India : Multi-Crore Silk-Import Scam Apprenhended

Large-scale evasion of anti-dumping duty is being apprehended in the case of Chinese silk yarn imported by traders in India for sale to weavers. Official sources told Economic Times that the bulk of imports was being declared as 3A and above and on which anti-dumping duty was not applicable.

These sources added, however, that the bulk of these imports was actually of the inferior 2A and below grades on which the anti-dumping duty had been levied by the Director General Foreign Trade (DGFT, anti-dumping) with effect from early January. Grading indicates that the quality of the yarn 2A and lower brands are inferior varieties.

The extent of evasion can be seen by the fact that 95% of the silk imported from China through the Chennai port has been declared as 3A and above, on which anti-dumping duty is not applicable. However, official sources state that nearly all of it is actually 2A and below grades and that anti-dumping is not being levied at all.

In January alone (as per Chennai customs data sheet), India imported 1.7 lakh kg of silk yarn at a cost of Rs 13.27 crore at the OGL rate of around $17 a kg. However, if all of it is 2A and below grades as officially suspected, the evasion by way of anti-dumping duty at the rate of $33.19 per kg -- or a differential of $16 over the OGL rate -- works out to $2.7 million (Rs 9.4 crore) just for the month of January alone.

Extrapolated over a period of 12 months, this could work out to an annual evasion of anti-dumping duty to the tune of almost Rs 113 crore just for imports of China silk through Chennai! Around 40% of the silk yarn imported by Indian traders is sourced through Chennai port, sources indicated. Before the imposition of the anti-dumping duty and for the corresponding month of January 2002, traders imported around 600 tonnes of 2A and below grade!

"Clearly, this indicates the scale of mis-declaration and evasion," sources said. What is even more shocking is that some of the key customs check points (notably in Mumbai, Kolkata and New Delhi) don't even have data on the quantum of such imports coming into the country after the duty became effective.

The Central Silk Board (CSB) had, in fact, sent a note to the various customs check-points in mid-January warning them of what could be in the offing!

It was only as recently as May 7 that the Customs Department issued a circular highlighting the possibility of mis-declaration of grades. In its circular, the department suggested that a test report could be sought from the importer. The circular also added that "to ensure that clearance is not delayed, the consignments may be cleared without waiting for the test report after taking suitable bank guarantees from importers".

Industry sources, however, deny any mis-declaration.