Court dismisses challenge to steel safeguard duty

This article first appeared in The Edge Financial Daily, on June 28, 2018.
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KUALA LUMPUR: The Kuala Lumpur High Court yesterday dismissed a judicial review application in relation to the safeguard duties imposed from April last year on imported steel wire rods (SWR) and deformed bar in coils (DBIC).

Filed by the Steel Wire Association of Malaysia (SWAM) last year, the application is the second such challenge under the Safeguards Act 2006 in as many years.

The first was filed by Megasteel Sdn Bhd in 2016 after the government declined its petition for safeguard protection against hot-rolled coil imports. It was unsuccessful.

SWAM had named the international trade and industry ministry (Miti) as the responding party to its application. The decision yesterday was delivered verbally by High Court Justice Azizah Nawawi.

At the time of writing, it was unclear whether SWAM will pursue the matter further.  The parties involved have 14 days to decide whether to appeal.

Notably, Megasteel did not appeal after the High Court dismissed its application last year.

To recap, SWAM had sought a court order to quash the findings of safeguard investigations by Miti that culminated in the safeguard duties.

Miti initiated two parallel investigations in May 2016 following petitions by members of the Malaysia Steel Association (MSA), representing the upstream steel industry players.

The petitioning companies were Ann Joo Steel Bhd, Southern Steel Bhd, Malaysia Steel Works (KL) Bhd and Lion Industries Corp Bhd’s subsidiaries Amsteel Mills Sdn Bhd and Antara Steel Mills Sdn Bhd.

MSA and the petitioning companies were also joined as party to the proceedings and they were represented by Lee Hishammuddin Allen & Gledhill. Jason Teoh & Partners represented SWAM, while Miti was represented by the Attorney-General's Chambers.

The petitioners had sought safeguard protection as they claimed that surging imports of steel concrete reinforcing bar (rebar) by SWR and DBIC, between Oct 1, 2012 and Sept 30, 2015, had caused injury to the domestic industry.

According to the petitioning companies, which collectively represented 73.4% of local rebar output and 100% of local SWR and DBIC production at the time, this caused them to lose market share, leading to downsizing and operational scale backs.

SWAM’s judicial review application had only concerned SWR and DBIC and did not involve the safeguard duties for rebar.

The association’s membership includes listed players such as Chin Well Holdings Bhd, Engtex Group Bhd, Leader Steel Holdings Bhd and YKGI Holdings Bhd.

Generally, SWAM members produce steel products from steel wire mesh to fasteners such as nuts, bolts and nails.

When the investigations were conducted, the objecting parties to the rebar petitions included the Master Builders Association Malaysia (MBAM) and the Malay Contractors Association Malaysia.

MBAM officials had previously said it represents as many as four-fifths of the listed construction firms on Bursa Malaysia.

Following the investigations, on April 13 last year the Malaysian government announced the imposition of safeguard duties for rebar and on SWR and DBIC for three years beginning April 14, 2017.

“During the investigations, the government assessed the issues and concerns submitted by all interested parties in accordance with the Safeguards Act 2006 and Safeguards Regulations 2007,” Miti said in a statement.

For rebar, the duties for rebar began at 13.42% from April 14, 2017 to April 13, 2018. The rate lowers to 12.27% in the second year up to April 13, 2019 and reduces further to 11.1% between April 14, 2019 and April 13, 2020.

For SWR and DBIC, the duties kicked in from April 15, 2017 at 13.9% for the first year. The rate reduces to 12.9% from April 15, 2018 to April 14, 2019 and subsequently falls to 11.9% between April 15, 2019 and April 14, 2020.

Now into its second year of implementation, the safeguard duties were notably granted as reprieve to the petitioning companies so they can rejig their operations to cope with the imports.

While individual adjustment plans submitted to Miti alongside the petitions vary from one company to another, the general underlying thread is to boost efficiency, increase productivity and in some cases invest in new plants and machinery.

The specific numbers and estimated investment costs are redacted from the petition documents made public by Miti but are understood to be upwards of hundred millions of ringgit in some cases.

Last year, the ministry told The Edge Malaysia weekly that it would monitor the implementation of the proposed adjustment measures on possible consequences of unsatisfactory implementation on the petitioners’ part.