Steel minimum import price: SC overturns 2018 Delhi HC order

In a key judgment on Wednesday, the Supreme Court clarified that companies can be subjected to trade restrictions only after the relevant rule is officially published in the Government Gazette, and not merely from the date of a government announcement or a notice uploaded on a website.

A bench of Justice P.S. Narasimha and Justice Alok Aradhe set aside a 2018 Delhi High Court order and granted relief to mild steel importers Vinayaga Marine Petro, Viraj Impex, K. Amishkumar Trading and RKB Global.

The court held that the companies are entitled to protection under Paragraph 1.05(b) of the Foreign Trade Policy (FTP) in connection with the Centre’s 2016 decision to impose a minimum import price (MIP) on mild steel to curb cheap imports from countries such as China and South Korea.

Allowing their appeals, the apex court ruled that the notification could acquire the force of law only upon its publication in the Official Gazette, and not earlier. It held that the expression “date of this Notification” must necessarily mean the Gazette publication date, and not the date on which it was uploaded on a website or announced through a trade notice.

“We accordingly hold that the Notification issued under Section 3 of the Act acquires the force of law only upon its publication in the Official Gazette. The expression ‘date of this Notification’ must necessarily mean the date of such publication,” the court observed.

The court noted that the Foreign Trade law clearly requires any order restricting imports or exports to be published in the Official Gazette. Since, in this case, the steel MIP notification was published on 11 February 2016, it could not operate before that date.

This provision protects companies that had already made firm commercial commitments through banks before a new trade restriction came into force. In simple terms, it says that if the government suddenly changes import or export rules, genuine contracts supported by irrevocable Letters of Credit (LoC) issued earlier should not be affected.

The background

The dispute dates back to February 2016, when the government imposed an MIP on several steel products to curb very cheap imports from countries such as China and South Korea and to protect domestic steel producers. Steel imported below the fixed price was not allowed to be cleared by customs.

The decision was uploaded on the website of the Directorate General of Foreign Trade (DGFT) on 5 February 2016, but the notification was formally published in the Official Gazette only on 11 February 2016. The notification said imports backed by LoCs opened before the “date of the notification” would be exempt from the MIP.

However, the government treated 5 February as the cut-off date and denied protection to importers who had opened their LoCs between 5 and 11 February. The importers argued that the rule could legally take effect only from the date of its publication in the Gazette, and that a website notice could not override their contractual rights.

Vinayaga Marine Petro and K. Amishkumar Trading had imported mild steel from South Korea through GS Global Corp. Viraj Impex had imported steel from China through a Hong Kong-based supplier, with shipments from Tianjin and Shanghai. RKB Global had imported steel from South Korea and China through Hyundai Corporation and Winfaith Trading. The consignments were destined for Indian ports, including Mumbai and Kandla.

After customs denied them an exemption, the companies approached the Delhi high court. In 2018, the high court agreed that a law becomes effective only when published in the Gazette, but still upheld the government’s choice of 5 February as the cut-off.

“This will have no impact on the steel industry. This is just a petition to protect the interests of importers whose orders were already open, so that they can execute their existing open orders,” said Suman Kumar, assistant vice-president for metals and mining at brokerage Philip Capital.