3.1 Tariff and tariff administrative measures

3.1.1 Tariff peak

Although the tariff of India has been reduced several times in recent years, it is still at a fairly high level. Since March 1st, 2005, the import tariff peak rate for non agricultural products has been reduced to 15 percent except for a few products under special regulations. On February 15, 2005, the import tariff rate for palm oil series products was increased and the assessable value was reduced at the same time, which caused an increase in the actual import duty on these products. The tariff rate for used cars and motorcycles was reduced from 105 percent to 100 percent, which remained high. The tariff rate for passenger motor vehicles is 100 percent. In the agricultural sector, the tariff rate for fresh cut flowers (including orchid) was increased from 30 percent to 60 percent.

In 2005, India continued to impose high tariff on some products, particularly in agricultural products. For instance, a 100 percent import tariff rate is imposed on coffee, tea, wheat and mixed wheat, sunflower seed oil and coconut oil; 80 percent on rice and sorghum; 70 percent on pepper, dried chili and chili powder; 70 percent for some spices. Besides, India imposes generally high tariff on alcoholic beverage too. For example, the tariff rate for malt-brewed beer is 100 percent and the rate for undernatured ethyl alcohol such as rum, whisky and gin is as high as 182 percent. The tariff peak has impeded the entry of such Chinese products into the Indian market.

3.1.2 Tariff escalation

Tariff escalation in India is prominent on some products. The import duty is 5 percent on lead, whilst the duty on lead products is 10 percent. The tariff rate on fresh grapes is 40 percent, whilst the rate on raisin is 105 percent, and 100 percent on wines brewed with grapes (including alcoholic grape juice whose customs code is not 20.09). The tariff rates on fresh apples and pear are respectively 50 percent and 35 percent, whist the rate on cider and perry is 100 percent. The tariff rate on motorcycle components is 15 percent whilst it is 100 percent on complete motorcycles. The tariff escalation has impeded the entry of relevant Chinese products into the India.

3.2. Import restrictions
 
Although import license for most products has been abolished in India, strict import restrictions are still imposed on second-hand products and motor vehicles of various models. Refurbished computer spare parts can only be imported if an Indian Chartered Engineer certifies that the equipment retains at least 80 percent of its residual life.

The Indian government stipulated restrictive conditions such as life cycle and entry from specify ports for the importation of new vehicles and used vehicles. Besides, importers of vehicles of any type also face restrictive and trade-distorting import practices. For example, the government of India requires special licenses for importing motorcycles that are virtually impossible to obtain. Import licenses for motorcycles are granted only to foreign nationals: (1) permanently residing in India; (2) working in India for foreign firms that hold greater than 30 percent equity; or (3) working at embassies located in India. The application procedure is unduly complicated and lacking in transparency. In fact, there is no Chinese enterprise that has been granted such licenses.

3.3 Barriers to customs procedures

The government of India appears to apply discretionary customs valuation criteria to import transactions. Valuation procedures issued in 2001 allow Customs to reject the declared transaction value of an import because a particular sale was not undertaken "in the ordinary course of trade under fully competitive conditions;" or involved a "reduction from the ordinary competitive price." Some exporters have reported that India's customs valuation methodologies do not reflect actual transaction values, and that they, in fact, increase tariff rates and become a means of controlling import trade. Moreover, Indian Customs have some unreasonable stipulations. For instance, the Indian customs authorities require the exporter who applies for withdrawal of cargos that have already arrived in India to present "no-objection certificate or letter" signed by the intended importer. This causes great trouble to exporters in the disposal of goods.

In addition, Indian Customs requires extensive documentation, which leads to frequent processing delays and inhibits the normal operation of trade.

3.4 Technical barriers to trade

3.4.1 Compulsory import certification system

The government of India stipulates that to import any of the 109 products that require compulsory import certification of the Bureau of Indian Standards (BIS), foreign manufacturers or Indian importers should apply in advance to the BIS for product quality certification. Only with the certification will the Customs allow such products into India. Among the 109 products, there are food preservatives and additives, milk powder, infant dairy products, cement of certain types, household electric appliances, high-pressure gas cylinders and multi- function dry batteries. Foreign manufacturers need to pay the application fee, all the travel expenses for the inspection panel, $300 inspection fee, certification fee of a certain amount, and an annual fee of no less than $2000 to use the certification marking. The certificate is valid for one year and may be extended upon expiration with the application of the manufacturer.

The product application procedures under the compulsory import certification system are very complicated, costly and time-consuming, and have caused undue burdens to foreign manufacturers.

3.4.2 Regulations on labeling

The G.S.R.389 notification issued by the Ministry of Health of India on May 27, 2005 stipulates that no container or label of infant milk substitute or infant food shall have a picture of infant or women or both. The terms "humanised" or "maternalised", or any other similar words shall not be used. The package and /or any other label of milk substitute or infant food shall not exhibit such words as "Full Protein Food", "Energy Food" or "Health Food" or any other similar expressions.

3.5 Sanitary and phytosanitary measures

The government of India revised the Prevention of Food Adulteration Rules in July 2005 with the revised Rules being titled Prevention of Food Adulteration (Amendment) Rules, 2005. The new version principally governs food (including processed food). It expands the list of food additives in certain food and stipulates the maximal residue limit of such additives in food. For instance, it sets standard parameters for tea, palm oil series, imported safflower seed oil and safflower oil, and stipulates label requirements for ordinary salt, iodized salt or ordinary iron- intensified salt. Besides, the new Rules set micro-organism parameters in accordance with the World Food Sanitation Law, and meanwhile, adjust the standards for different dairy products and the use of food additives. In short, the revised Rules are more stringent in food administration. The Chinese side will monitor closely the potential negative influence of the revision on export enterprises of relevant products.

In August, 2005, India issued the Notification on Emergency Measures to Prevent Bird Flu from Entering India. The Notification listed nine poultry products temporarily forbidden to enter India. The Chinese side expressed the hope that the Indian government would re-assess the safety status of relevant Chinese products in accordance with the actual inspection results and resume the importation of such Chinese products.

3.6 Trade remedies

3.6.1 Information on investigations for trade remedy measures

India is among the countries that most frequently resort to trade remedy measures on Chinese exports. By the end of 2005, India had initiated 91 trade remedy investigations against Chinese products, 2 safeguard measure investigations and 1 product-specific safeguard investigation involving Chinese products. Among the 69 cases ruled, 63 involved final measures. In 2005, India initiated 10 anti-dumping investigations against China involving a total amount of US$281 million, which is 10 times higher than that of 2004. The products involved are mainly textile products and chemical products that pose strong competition to its domestic products, including pentaerythritol, viscose yarn, Ethylene-Propylene-non-conjugated Diene Rubber (PEDM), silk fabrics, nylon filament yarn, and bias tyres for passenger cars and trucks. The investigation on silk fabrics of 20-100 gram/meter of Chinese origin in May 2005 involved an amount as high as $181 million, the biggest anti-dumping case initiated by India against China, and also the biggest like case initiated by a developing member country after the textile trade integration. The Chinese side expresses deep concern over the development of the case.

On January 16, 2006, the Directorate General of Anti-dumping and Allied Duties of Ministry of Commerce and Industry announced that it would launch anti-dumping investigations against penicillin industrial salt of Chinese origin. In recent years, India has frequently restricted the entry of Chinese penicillin industrial salt. As early as July 2004, India issued an import ban on Chinese penicillin industrial salt, dealing a heavy blow to the related Chinese exporters. This new anti-dumping case against Chinese penicillin industrial salt is likely to impede the export of related enterprises in China. The Chinese side will closely observe the development of the case.

3.6. 2 Unfair practices in trade remedy investigations against China

3.6.2.1 Market economy status

At present, in India's anti-dumping investigations, laws concerning market economy are unduly general. Relevant provisions can only be found in section 8 of Annex 1 of the Customs Tariff Act and the subsequent revisions. There exists no procedural provision on how enterprises involved can apply for market economy status, and related provisions are very ambiguous with some parts mixing the market economy status standards for countries and for companies. India hasn't formally recognized China as a market economy so far, and has not granted market economy status to any Chinese enterprises in its rulings in 2005. This is definitely at variance with the fact that Chinese enterprises operate in full market economy conditions, and severely affects the confidence of Chinese enterprises in defending India- initiated cases and in the Indian market.

3.6.2.2 Unclear product scope

The product scope in the anti-dumping case announcements of India tends to be excessively vague, which often makes it difficult for the responding enterprises to determine the products to be investigated. For instance, in the anti-dumping case of penicillin indus trial salt initiated in January 2006, there was inconsistency between the product scope in the petition and that in the announcement, and there was no formula of the products to be investigated in the announcement. This greatly baffled the responding enterprises of China.

3.6.2.3 Lack of transparency in information revelation

The Ministry of Commerce and Industry is responsible for initiating anti-dumping investigations, but in the investigation process, the Indian authorities often fail to notify in time or reveal sufficient information to the responding enterprises. The enterprises involved cannot obtain information promptly and accurately to conduct due defense. In this sense, the Chinese enterprises are virtually deprived of the opportunity to defend themselves.

3.6.2.4 Arbitrariness in investigation

India's investigations into the anti-dumping cases and countervailing cases are rather arbitrary. For instance, in the viscose filament yarn case in 2005, the Indian investigation agency made an appointment with the Sichuan enterprise involved to conduct an on-site investigation in China on November 25. However, when the Chinese lawyer arrived at the site, the Chinese side received a notice to the effect that the investigation agency decided not to come due to force majeure events. No further reasonable explanations were given. The arbitrariness of India's investigation authorities caused inconvenience and increased responding cost to the Chinese enterprises.

3.7 Subsidies

3.7.1 Target Plus Scheme for export promotion

To encourage export, the government of India classifies domestic enterprises into star-rated export enterprises of different grades according to their year-on-year export performance. Star-rated quality enterprises are entitled to multiple special treatments, including simplified and swift customs clearance procedures, free bank guarantee and preferential policies covered in the Target Plus Scheme. Foreign trade enterprises achieving an annual increase of 20 percent, 25 percent and 100 percent in their business volume are respectively granted 5 percent, 10 percent and 15 percent tax reduction.

3.7.2 Other subsidies

The Ministry of Commerce and Industry announced in October 2005 that export-oriented enterprises and manufacturing enterprises in Special Economic Zones were entitled to import petroleum, high-quality gasoline, high-speed diesel, light diesel fuel and oil free of customs duties. This subsidy enhances the competitiveness of relevant enterprises of India.

3.8 Inadequate intellectual property right protection

India does not have laws protecting commercial secrets. Indian law does not provide for protection against unfair commercial use of test or other data that companies submit to the Government in order to obtain marketing approval for their pharmaceutical or agricultural chemical products. Due to insufficient protection of intellectual property rights, some companies in India are able to copy certain pharmaceutical products and seek immediate government approval for original ownership of the developer's data.

Piracy of copyrighted materials (particularly software, films, and best-selling books) remains a serious problem. India has not adopted an optical disc law to protect optical media. Although classification of copyright and trademark infringements has been expanded and the law also provides for minimum criminal penalties, the Indian government has not in effect taken adequate measures to combat intellectual property right infringement, and the laws enacted are rarely effectively implemented.

3.9 Barriers to Trade in Services

3.9.1 Wholesale and retail

Permits of Foreign Investment Promotion Board (FIPB) is required for investment in export-oriented wholesale business and wholesale business in which the foreign stake is 51 percent or greater. Investments in supermarkets, convenience stores and other retail sectors are for all practical purposes banned. In recent years, the government of India has intended to open the retailing sector to foreign companies, but no specific regulations have been issued so far. Up to the present, the Government has only allowed multinational companies to open specialty stores in the Country.

3.9.2 Insurance

The Insurance Regulatory and Development Authority (IRDA) Bill ended the government monopoly in 1999, and opened India's insurance market to private participation. However, foreign equity was limited to 26  percent of paid-up capital and a license must first be obtained from the Insurance Regulatory and Development Authority for FDI. In July 2004, the government of India announced its intention to amend the IRDA law to increase that cap to 49 percent. Intense domestic political debate has delayed action. Up to the present, it has not yet been implemented.

3.9.3 Banking

Most Indian banks are government-owned, and entry of foreign banks remains strictly controlled, including the establishment of bank branches. State-owned banks control 80 percent of the banking system. The liberalization process of India's banking industry is very slow. FDI in state-owned banks remains capped at 20 percent. The banking sector still needs further liberalization.

3.9.4 Accounting

According to the domestic regulations of India, only chartered accountants with domestic qualifications in India can set up CPA firms. Foreign accounting firms can practice in India if their home country provides reciprocity to Indian firms. Internationally recognized firm names may not be used, unless they are comprised of the names of proprietors or partners, or a name already in use in India.

3.9.5 Telecommunications

Although the government of India has taken a series of positive measures to liberalize its telecommunications sector, further opening is needed. Internet telephony became legal in India in 2002, but this liberalization came with several restrictions. Only Internet Service Providers (ISPs) are allowed to offer Internet telephony within their service areas, and telephone-to-telephone communications through the Internet remain illegal within India.

3.9.6 Media

The government of India takes a cautious position in allowing foreign investment in the media sector. With a view to ensuring the controlling decision-making power of the Indian side in media enterprises, the Indian government stipulates that FDI in newspapers and TV news channels shall not exceed 26 percent and that investment by foreign institutional investors is forbidden. Although there is no restriction on FDI in TV entertainment channels, foreign investment in cable network is not allowed to exceed 49 percent.

The government of India announced in July 2005 that FDI in privately owned FM radio sector was allowed. A public invitation for tender was held to seek for private investors for 330 FM radio stations in 90 cities. Foreign radio stations and participate in the bidding in conjunction with their Indian partners and are allowed to have a maximum of 20 percent ownership. This policy is slightly liberalized, but the government of India stipulates in the mean time that privately owned radio stations shall only broadcast entertainment programs and are not allowed to broadcast news. In addition, the Country will have 15 percent ownership in these FM radio stations, and each station is only allowed to have one channel.

3.10 Other barriers

Although the Memorandum of Understanding on Simplifying Visa Procedures between the Government of the Republic of India and the Government of the People's Republic of China was signed on June 23, 2003, the India embassy's examination of visa applications from Chinese nationals remains bureaucratic, and India's visa policy towards Chinese citizens lack certainty and transparency. Chinese business people traveling to India often complain that it is rather difficult and time-consuming to obtain a business visa or work visa. These practices by the Indian government exert a negative impact on the normal contacts between Chinese and Indian business people.