India: Anti-Dumping Laws In India

Dumping is said to have taken place when an exporter sells a product to exporting country at a price less than the price prevailing in its domestic market. When dumping causes or threatens to cause material injury to the domestic industry of the importing country, the Designated Authority initiates necessary action for investigations and subsequent imposition of anti-dumping duties.

This article is an attempt to discuss the ‘anti-dumping laws in India’ under the following headings:

• Legal Framework

• Determination of Dumping

• Injury Determination

• Filing an Application

• Investigation Process

• Relief to the Domestic Industry

• Anti-Dumping Duties

• Price Undertakings

• Appeal

• Relief

The legal basis for anti-dumping investigations and for the levy of anti-dumping duties is:

• Based on Article VI of GATT, 1994

• Customs Tariff Act, 1975- Sec 9A, 9B (as amended in 1995)

• Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995

• Investigations and Recommendations by Designated Authority, Ministry of Commerce

• Imposition and Collection by Ministry of Finance.

Article VI of General Agreement on Tariffs and Trade (GATT) 1994 lays down the principles to be followed by the member countries for imposition of anti-dumping duties, countervailing duties and safeguard measures. Pursuant to GATT 1994 detailed guidelines have been prescribed under the specific agreements which have also been incorporated in the national legislations of the member countries of the WTO. Indian laws were amended with effect from 1-1-95 to bring them in line with the provisions of the respective GATT agreements.

The provisions pertaining to levy of anti-dumping duties have been provided under Sections 9A, 9B and 9C of the Customs Tariff Act, 1975 and the corresponding Customs Tariff ( Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995.  

According to Section 9A where any article is exported from any country or territory to India at less than its Normal Value, then, upon the importation of such article into India, the Central Government may by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article.

The Normal Value is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country or territory. If the Normal Value cannot be determined by means of domestic sales, the Act provides for the following two alternative methods:

• Comparable representative Export Price to an appropriate third country.

• Cost of production in the country of origin with reasonable addition for administrative, selling and general costs and for profits.

The ‘Export Price’ could either be:

1. price paid or payable for the goods by the first independent buyer;

2. price at which the imported articles are first resold to an independent buyer;

3. price as may be determined on a reasonable basis;

‘Margin of Dumping’ is generally expressed as a percentage of the Export Price. It refers to the difference between the Normal Value of the like Article and the Export Price of the product under consideration and normally established on the basis of:

• comparison of weighted average Normal Value with a weighted average of prices of comparable export transactions; or

• comparison of Normal Values and Export Prices on a transaction-to-transaction basis.

Factors affecting the Normal Value and Export Price when making a comparison The Export Price and the Normal Value of the goods must be compared at the same level of trade, normally at the ex-factory level, for sales made as near as possible in time. Due allowance is made for differences that affect price comparability of a domestic sale and an export sale. These factors, interalia include:

• Physical characteristics

• Levels of trade

• Quantities

• Taxation

• Conditions & terms of sale

It must be noted that the above factors are only indicative and any factor which can be demonstrated to affect the price comparability, is considered by the Authority. Anti-dumping action can be taken only when there is an Indian industry which produces ‘Like Articles’ when compared to the allegedly dumped imported goods.

The article produced in India must either be identical to the dumped goods in all respects or in the absence of such an article, another article that has characteristics closely resembling those goods.

The Indian industry must be able to show that dumped imports are causing or are threatening to cause material injury to the Indian 'domestic industry'. Material retardation to the establishment of an industry is also regarded as injury.

The material injury or threat thereof cannot be based on mere allegation, statement or conjecture. Sufficient evidence must be provided to support the contention of material injury.

Normally, ‘Material Injury’ is determined by the authorities by examining:

• the volume of the dumped imports,

• effect of dumped imports on prices of like products in domestic market, and

• the consequential impact of these imports on domestic producers.

‘Causal Link’ is the link to establish relationship between the imports and the injury in the context of protective measures against injury caused by imports. A 'Causal Link' must exist between the material injury being suffered by the Indian industry and the dumped imports.

The authority examines the volume of the dumped imports, including the extent to which there has been or is likely to be a significant increase in the volume of dumped imports, either in absolute terms or in relation to production or consumption in India, and its effect on the domestic industry in order to determine if the injury has been caused due to the ‘Volume Effect'.

The authority determines the effect of the dumped imports on prices in the Indian market for like articles, including the existence of price undercutting, or the extent to which the dumped imports are causing price depression or preventing price increases for the goods which otherwise would have occurred to determine if there is a ‘Price Effect’,.

• A dumping investigation can normally be initiated only upon receipt of a written application by or on behalf of the Domestic Industry. "Domestic Industry" means the Indian producers of Like Articles as a whole or those producers whose collective output constitutes a major proportion of total Indian production.

• In order to constitute a valid application, the following two conditions have to be satisfied:

i. The domestic producers expressly supporting the application must account for not less than 25% of the total production of the Like Article by the Domestic Industry in India; and

ii. The domestic producers expressly supporting the application must account for more than 50% of the total production of the Like Article by those expressly supporting and those opposing the application.

Application should be submitted to the Designated Authority in the Ministry of Commerce in the prescribed form. An application for anti-dumping investigation needs to contain such information as is reasonably available to the applicant on the following:

• the identity of the applicant and a description of the volume and value of the domestic production of the like product by the applicant;

• a complete description of the allegedly dumped product, the names of the country or countries of origin or export in question, the identity of each known exporter or foreign producer and a list of known persons importing the product in question;

• information on prices at which the product in question is sold when destined for consumption in the domestic market of the country or countries of origin or export;

• information on the evolution of the volume of the allegedly dumped imports, the effect of these imports on prices of the like product in the domestic market and the consequent impact of the imports on the Domestic Industry, as demonstrated by relevant factors and indices having a bearing on the state of the Domestic Industry.

In order to proceed with the investigation, the authorities need to collect information on various matters from the interested parties. The authorities seek such information in the form of questionnaires which are sent by the investigating authorities to the parties concerned.

The questionnaires for exporters/foreign producers generally seek the following information:

A. Organizational details which may include detailed information on:

i. Corporate structure including information on hierarchical and organizational structure, affiliation with details of relationship and percentage of stock holding in or by the affiliated companies.

ii. Marketing set up including information regarding channels of distributions in both the domestic market and export markets, terms of sales and selling price giving explanation for difference in terms of sales to different classes of buyers, if any. Details of sales through related and/or unrelated parties etc.

iii.Accounting practices, which include information on normal accounting period, audited accounts reports etc.

B. Merchandise under investigation seeking detailed information with product catalogue, brochures or any other descriptive product literature.

C. Sales including details of quantity and value of sales in the domestic market and foreign markets, product quantity, size, model type and also country wise.

D. Cost of production, which may include information on cost of manufacture e.g. cost of materials and fabrication costs, selling, general and administrative expenses and financial expenses.

E. Details of manufacturing process including flow chart and if the merchandise is partly processed on job work basis, details may also be required for jobbing expenses etc.

On receipt of an application by the Designated Authority, the application is dealt with in the following stages:

The application is scrutinized to ensure that it is adequately documented and provides sufficient evidence. In case it is not adequate, then the deficiency letter is issued normally within 20 days of the receipt of the application.

ii. Initiation

When the Designated Authority is satisfied that there is sufficient evidence in the application with regard to dumping, Material Injury and Causal Link, a public notice is issued initiating an investigation to determine the existence and effect of the alleged dumping. The Designated Authority also notifies the diplomatic representative of the Government of proceeding to initiate the investigation.

The Authority provides access to the non-confidential evidence presented to it by various interested parties in the form of a public file, which is available for inspection after receipt of the responses.

iv. Preliminary Findings

The Designated Authority shall expeditiously proceed with the conduct of the investigation and shall, in appropriate cases, make a preliminary finding containing the detailed information on the main reasons behind the determination. The preliminary finding will normally be made within 150 days of the date of initiation.

A provisional duty not exceeding the Margin of Dumping may be imposed by the Central Government on the basis of the preliminary finding recorded by the Designated Authority.

The provisional duty can be imposed only after the expiry of 60 days from the date of initiation of investigation.

The provisional duty will remain in force only for a period not exceeding 6 months, extendable to 9 months under certain circumstances.

Interested parties who participate in the investigations can request the Designated Authority for an opportunity to present the relevant information orally. However, such oral information shall be taken into consideration only when it is subsequently reproduced in writing. The Authority may grant oral hearing anytime during the course of the investigations.

vii. Final Determination

The final determination is normally made within 150 days of the date of preliminary determination.

The Designated Authority will inform all interested parties of the essential facts, which form the basis for its decision before the final finding is made.

The normal time allowed by the statute for conclusion of investigation and submission of final findings is 1 year from the date of initiation of the investigation. The above period may be extended by the Central Government by another 6 months.

The Designated Authority may suspend or terminate the investigation in the following cases-

1. if there is a request in writing from the Domestic Industry at whose instance the investigation was initiated;

2. when there is no sufficient evidence of dumping or injury;

3. if the Margin of Dumping is less than 2% of the Export Price;

4. the volume of dumped imports from a country is less than 3% of the total imports of the Like Article into India or the volume of dumped imports collectively from all such countries is less than 7% of the total imports;

5. injury is negligible.

An anti-dumping duty imposed under the Act shall have the effect for 5 years from the date of imposition, unless revoked earlier. The 5 year period is to be reckoned from (i) the date of imposition or (ii) in a case of mid term review covering both dumping and injury from the date of such review, or (iii) from the date of a sun-set review.

The Designated Authority may review the need for the continued imposition of the anti-dumping duty, from time to time. Such a review can be done suo motu or on the basis of request received from an interested party in view of the changed circumstances. A review shall also follow the same procedures prescribed for an investigation to the extent they are applicable.

The Designated Authority is also required to carry out a review for determining Margin of Dumping for any new exporter or producer from a country that is subject to anti-dumping, provided that these exporters or producers are new and are not related to any of the exporters or producers who are subject to anti-dumping duty on the product.

An appeal against the order of the Designated Authority may be filed with the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) within 90 days of the date of the order. However, it may entertain any appeal after the expiry of 90 days if it is satisfied that the Appellant was prevented by sufficient cause from filing the appeal in time.

The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the order appealed against

Every appeal is heard by a Special Bench constituted by the President of the Appellate Tribunal for hearing such appeals and such Bench shall consist of the President and not less than 2 members including 1 judicial member and 1 technical member.

Appeal from an order passed by the CEGAT relating to the determination of existence, degree and margin of any dumping shall lie to the Supreme Court of India.

Besides taking recourse to the ‘Judicial Review’ under the domestic law of the Member imposing anti-dumping measures, the Agreement on Anti-dumping provides for Consultations and Dispute Settlement through WTO with respect to any matter affecting the operation of the Agreement and further, except as provided otherwise, the ‘Dispute Settlement Understanding’ (under the WTO) is applicable to consultations and dispute settlement under the Agreement.

If the anti-dumping duty imposed on the basis of final findings is higher than the provisional duty already imposed and collected, the difference shall not be collected. If the final anti-dumping duty is less than the provisional duty already imposed and collected, the difference shall be refunded.

If the provisional duty is withdrawn based on a negative final finding, then the provisional duty already collected shall be refunded.

Neither the GATT Agreement on anti-dumping nor the Indian laws provide for any specific guidelines regarding the period of investigation. However, generally it is less than six months. It is, however, important that the period taken into consideration for detailed investigation should be representative and as recent as possible.

Any information provided to the Designated Authority on a confidential basis by any party shall not be disclosed to any other party without the specific authorization of the party providing the information, if the Designated Authority is satisfied about its confidentiality.

Interested parties supplying information on a confidential basis are required to furnish non-confidential summaries thereof or a statement of reasons as to why such summarization is not possible.  If the Designated Authority is not satisfied that the confidentiality is warranted or the provider of information is not willing to disclose it in a generalized form, then such information may be disregarded.

The Act provides for levy of anti-dumping duty retrospectively, where ---

1. there is a history of dumping which caused the injury or that the importer was or, should have been aware that the exporter practices dumping and that such dumping would cause injury, and

2. the injury is caused by massive dumping, in a relatively short time, so as to seriously undermine the remedial effect of anti-dumping duty.

Such retrospective application will not go beyond 90 days of the date of imposition of provisional duty. Further, no retrospective application prior to the date of initiation of investigation is possible.

Relief

Relief can be provided to the Domestic Industry in the form of

i. Anti- Dumping duties or

ii. Price Undertakings.

Anti-dumping duties are imposed on a source specific basis and can be expressed either on-ad valorem or specific basis. Non-cooperative exporters are required to pay the residuary duty, which is generally the highest of the co-operative exporters.

Price Undertakings: The Designated Authority may suspend or terminate investigation if the concerned exporter furnishes an undertaking to revise his price to remove the dumping or the injurious effect of dumping as the case may be. No undertaking can however be accepted before preliminary determination is made.

Under the GATT provisions, the national authorities cannot impose duties higher than the Margin of Dumping. It is, however, suggested that it would be desirable if the appropriate Government authorities impose a lesser duty which is adequate to remove the injury to the Domestic Industry. Under the Indian laws, the Government is obliged to restrict the anti- dumping duty to the lower of the two i.e. dumping margin and the injury margin. The ‘Injury Margin’ is the difference between the fair selling price and the landed cost of the product under consideration. "Landed Cost" for calculating Injury Margin is taken as assessable value under the Customs Act and the basic customs duties. Please note that besides the calculation of the Margin of Dumping, the Designated Authority also calculates the Injury Margin in the above said manner. Any exporter whose Margin of Dumping is less than 2% of the Export Price shall be excluded from the purview of anti-dumping duties even if the existence of dumping, injury as well as the causal link are established.  

Further, its pertinent to know the relevance of the DE Minims margin since investigations against any country are required to be terminated in the following cases:

i. if any exporter whose Margin of Dumping is less than 2% of the Export Price even if the existence of dumping, injury as well as the Causal Link are established;

ii. if the volume of the dumped imports from that particular source are found to be below 3% of the total imports, provided the cumulative imports from all those countries who individually account for less than 3%, are more than 7%.

i. No article shall be subject to both countervailing duty and anti-dumping duty to compensate for the same situation of dumping or export subsidization.

ii. The Central Government shall not levy any countervailing duty and anti-dumping duty by reasons of exemptions of such article from duties or taxes borne by the Like Article when meant for consumption in the country of origin or exportation or by reasons of refund of such duties or taxes.

iii. The duty is exempted on the import into India of any article from member country of the World Trade Organisation or from a country with whom Government of India has a most favoured nation agreement unless, import of such article causes or threatens Material Injury to established industry in India or materially retards the establishment of any industry in India and preliminary finding has been made in this regard.

iv. The anti-dumping duty shall not be imposed on receipt of satisfactory voluntary undertakings from the Government of the exporting country.

Actual resolution of legal issues depends upon many factors, including variations of fact and laws of the land. Though we have taken utmost care in the preparation of this Article, the information contained herein is not intended to constitute any legal advice and we cannot accept any responsibility towards those who rely solely on the contents of this booklet without taking further specialist advice. The reader should always consult with legal counsel before taking action on matters covered by this article.