China?s truck tyre imports share up 91% through tariff loophole

Chinese tyre makers have jacked up their imports to India, making good use of the tariff loophole offered by some regional trade pacts.

Chinese truck tyre imports are up from 750,074 tyres (in 2006-2007) to 1,187,939 tyres (in 2007-2008) at one go, proving that India’s great tariff wall for imports is bowing to the dragon rampage.

The basic rate of customs duty on tyres is 10%. But some FTAs offer lower tariffs for preferred partners.

For instance, under the Asia Pacific Trade Agreement (former Bangkok Agreement), China and South Korea can import tyres to India at a customs duty rate of 8.6%.

A close look at the DGCI&S import data shows that Chinese imports of bus and truck tyres constitute as high as 91% of the total bus and truck tyre imports to India. In 2002-2003, the ratio was only 24%. The robust progression of Chinese imports seems to have started from 2003-2004. In 2006-2007, the proportion came to 86% before crowding out the tyre imports from any other country to just 9% in the last financial year.

“Since the tyre demand in China is taking a plateau-like trend after the Olympics demand, the pressure to tap the Indian market will be higher on China in the coming months,” Lu Ruigang, a Chinese tyre dealer operating in Vietnam told FE. At the same time, the country’s tyre manufacturing has not slowed down.

For the buyer, Chinese tyres offer a 10-40% price advantage. The quality, however, is not all that assured. For instance, Indian tyre manufacturers quote the recent melee in US, when a New Jersey-based importer recalled 4.5 lakh radial tyres following the disclosure that they did not have a crucial safety feature.

“What is most disturbing is that Indians, who once understood the Chinese market as sub-standard, seem to be changing their minds,” says Rajiv Budhraj, director-general, ATMA (Automative Tyre Manufactures Association.). A worried Indian tyre industry notes that while the overall year-to-year increase in bus and truck tyres import is over 50% in the last year, the corresponding increase in export is only 7%.

In July 2008, ATMA had filed a petition against Chinese imports of radial truck and bus tyres and a case has been initiated. Based on a similar case earlier, the ministry of finance had slapped an anti-dumping duty against import of bias truck and bus tyre imports from China and Thailand in 2007.

?In fact, the FTA loophole is likely to be the rallying point in ATMA’s pre-budget memorandum for the next fiscal. There is no justification to include tyres in India’s preferential or concessional listing under the existing or future trade agreements,? says RP Singhania, chairman, ATMA.

Bumps ahead

•Chinese truck tyre imports are up from 750,074 tyres to 1,187,939 tyres

•Chinese imports of bus and truck tyres constitute as high as 91% of the total bus and truck tyre imports to India

•For the buyer, Chinese tyres offer a 10-40% price advantage

•FTA loophole may be the rallying point in ATMA’s pre-budget memorandum for the next fiscal

•There is no justification to include tyres in India’s preferential or concessional listing under the existing or future trade agreements