- Anti-absorption provisions were introduced by the Indian Government vide Finance Act, 2021.
- Absorption of duty has been defined as a situation wherein export price declines post imposition of duties without commensurate decline in cost of production, export price to other countries, or resale price of article in India.
- The DGTR has proposed amendments, including removal of the words "exporting country" or "countries" from Rule 29(1) which will clarify that an anti-absorption investigation can be filed against an individual or selective producers from a subject country.
- There is a need for further clarification in the Rules in order to consider a situation of absorption of duties even when the import price increases without commensurate increase in cost of production.
The Government of India introduced anti-absorption provisions in the Customs Tariff Act vide the Finance Act, 2021. Section 9(1B) and Section 9A(1B) were introduced to incorporate provisions relating to anti-absorption reviews of anti-dumping duty and countervailing duty respectively1 . The Rules were amended thereafter vide Notification No. 84/2021-Customs (NT) dated 27th October 2021 and Notification No. 83/2021 – Customs (NT) dated 27th October 2021, incorporating Rule 29, Rule 30 and Rule 31 in the Anti-Dumping Rules and Anti-Subsidy Rules respectively2 .
Under the provisions, absorption of anti-dumping / anti-subsidy duty was defined as a situation wherein the export price of an article declines post imposition of duties without any commensurate change in the following:
- Cost of production of such article; or
- Export price of such article to countries other than India; or
- The resale price of such article in India
The absorption provisions were much needed in India, since it provides the Designated Authority teeth to address a situation where the exporter has sought to negate the effect of the anti-dumping duty / countervailing duty imposed, without going through the detailed investigation process of a mid-term review. The first anti-absorption review in India was initiated into imports of Polyethylene Terephthalate Resins from China PR on 4 th March 20243.
Recently, on 18th June 2024, the DGTR issued a notification for stakeholder consultations and requested comments from all stakeholders on proposed amendments in the Act and the Rules for anti-absorption investigation. The amendments, inter-alia, proposes to delete the words "exporting country" or "countries" from Rule 29(1). Currently, Rule 29(1) of the Anti-Dumping Rules states as follows:
"(1) An anti-dumping duty imposed under Section 9A of the Act may be considered to be absorbed when export prices of an article from the exporting country or countries decrease post imposition of the anti-dumping duty without any commensurate change in cost of production of such article or export prices of such article to countries other than India or resale price of such article in India"
The language of the provision led to confusion and debate on whether an anti-absorption investigation can be initiated against a single producer or selective producers from the subject country, or whether such an investigation can only be conducted against the country as a whole.
In case the interpretation of the provision is taken to be that the investigation can be conducted only against a country as a whole, the same will defeat the purpose of the legislation. This is due to the fact that in a situation where only a single producer is involved in absorption of duties, such absorption would be masked on average basis, especially in cases where other producers are not absorbing the duties in force. This will leave the domestic industry remediless under the anti-absorption provisions. Further, an anti-absorption application can be filed by any interested party including the domestic producers, foreign producers, exporters, importers or users. In case, the interpretation of the provision is considered to be that an anti-absorption investigation can be conducted only against the subject country as a whole, no foreign producer or exporter will approach the Authority with alleged absorption by other producers / exporters from the subject country. This is due to the fact that such an application will lead to initiation of an investigation against the applicant producer / exporter itself, thus, rendering such provision redundant and ineffective.
The proposed amendment is only clarificatory in nature. This is a welcome clarification regarding the provisions of Anti-Dumping and Anti-Subsidy Rules for any interested party seeking remedy against absorption of duties by a single producer / exporter from a subject country.
While proposed amendments would clarify the Rules and scope of anti-absorption investigation, there is a need for further clarification in the Rules in addition to what has been proposed. The Rules state that absorption is considered when there is a decline in export price. However, there can occur a situation where the producers / exporters in the subject country absorb the duties in force even when the export price has not declined. This is relevant in cases where the export price has increased but the increase is not commensurate to increase in cost of production for such article. Though it can be argued that the present law already allows for such absorption to also be addressed, it would be appropriate to further clarify the provisions in this regard.
- Salil Arora, Senior Associate
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Footnotes
1. See Article on "Anti-Absorption Provisions for ensuring desired effect of duties", https://tpm.in/wp-content/uploads/2021/04/Adhyatan-TPM-Newsletter-Issue-3-of-2021.pdf
2. See Article on "Introduction of anti-absorption provisions in India" https://tpm.in/wp-content/uploads/2021/11/11-Adhyatan-TPM-Newsletter-Issue-11-of-2021.pdf
3. See Article on "India's first anti-absorption review – An expedited remedy to the industry". https://tpm.in/wp-content/uploads/2024/04/Adhyatan-TPM-Newsletter-April-2024.pdf
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