Maintainability of bilateral safeguards beyond the transition period: Insights from India-Korea CEPA

In today’s world with WTO mechanism and multilateralism under severe strain, countries are increasingly looking for bilateral and regional partnerships to enhance the market access for their products and services. In this quest, countries are entering into free trade agreements (‘FTAs’ or ‘agreements’), under which they grant duty concessions, often reducing tariffs to zero from their FTA partner countries. 

In hard ball negotiations there are several trade-offs which countries sometimes have to agree in the larger interest of the deal. After the agreement comes into effect, there may be certain industries who can feel the pressure of surge in imports from FTA partner country(ies) as a result of these tariff concessions. This increase in imports can adversely affect some domestic industry sectors in the importing partner country. 

To address this risk and protect domestic markets, provisions for bilateral safeguards are incorporated into the FTA agreements. These bilateral safeguards allow a country to temporarily impose restrictions by raising tariffs, if the increased imports resulting from tariff concessions cause or threaten to cause serious injury to the domestic industry. A considerable number of bilateral safeguard investigations have been initiated globally, and India has also resorted to such measures in the past. 

To operationalise these provisions, the Government notifies dedicated rules that prescribe the procedure, conditions, and modalities for the initiation, conduct, recommendation and imposition of bilateral safeguard measures under such agreements. 

Recently, India concluded a bilateral safeguard investigation under the India-Korea Comprehensive Economic Partnership Agreement (‘CEPA’). Such safeguard measures are governed by specific provisions contained in the India-Korea CEPA. Further, in the context of the India-Korea CEPA, India notified the India-Korea Comprehensive Economic Partnership Agreement (Bilateral Safeguard Measures) Rules, 2017, which provide the legal framework for investigating and imposing bilateral safeguard measures.

This article briefly examines the recent final findings issued by India concerning imports of Non-phthalate Plasticizers, namely Dioctyl Terephthalate (DOTP) and Diethylhexyl Cyclohexane (DEHCH) (collectively referred to as the ‘subject goods’), from Korea RP under the India-Korea CEPA. The article discusses an important issue of maintainability of the bilateral safeguard measures after the expiry of the transition period under the FTA. The article concludes with an assessment of the relevant articles of the Agreement in light of the interpretation adopted by the authorities on this issue.

On 30 September 2025, the Directorate General of Trade Remedies (‘DGTR’), the department under Ministry of Commerce (‘MOC’) initiated the bilateral safeguard investigation concerning imports of subject goods from Korea under the India-Korea CEPA. The initiation was undertaken by the DGTR pursuant to an application filed by KLJ Plasticizers Limited (‘domestic industry’). 

On 27 May 2026, the DGTR, issued final findings recommending the imposition of bilateral safeguard measures on imports of subject goods from Korea under the India-Korea CEPA.[1] The recommendation was made by way of withdrawing the concessions given and imposition of custom duty on imports of subject goods originating in Korea to the lesser of two-

1. Most Favoured Nation applied rate of custom duty on the subject goods as on the date of application of Bilateral safeguard measure or 
2. Most Favoured Nation applied rate of custom duty on the subject goods as on the day immediately preceding the date of entry into force the CEРА.

The measures are recommended for 2 years from the date of issue of the notification by the Ministry of Finance (‘MoF’) in the following manner--

Year 1:  Increase the rate of custom duty @100% to the level of Most Favoured Nation applied rate of customs duty. 

Year 2: Increase the rate of custom duty @75% to the level of Most Favoured Nation applied rate of customs duty.

Maintainability of bilateral safeguard measures after the expiry of transition period: 

The investigation involved examination of issues customary to such proceedings, including like/competitive article, import surge, serious injury, causation and the relationship between tariff concessions and the performance of domestic industry.  However, the most noteworthy aspects of the investigation were the arguments advanced by parties before the DGTR regarding the maintainability of bilateral safeguard measures after the expiry of the transition period under the FTA.

This issue brought into focus a question of paramount legal importance, which the DGTR was required to adjudicate upon and which would potentially set an important precedent. The ambiguity was created due to absence of a clear and specific articulation in the India-Korea CEPA text concerning the applicability of safeguard measures beyond the expiration of transition period. In contrast, certain later Indian FTAs, such as the ASEAN-India Free Trade Area (‘AIFTA’), contains explicit provisions within their texts which clarify that such measures must cease upon the expiry of transition period. 

Article 2.22[2] of India-Korea CEPA stipulates the conditions for the invocation of bilateral safeguard measures. The provision outlines that such measures may be adopted by an FTA partner country only after satisfying the requirements prescribed therein. 

In this context, Article 2.21 of the CEPA defines the ‘transition period’ as follows:

“transition period means a period for a good from the date of entry into force of this Agreement until ten years from the date of completion of tariff elimination or completion of tariff reduction, as the case may be for each good.”

Applying the Article 2.21 in the present context, the India-Korea CEPA came into force on 1st January 2010, and the tariff on the subject goods was completely eliminated on 1 January 2017. Accordingly, the transition period will expire on 1 January 2027 resulting in a balance period of only 6 months for the expiration of transition period. 

On this basis, certain parties argued that bilateral safeguard measures cannot be imposed or maintained post expiry of the transition period. It was argued that the phrase ‘during the transition period only’ refers to the right to impose or continue measures. The net effect being that measures could be imposed for a maximum of 6 months, after which the transition period will expire irrespective of the domestic industry’s restructuring plan of 2 years.

On the contrary, the domestic industry argued that the interpretation of other parties that any measure imposed would only be in effect for the duration of the transition period is incorrect. It was argued that the provision in the Agreement merely provides that measures may be imposed before the expiry of the transition period and does not dictate the duration of measures. The provisions do not state that the measures, if already imposed, cannot be continued post expiry of transition period. The obligation of the Government under the CEPA is to impose measures within transition period. The Agreement does not bar the Government from continuing such measures beyond the transition period.

The DGTR examined the argument raised by the parties and concluded that bilateral safeguard measures are invoked under Article 2.22, and the same is subject to the transition period; the measures once imposed are maintained under Article 2.23(g).[3] Article 2.23(g) does not provide that the measures may be maintained only during the transition period. Therefore, once a measure has been imposed during the transition period under Article 2.22, it may be maintained for such period, as may be necessary to remedy serious injury and to facilitate adjustment, with a maximum duration of two years. DGTR concluded that the opposing parties have not shown any legal basis for reading the provisions of Article 2.22 concerning transition period into Article 2.23(g).

Analysis of the DGTR’s conclusion considering the relevant Articles of India-Korea CEPA and Vienna Convention on Law of Treaties

The interpretation of ‘transition period’ requirement by the DGTR in the final finding is persuasive and reflects a harmonious reading of Articles 2.22 and 2.23(g) of the CEPA, instead of reading in isolation. 

Article 2.22 establishes the circumstances in the presence of which a country may invoke a bilateral safeguard measure, specifically when during the transition period imports have increased as a result of tariff concessions and have caused or threatened serious injury to the domestic industry. 

Article 2.23(g), on the other hand, regulates the duration and continuation of such measures once imposed and provides for conditions and limitations of such measures. The two provisions therefore operate sequentially, in harmony with each other and must be read together.

The interpretation advanced by other parties suggests that the phrase ‘during the transition period only’ refers to the right to impose or continue measures. The net effect being that the measures could be imposed for a maximum of 6 months, post which the transition period expires irrespective of the domestic industry’s restructuring plan of 2 years. In other words, as per the other parties, the safeguard measure imposed may remain in force only until the expiry of the transition period.

The interpretation by other parties appears to read into the CEPA a requirement that is not articulated in CEPA text. It may also have implications for the operation of Article 2.23(g), which addresses the duration and continuation of safeguard measures.

Under customary principles of treaty interpretation as reflected in Articles 31 of Vienna Convention on Law of Treaties (‘VCLT’), a treaty is to be interpreted in good faith in accordance with the ordinary meaning of its terms, in their context, and in light of its object and purpose. This approach requires that the treaty be read as a whole, including all its provisions, annexes, and related instruments, rather than interpreting specific phrases in isolation.

While analysing the text of Article 2.22, the phrase ‘During the transition period only’ may be understood as indicating the period within which the relevant conditions, such as increase in imports due to tariff concessions, injury and causal link are to be assessed. The provision itself does not expressly address the duration for which safeguard measures may remain in force. 

The question of duration is more directly addressed in Article 2.23(g) which sets out the timeframe for the application and possible extension of bilateral safeguard measures. Further, this article does not explicitly link the duration of the measure to the transition period. 

Accordingly, an interpretation that relies solely on Article 2.22, without taking into account Article 2.23(g), may not reflect a complete reading of the CEPA text. In its findings, the DGTR also noted that such an interpretation could affect the practical operation of Article 2.23(g). 

A combined reading of the relevant provisions indicates that the CEPA provides for safeguard measures to remain in force for up to two years and further permits extension of two years where continuation of such measures is necessary to remedy serious injury and facilitate adjustment. 

Conclusion

The authors note that the interpretation adopted by the DGTR on the issue of the maintainability of bilateral safeguard measures beyond the expiry of the transition period appears to be in line with the principles of harmonious construction of law, as well as the interpretative framework set out in VCLT, which governs the manner in which international law are to be interpreted.

It is pertinent to note that the recommendation made by the DGTR for the imposition of bilateral safeguard measures falls within the prescribed time limits, and such measures have been recommended for a period of two years from the date of the notification to be issued by the MoF.

Given that the transition period is set to expire on 1 January 2027, it becomes imperative that the MoF issues the requisite notification giving effect to the DGTR’s recommendation prior to the expiry of the transition period, i.e., by 1 January 2027, in order to ensure the legal sustainability of the measure.

[The authors are Partner and Associate, respectively, in International Trade & WTO practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]

[1]Final Findings, Bilateral Safeguard Investigation concerning imports of Non-Phthalate Plasticizers in the form of Dioctyl Terephthalate (DOTP) and Diethylhexyl Cyclohexane (DEHCH) under the India-Korea Comprehensive Partnership Agreement. RP; F No. 22/01/2025-DGTR, dt. 27 May 2026.

[2] See, Article 2.22 - Bilateral Safeguard Measures: During the transition period only, if as a result of the reduction or elimination of a customs duty under this Agreement, … the Party may … 

[3] See, Article 2.23 - Conditions and Limitations on Imposition of a Bilateral Safeguard Measure:

(g) no measure shall be maintained:

i. except to the extent and for such time as may be necessary to remedy serious injury and to facilitate adjustment; or

ii. for a period exceeding two years except that in exceptional circumstances, the period may be extended by up to additional two years, to a total of four years from the date of first imposition of the measure …