade Classification (ITC), based on the Harmonized Commodity Description.
There are basically two routes for manufacturing Methylene Chloride using either Methane or
Methanol as the basic raw material.  The Methane route involves thermal chlorination of Methane.The reaction between Chlorine and Methane in the presence of light or a catalyst is the most important
process.  Depending upon the adjustment of the process parameters, the predominant yield is Methyl
Chloride which is recycled for chlorination for obtaining Methylene Chloride.  In the Methanol route,
Methyl Chloride is produced in the first stage of the reaction by hydrocholorination of Methanol with
Hydrogen Chloride.  The second stage of the process involves either thermal chlorination or photo-chlorination of Methyl Chloride to produce a mixture of four products i.e. un-reacted Methyl
Chloride, Methylene Chloride, Chloroform and Carbon Tetrachloride.  The above products are
subsequently separated and purified in the downstream towers.  GACL adopts the Methane route
whereas CSL adopts the Methanol route for the manufacture of Methylene Chloride.  Methylene
Chloride is used in photo films, bulk drugs and pharmaceutical industries and for the manufacture offoam, resin casting, fumigants and agrochemicals.G/SG/N/6/IND/11
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4. Increased imports
Methylene Chloride is imported into India from  Belgium;  Brazil;  Chinese Taipei;  France;
Germany;  Hong Kong, China;  Hungary;  Israel;  Italy;  Japan;  the Netherlands;  Russia;  Spain;
Switzerland;  the United Kingdom and the United Stat es.  The imports have shown an increasing trend
in absolute terms as well as compared to domestic production.  The imports and domestic production
of Methylene Chloride during 1995-96 to 1999-2000 have been as under:
Year Capacity Domestic
productionImports Imports as % of
domestic production
1995-96 14,910 16,340 10,776 65.95
1996-97 14,910 15,588 12,302 78.92
1997-98 22,410 17,491   7,390 42.25
1998-99 22,410 22,626   9,269 40.96
1999-2000 22,410 22,872 13,500 59.02
5. Injury
The increased imports of Methylene Chloride have caused/threatened to cause serious injury
to the domestic producers of Methylene Chloride as indicated by the following factors:
(i) International prices of Methylene Chloride have been steadily falling.  The landed
cost of Methylene Chloride during the last two years has fallen by almost 46 per cent.To keep up with this drastic fall in the in ternational prices and to retain their market
share, the domestic producers had to reduce their prices of Methylene Chloride;  as a
sequel their net price realizations have declined considerably and resulted in loss to
the domestic producers.
(ii) The relative market share of the domestic producers which was about 70 per cent in
1997-98 declined to 60 per cent in 1999-2000 as will be evident from the table below:
Year
(1)Domestic sales
(including captive
consumption)
(2)Total domestic
consumption including
imports
(3)Share of domestic sales
to domestic
consumption
(2/3 x 100%)
1997-98 16,633 24,023 69.24
1998-99 20,515 29,784 68.88
1999-2000 20,982 34,482 60.85
6. The domestic producers have requested for imposition of safeguard duty on imports ofMethylene Chloride.  They have also requested for an immediate imposition of provisional safeguard
duty.
7. The application has been examined and it appears that prima facie  increased imports of
Methylene Chloride have threatened to cause serious  injury to the domestic producers of Methylene
Chloride and accordingly it has been decided to initiate an investigation through this notice.G/SG/N/6/IND/11
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8. All interested parties may make th eir views known by 28 August 2000 to:
The Director General (Safeguards)
5th Floor, Drum Shape Building
I.P. Bhawan, I.P. EstateNew Delhi – 110 002
India
9. All known interested parties are also being addressed separately.10. Any other party to the investigation who wishes to be considered as an interested party may
submit its representation so as to reach the Director General (Safeguards) within 21 days from thedate of this notice.
(Signed)
(R.K. Gupta)
Director General (Safeguards)
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