DGAD proposes high Anti-dumping Duty on USBs

Directorate General Of Anti-Dumping & Allied Duties (DGAD) has released an investigation report  that puts across a proposal for an Anti-dumping Duty  @$3.12 (Rs 199.01) per piece and @$3.06 (Rs 195.18) per piece irrespective of capacity of USB flash drives manufactured in China and Taiwan respectively. The report will be presented before the Finance Minister and once his approval is taken, it is expected to become a law in a week or two. At current prices of 4GB and 8GB products this duty represents apex 125% to 140% over the FOB or freight on board prices. The anti-dumping investigation was initiated on the basis of data submitted by Moser Baer solely represented as Domestic Industry. The investigating period was 2012. During the investigation period, the domestic industry had 4.9 Mu as published in public reports that represents 5% market segment share and 15% of total capacity. That means, if Moser Baer sold off its entire capacity, it could have catered to only 15% of total demand. Some Key points relating to the entire process -

• DI/Moser Baer doesn’t produce/manufacture all types of USB Flash Drives: Moser Baer can make USB Flash Drives of 512MB, 1GB, 2GB, 4GB, 8GB, 16GB and 32GB. Moser Baer is not manufacturing 64 GB, 128 GB and 256 GB flash drives nor has it claimed anywhere to that effect. Moser Baer doesn’t manufacturer high end products like USB 3.0 Flash Drives.
• Prices in Flash Industry are demand –Supply driven in short term and due to constant technological advancement in the long term. Many companies have developed core IP in this product category and that helps drive competitive advantage. Please note Moser Baer/DI must procure several of core technologies and components to produce highly dynamic USB products. In respect of USB Flash Drive market itself, the technology has advanced so much that prices of USB Flash Drives have plummeted in last couple of years. This is not just a trend in India but around the world too.
• DGAD treated complex supply chain as concern: During the investigation DGAD dismissed each and every Global vendors response as evasive on account of products passing through multiple sub vendors/contract manufacturers. All vendors tried in vain to put forth that such multiple sub-contractors is a part of modern tech industry.

Impact of proposed Anti-Dumping Duties:

1.   Given that Moser Baer has limited capacity to product and the cost of USB FD will increase by 150% or more. This is significant hit to Indian consumers mostly students who use USB drives as a convenient media to share/transfer data. Single Files of large sizes (more than 5GB) cannot be sent by email.
2. A sure setback to PM Modi’s dream of Digital India where the poorest person uses information technology to improve governance and spread education and medical facilities.
3. Growth of Grey Market and Counterfeit products: Industry experience clearly shows that such high level of duties and brand strength of impacted vendors will immediately result in Grey imports and counterfeiting. It is a Net loss to Government on both Custom Duty collection as well as VAT payments while it will increase disputes with leading brands when consumers will experience poor service and fake products
4. Impact to local Distributors/ resellers and retailers : Moser Baer has approx. 5% USB market segment share and that means there will be loss of opportunity, revenue and earnings for more than a dozen Large National Distributors, hundreds of regional distributors and hundreds of thousands of traders, retailers. This vast channel currently thrives due to multiple brands having established a network to supply some 35 Mu per annum.