US pressures India on boric acid imports

By Myles McCormick
Published: Thursday, 15 December 2016

A recent trade forum saw US delegates prioritise the issue of India’s protectionism in its boric acid trade. Indian buyers, US producers and US diplomats are pushing Indian authorities to fully abandon the country's current import regime.

The US is ratcheting up pressure on Indian authorities in a bid to eliminate a restrictive import regime on boric acid, which it argues discriminates against foreign producers.

India’s complex import regime on the material, which has been active since 2006, was among key issues discussed at the US-India Trade Policy Forum held in Delhi in late October.

US deputy trade representative, ambassador Robert Holleyman, said that the US had "made it clear to the Indian government that elimination of trade barriers to the importation of boric acid into India is a priority for immediate resolution". 

"Indian business leaders and employers share this view and understand the harmful effects of these barriers on their operations," he added.

US House Majority Leader, Kevin McCarthy, added to the pressure, describing the regime in an October letter to the Indian ambassador, Navtej Singh Sarna, as "arbitrary" and "a barrier to trade".

McCarthy went on to label the restrictions as "contrary to prime minister Modi’s commitments to a global trading system that is transparent, non-discriminatory and rules-based".

Under India’s current system, Indian companies looking to use boric acid produced abroad must undergo a lengthy process of applying for a license, giving the domestic boric acid producing industry an advantage over competition from abroad.

The US has previously raised the issue with the World Trade Organisation (WTO).

Anglo-Australian miner Rio Tinto Plc, which has produced borates from its Boron open-pit mine in California, US since 1872 and currently supplies around 30% of the global refined borates market, has been particularly vocal in opposing India’s position.

"This is simply a discriminatory measure against imported boric acid. There is no licensing regime for domestically-produced boric acid and it only exists to protect a domestic industry from competition," a Rio spokesman told IM.

Dumped on? India’s import restrictions on boric acid have been described
as a "barrier to trade" by the US. 

The background

Boric acid trade imports to India were initially clamped down on in 2006 by the then government on the basis that its use in insecticides was harmful to humans.

The regulation introduced meant that all domestic manufacturers were obliged to be registered (to date, however, no one has registered to manufacture boric acid as an insecticide).

It also meant any company wishing to import boric acid, for whatever end use, had to have a permit from the Central Insecticide Board, within the Ministry of Agriculture.

According to Kaliprasad Kallakuri, president of the India Ceramic Glaze & Glass Frit Manufacturer’s Association, whose members have been significantly impacted by the regulation, the process is drawn out and bureaucratic.

To gain the permit, companies first have to submit consumption data for the last three-to-five years, verified by local authorities and receive a no objection certificate, signed off by various government departments.

Gaining the permit takes six-to-eight weeks, with another eight weeks for material delivery, meaning a total lead time of over three months, said Kallakuri. Licenses have to be applied for each calendar year, or whenever quotas are used up.

"We are a bunch of small and medium manufacturers. Not all of us have the facility to do all these processes," Kallakuri told IM.

"If we only require a little quantity, we rely on traders, but traders are not granted a permit, as the end use cannot be verified (…) so small producers have to buy locally."

Locally-produced material is both more expensive and of a lower quality, which impacts the quality of the frits produced, according to Kallakuri.

Kiran Ajmera, managing director of distributor Chemie Alliance, said in a statement: "The current regulation is highly discriminatory as it is only applied to imports, which is intended to protect the interests of a handful of domestic producers of boric acid at the expense of many more manufacturing and trading companies."

Rio Tinto has made the same case. "Unfortunately, the discriminatory licensing regime impacts numerous added value manufacturers making their products in India because the policy allows domestic producers to charge a higher price for boric acid that is readily available without the uncertainty and delay of a license requirement," the company spokesperson told IM.

Pushing for change

While there has been some hope among local buyers that the Narendra Modi administration, which was elected in 2014, might modify the restrictions, so far little progress has been made.

Local frit manufacturers are now making a two-pronged effort to change the process. On one side they are lobbying the authorities to make the process easier, calling for the introduction of a one-off application process and the electrification of the forms.

On the other they are challenging the government in the courts, with an application currently before the High Court of Gujarat to quash the whole system of permitting. The case should come before a judge in the next three months.

"I am optimistic (…) ease of doing business is a very important buzz word in India right now," said Kallakuri.

He went on to say that "if not a total quashing, a middle ground would do, with less bureaucracy, less red tape".

US trade representatives however, are pushing for total elimination of the regime, rather than its amendment or relaxation, which has been attempted in the past.

Outside of insecticides and frits, boric acid is also used in  flame retardants, cosmetics and nutrition.

The Indian Agriculture Ministry could not be reached for comment.