Anti - Dumping in International Trade

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CHAPTER I

Introduction

1.1.1 Introduction

When first thought of organizing a study on this topic, my focus was other developed

countries use of subsidies, particularly when their use against developing countries. The study

was designed to look at these actions from the bottom up and from the top down. The bottom-

up or victims view is provided up a group of studies of industries in particular countries, such

as the flower industry in Columbia whose exports have been heavily restricted by

countervailing duties and other unfair trade actions.

At the same time a set of studies of economics of the matter is done. How these actions

affected the industry to which they were applied and in turn what contribution that industry

makes to the overall development of the economy of which it was a part. How these actions

affected the national economic interest of the country that applied them-their implicit

economics for their economy that is shielded by them.

My concern was that countervailing duties should not be overused. They were just ordinary

protection in that they served the national economic interest of neither the victim nor the

regulatory country. The logic behind this is the usual logic of economic i.e. a trade restriction

harms the overall economic interests of the country that applies it, just as it harms the country

whose exports are restricted.

1.1.2 Historical Background

The concept of dumping in international trade has a long history: Jack Viner1 reports

mention of bounty practices by Adam Smith. Viner also notes a statement by Alexander

Hamilton in debates in the US in 1791 warning about foreign country practices of under-

selling competitors in other countries. Viner reports that during the 17th century, dumping was

extensively used by firms in Germany. During and after World War I, the US Congress

enacted several anti-dumping statutes. During the 1930s the US embarked on its reciprocal

programme negotiating about 30 bilateral treaties for the mutual reduction of tariff barriers.

1Capital Formation and Output in the Third Worldby V R Panchamukh, 1985.

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Many of these agreements recognise the problem of dumping and allowed national

government treaty partners to use anti-dumping duties to offset dumping2.

During the ITO (International Trade Organization which never came into being) negotiations 3

there was no challenge to the right of the government to impose anti-dumping duties. It was

agreed that the dumping was to be condemned and that the only function of an international

agreement was to limit abuses (anti-dumping measures). However, the provisions of Article

VI 1947, which was designed to accommodate US domestic anti-dumping law, lacked

precision and specificity. In any case, ITO never came into existence because of strong

opposition from the US Congress. The general language of Article VI was made more detailed

and precise by the 1967 agreement on implementation of Article VI of the General Agreement

on Tariffs and Trade of Kennedy Round (1962-67) (referred to as an anti-dumping code).

Little would be gained by extensive consideration of the language in the General Agreement.

However, in the United States, the Kennedy Round code raised a major constitutional problem

with the Congress enacting legislations violative of the Anti-Dumping Code. At the beginning

of the Tokyo Round negotiations (1973-79) the subject of dumping was not on the agenda

However, a sudden turn of events late in the negotiations caused the negotiators to take up the

subject of dumping. A new anti-dumping code was devised in 1979, replacing the l967code.

The multilateral anti-dumping framework which has formed the basis for further negotiations

was agreed upon during the Tokyo Round of multilateral trade negotiations (1973-79). While

the 1967 Agreement, following the Kennedy Round, was limited in participation to those

contracting parties and the EC which had accepted it, the 1979 Agreement following Tokyo

Round was limited in participation to contracting parties that had accepted them, or

governments, not necessarily contracting parties to the GATT, which had acceded to them. It

did provide an opportunity to the United States to accept the code concept of material injury

because it was defined in US Law as being injury that was not immaterial. Moreover,

according to some, the causal link between dumping and injury was weakened; thus it became

easier for domestic firms to seek relief from competition from dumped imports. In addition,

the problem of calculating margins of dumping in a neutral, non-protectionist manner was not

addressed.

2

Bagchi, J K,Dumping and Anti Dumping Measures Policy and Practice, 1999, Research and InformationSystem for the Non Aligned and other Developing Countries, New Delhi.3The Third World War and the World Economic System by V R Panchamukhi, K M Raipuri 1986.

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In the Uruguay Round of multilateral trade negotiations (1986- 1993), problems relating to the

administration of national anti- dumping systems became more pronounced before and during

the Uruguay Round. Demands were made to clarify or expand multilateral rules and

disciplines on anti-dumping measures in the Tokyo Code. Exporting countries4, including

many developing countries were of the view that anti-dumping measures were being applied

to harass importers and unjustifiably protect domestic industries. On the other hand importing

countries were concerned that exporters were engaged in innovative practices to avoid anti-

dumping duties.

However, once agreement was reached, it was clear that 1994 agreement is by far the most

detailed multilateral instrument to regulate the application of anti-dumping measures. An

important aspect was that many developing countries which had undertaken liberalization

measures started introducing anti-dumping laws as a safeguard to industries threatened by

unfair competition via dumping. India is one of the countries which have gone through a

similar experience andhas started taking up number of proceedings against the excessive

increase of such imports which were causing unjustifiable material injury to its industries. The

Uruguay Round Agreement has an additional feature which will strengthen it to a great extent.

Under this agreement all the WTO members will be bound by the 1994 Anti-Dumping

Agreement. However, given the different needs and aspirations of various countries, it is

premature to forecast whether another round of anti-dumping negotiations will be required in

the future5.

1.2 Literature Review

This is a doctrinal research project and for the purpose of the said research project the relevant

material has been collected from secondary sources. At this point of time it is pertinent to

review the literature form where the relevant material has been collected. For the purpose of

said research project the researcher has collected the relevant material from the books on Anti-

Dumping and Countervailing. Besides this, the material has also been collected from the

articles on this topic available on websites and journals.

4

The World Economy in the Mid Eighties by Research Team 1986.5 Bagchi, J K,Dumping and Anti Dumping Measures Policy and Practice, 1999, Research and Information

System for the Non Aligned and other Developing Countries, New Delhi.

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For the purpose of this research project the researcher has referred following books on Anti-

Dumping and Countervailing by R.K. Gupta, J K Bagchi, Arandna Aggarwal, Arvind

Panagariya.

The researcher has heavily relied on the book Anti-Dumping and Countervailing measures by

R K Gupta, for preparing this research project. This book contains a nice explanation of the

topic. The said books proved to be very helpful in the better understanding and clarification of

the concepts. It is one of the best books for the student of Anti-Dumping and Countervailing

measures. This book provides good explanation on the concept.

The book Dumping and Anti-Dumping Measures Policy and Practice by J K Bagchi is quite

elaborative on the said topic. The author of this book has discussed the topic at length.

Besides, the author has covered each and every aspect of the topic with the help relevant

examples and the development of Anti-Dumping and Countervailing duties. Moreover there is

appropriate classification of all aspects for the convenience of the reader. These books proved

to be a great source for the present research project.

The book The Anti-dumping Agreement and Developing Countries by Arandhna Aggrawal,

has proved to be an useful source in the present research project. This book helped in

understanding the development and progress of the Anti-Dumping and Countervailing

measures. This book has stated the implementation of Anti-Dumping and Countervailing

measures and the changes in the past.

The book Safeguards Countervailing and Anti Dumping Measures (Against Imports and

Exports) has proved to be of great help and provided a better understanding with the help of

commentary as it provided a detailed explanation on every aspect to clear all the doubts on

Anti-Dumping and Countervailing duties and case analysis provided in the book helped to

analyze the practical view on the Anti-Dumping and Countervailing measures in India and

other countries.

I have also referred to various website which enhanced me with the various stages of the

development of the Anti-Dumping and Countervailing measures and the various aspects

relating to Anti-Dumping and Countervailing measures and its growth.

Chapter II

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Methodology of the Study

2.1 Objective:

The researcher undertakes the task to provide some initial thoughts and insights on the

challenge of designing a regulatory framework for subsides in services, which WTO

negotiators could use as a starting point as for revitalizing real negotiations on this new and

complex subject.

2.2 Importance:

To explain and understand the concept of Anti Dumping and Countervailing

duties.

Challenges in framing the regulatory framework for subsidies in services.

The effect and governance of Anti Dumping and Countervailing duties.

2.3 Hypothesis:

In order to conduct a research work, some important hypotheses are to be formulated. Thefocal points and assumptions are normally available through the formulation of hypothesis.

The major hypotheses developed on the basis of study of available literature and evaluation of

secondary data and work done earlier including related studies are:

1. That the rules and regulations set up by WTO are more than enough for such trade

problems.

2. That this process might bring the disputes between two countries to an end and that

to in a peaceful manner.

2.4 Research Methodology:

The present research study is mainly a doctrinal and analytical. Keeping this in view, the

researcher utilized the conventional method of using libraries consisting of secondary sources.

As the study is doctrinal in nature, historical and doctrinal methods are adopted because it is

not possible to study purely by experimental method.

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2.5 Utility of the Study:

The project prepared by the researcher on the topic of A Critical Analysis of Anti Dumping

and Countervailing duties and its development in India, will be useful for the academic

purposes and the legal fraternity at large. The research study on the subject matter in question

would certainly enhance the knowledge and understanding of the readers including the

researcher.

Chapter III

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Observation and Findings

3.1Salient Features of GATT Anti-Dumping Law and Changes Made in the

Uruguay Round

Dumping is defined in GATI as offering a product for sale in an export market at a price

below Normal value. Normal value is defined as the price charged by a firm in its home

market, in the ordinary course of trade. Trade is considered not to be ordinary if over an

extended period of time a substantial quantity of goods is sold at less than average total costs.

If sales in its domestic market are too small to allow price comparisons, the highest

comparable price charged in third markets or the exporting firms estimated costs of

production plus a reasonable level for profits, and other requirements like administrative,

selling, and any other expenses, is to be used to determine the normal value (the so-called

constructed value). In cases of centrally planned economies or similar cases where market are

not free, the investigators use the concept of a surrogate or analogue country, which is similar

to the country concerned, keeping the product range in mind. The comparison of the export

price and the normal value must be made at the same level of trade (normally ex-factory level)

and as close as possible to the same time, allowing for differences in factors, such as theconditions and terms of sale, the quantities involved physical characteristics, and differences

in relevant costs. Similarly, adjustments should be made for different currencies.

Action against dumping may only be taken if it has caused or threatens to cause material

injury to domestic import-competing firms. Injury determination must be based on positive

evidence and must involve an objective examination of the volume of dumped imports, their

effect on prices in the domestic market, and the impact on domestic producers of like

products.

3.2 Procedures Followed by Major Countries6

6 Gupta, R K, Anti Dumping and Countervailing Measures, 1996, Response Books, New Delhi.

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Most of the anti-dumping investigations against Indian exporters have been initiated by the

US and the EC authorities. In order to acquaint Indian exporters/producers with the

procedures followed by the IJS and the BC authorities, this chapter discusses their details at

some length. This chapter also covers the procedure followed by the Indian authorities in

conducting investigations in India against foreign exporters/producers.

3.2.1 The US Procedure

In the case of the US, the Department of Commerce (DOC) investigates the alleged dumping

of imports. Whether the dumped imports have caused material injury is determined by the

International Trade Commission (ITC). Both these agencies conduct simultaneous

investigations. Their investigations are conducted in a scheduled manner as described below.On receipt of an application, within 20 days the DOC examines the sufficiency of the petition.

It also examines the applicants standing, i.e. whether or not the petition has been filed on

behalf of the domestic industry. This period may be extended by another 20 days in case the

DOG needs to obtain additional information.

Within 45 days of the filing of the application, the ITG makes a preliminary injury

determination, i.e. after considering all the evidence they determine whether there is a

reasonable indication of material injury, threat of material injury or material retardation to the

establishment of an industry caused by the alleged dumped imports. In case the ITC comes to

a negative determination, the case is terminated. However, the standard applied to determine

injury at this stage is not very strict7.

In case DOC comes to a decision to initiate the investigation, they request the US embassy in

the exporting country to obtain the necessary information on foreign parties. The DOG sends

questionnaires to foreign producers on the 46th day. These are expected to be received within30 days, i.e.by the 76th day. In case the questionnaires are not completely answered, the DOG

may send supplementary questionnaires. This exercise is expected to be completed by the

130th day.

After receipt of information, the DOC examines the responses and within 140 days (190 days

if the case is extraordinarily complicated) of the initiation of investigation, i.e. within 160 days

of the filing of application, they publish the preliminary determination. The allegedly dumped

7 The Anti-Dumping Negotiations: Proposals, positions and Antidumping Profiles by Linda M Young and John

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imports would not be finally assessed to customs duty by US Customs after publication of

preliminary determination. The importers will be required either to execute a bond or to make

a cash deposit equivalent to the amount of the dumping margin for all imports made on or

after the date of publication of the preliminary determination. In case the preliminary

determination is negative, US Customs are not required to take any special action. The DOG,

however, would still proceed towards a final determination.

After making a preliminary determination a disclosure is made on the 165th day. The DOG

may also send their teams to the concerned exporting company for verifying the information

furnished by the foreign producers/exporters.

After verification of the information, the DOG issues a verification report. The interestedparties may offer their comments and submit written arguments and if so desired may seek

hearing. After the above process is over, the DOC would proceed towards final determination

of dumping margin which would he issued on the 235th day. If the final determination by the

DOC is negative, the case will be terminated resulting in discharge of bond, if executed, or

release of cash deposit.

In case the final determination by the DOG is affirmative, a disclosure is made on the 240th

day. The final determination of the dumping margin, however, is made by the ITC. In case the

DOC has made an affirmative preliminary determination, the ITC would make its final

determination in 45 days and in case the DOC has made a negative preliminary determination,

the ITG would have 75days to decide final determination. During this period of 45 days (or

75 days) the ITC will make a final injury determination on the basis of pre-hearing written

arguments, submissions made during hearing and post-hearing written arguments. If the ITC

issues a negative injury determination, the case is terminated. In case the ITC comes to the

conclusion of an affirmative injury determination, it issues an anti-dumping order. The

importer would thereafter be required to pay cash deposits on all imports.

The DOC conducts an annual review of anti-dumping margins on request to determine the

amount of anti-dumping duties to be assessed on past imports (it may be noted that the amount

collected on preliminary or final determination is only a cash deposit) and to determine the

rate of cash deposit to he collected for future imports. The procedure followed is similar, i.e.

the DOC issues questionnaires, conducts verification, publishes preliminary results of review,

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holds disclosure meetings, has written arguments, hearings, etc. It may, however, be noted that

the review is only in respect of dumping and not in respect of injury.

An anti-dumping investigation may be terminated in consultation with the domestic industry

anytime upon withdrawal of the application (complaint) by the applicant or in the case of self-

initiated proceedings, by the DOC, if the DOG finds that such withdrawal would be in the

public interest.

3.2.2 The EC Procedure

The European Union has three institutions to deal with anti-dumping matters, namely, the

European Commission (EC), the Council of Ministers and the Advisory Committee.

The Commission is an independent institution which takes a decision regarding initiation of an

investigation. The Advisory Committee consists of representatives of each member state (of

the European Union) and a representative of the EC. The Commission is required to consult

the Advisory Committee on the issues concerning the existence of dumping, determination of

dumping margin, injury determination, the causal link between the dumped imports and injury

and the protective action desired to be taken. Since the Advisory Committee consists of

representatives of member states, their interests at times may be conflicting, for example, if a

particular industry has a strong presence only in a few member states and user industry in

some member states, they may have divergent interests8.

The Council of Ministers consists of a representative from each of the member states of the

Union. The Council acts through a simple majority. No definitive anti-dumping duty can be

imposed without the approval of the Council of Ministers. An investigation, however, can be

terminated without consulting the Council of Ministers if the Commission in consultation with

the Advisory Committee comes to such a conclusion. However, if some of the members of theAdvisory Committee object to the termination, the Council may decide within one month to

continue the investigation. The following procedure is followed by the Commission to

investigate both the dumping and the injury:

A complaint may be filed with the Commission or with the member state concerned who

would, in turn, pass on the complaint to the Commission. The Commission, on receipt of a

complaint, sends copies to all the member states. It then examines the complaint and if there is


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sufficient evidence to justify initiation of an investigation, initiates the proceedings within 45

days and publishes a notice for the same.

The Commission sends the questionnaires on the day of publication of the notice and the

parties concerned have 37 days to respond to the questionnaires. They may also, during this

period, indicate their desire to be heard in the matter. The Commission generally grants a

hearing to the parties concerned which is informal in nature.

The Commission verifies the information furnished by the parties in response to

questionnaires before issuing the preliminary findings. For this purpose the Commission

informs the parties concerned of the nature of the information to be verified and any further

information which needs to be made available by the parties during the visit of verificationteams9.

The Commission allows interested parties to inspect the records including a non-confidential

version of the complaint, all responses to the questionnaires and other submissions made by

the parties. The Commission, however, does not permit inspection of reports on hearings

prepared for internal purposes and verification reports.

The Commission may also, on request, organize meetings between the parties concerned.

These meetings are held at the Commissions office in Brussels. In practice the Commission

allows disclosure of information and calculation sheets regarding the dumping margin during

pre-disclosure meetings. With regard to injury determination also, the Commission allows a

limited disclosure.

The Commission may impose provisional anti-dumping duties after 60 days from the

initiation of the proceedings but not later than nine months from such initiation. For

imposition of provisional duties the Commission is required to consult the Advisory

Committee. The provisional duties may be imposed for six months which may be further

extended for a period of three months. Alternatively, the provisional duties may be, ab initio,

imposed for nine months.

The parties may request for disclosure of the details underlying the essential facts and

consideration, on the basis of which provisional measures have been imposed. The request for


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such a disclosure is required to be made in writing following the imposition of provisional

duties and the Commission makes the disclosure in writing as soon as possible.

For imposition of definitive duties, the Commission is required to submit a proposal to the

Council not later than one month before the expiry of provisional duties. The Commission has

to consult the Advisory Committee before submitting such a proposal. Acting by simple

majority the Council may decide upon the imposition of definitive duties.

3.2.3 Procedure in India

In the case of India, imposition of anti-dumping duty is authorized under Section 9A read with

Section 9B of the Customs Tariff Act, 1975. The rules in this regard, namely, the Customs

Tariff (Identification, Assessment and Collection of Anti- dumping Duty on Dumped Articles

and the Determination of Injury) Rules, 1995 have been notified by the Central Government

vide Notification No. 2/95 NT. Customs, dated 1 January 1995. The Rules and Procedures

adopted by India correspond to the Provisions stipulated under the Agreement. In India the

Designated Authority (an Additional Secretary in the Ministry of Commerce, Udyog Bhavan,

New Delhi) determines both the dumping and extent of injury. An appeal against the orders of

the Designated Authority lies before the Customs Excise and Gold (Control) Appellate

Tribunal (CEGAT).

It may, however, be noted that in India, the injury test is necessary only in case the allegedly

dumped imports are from any country or territory which is either a party to the GAIT or has

entered into an agreement with India for giving Most Favored Nation treatment. (China,

though not a member of the WTO, has entered into a MFN agreement with India.) Regarding

imports from other countries anti-dumping duties can be imposed even if the dumped imports

do not cause any injury

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.

Rule 11 of the Anti-dumping Duty Rules of India require the designated authority, only in

case of imports from specified countries, to record a finding that import of such articles into

India cause or threaten material injury to any established industry in India or materially retard

the establishment of any industry in India. Specified countries have been defined under Rule

2(f) to mean a country or territory which is a member of the WTO and include the country or

territory with which the Government of India has an agreement for giving it the Most Favored


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Nation treatment. Further, Rule 12 relating to preliminary findings and Rule 17 relating to

final findings require the designated authority in respect of imports only from specified

countries to record a finding regarding injury to the domestic industry.

Thus, in case of imports from any country or territory which is neither a member of WTO nor

has entered into an MFN agreement with India, the designated authority is neither required to

record a finding regarding injury nor regarding a causal link and may impose an anti-dumping

duty whether or not such dumped imports cause injury to a domestic industry.

3.3 Anti Dumping and Countervailing Measures in India:

3.3.1 Indian Enactment on the subject of Anti Dumping:

The Anti-Dumping Legislation in India is governed by the Customs Tariff (Amendment) Act

1982 which added two sections 9A and 9B to the Customs Tariff Act, 1975 and the Customs

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Tariff (Identification, Assessment and Collection of Duty or Additional Duty on Dumped

Articles and for Determination of Injury) Rules, 1985 framed there under. These enactments

arose out of our commitment to Article VI of the GATT, commonly referred to as the Anti-

Dumping Code. Consequent to the completion of the Uruguay Round of trade negotiations,

the Final Act embodying the results of these negotiations was signed in Marrakesh on 15th

April, 1994. Accordingly, the Agreement on Implementation of Article VI and our enactment

have been modified by taking into account the new changes brought about in the Anti-

Dumping Code as well as the experience in the administration in the anti-dumping cases

during the intervening period. The ordinance namely the Customs Tariff (Amendment)

Ordinance, 1994 was promulgated in 1994, and it came into force on the first day of January

1995. For our convenience, it is better to highlight some of the important issues in the Indian

law as it stands at present. Subsequently, the concluding paragraph will outline the changes

that have been made since the earlier enactments11.

In simple terms, dumping occurs when a product is introduced into the commerce of another

country at an export price which is less than the comparable price of like products, in the

ordinary course of trade, for a like product, when destined for consumption in the exporting

country.

Normal Value: The term refers to the fair selling price in the domestic market of the

exporting country; i.e. the price at which the products are sold in the domestic market of the

exporting country in the ordinary course of trade.

Like Product: Like product means a product of like kind and quality. If a like product is

sold in the domestic market of the exporting country or in a third country, the price of such

product will be considered, otherwise it becomes necessary to make the adjustment in price

for differences in the product. In the absence of a product which is identical, another product

whose characteristics closely resemble those of the product under investigation, is taken up.

Ordinary Course of Trade: A transaction in the ordinary course of trade refers to one

between an independent buyer and seller where buyer and seller are not related, the price

being the sole consideration for the sale. Low volumes of sales in the domestic market of the

exporting country (less than 5 per cent of sales to the importing country) are treated as not

having been made in ordinary course of trade. Similarly, sale of the like product at a price

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below unit cost of production plus selling, general and administrative cost may be disregarded

as being not in the ordinary course of trade. However, this could be done only where such

below-cost sales are over an extended period of time, which is normally one year. Moreover,

the quantity of sales below unit cost must also be substantial, that is not less than 20 per cent

of the volume of sales considered for determination of normal value.

Domestic Industry: The collective output of firms for relief under anti-dumping should

constitute proportion of the total domestic production of that p except when such producers

are related to the exporters or importers of the alleged dumped article or are themselves

importers thereof in which case the producers shall be deemed not to form part of domestic

industry. It is further provided that domestic producers supporting the application, should, in

any case, account for not less than 25 per cent of the total production of that product by the

domestic industry. To elucidate further, an application is treated as having been made as such

if it is supported by those domestic producers whose collective output is more than 50 per cent

of total production of like product produced by that portion of domestic industry expressing

either support or opposition to the application and in any case not less than 25 per cent of the

total production of that product by the domestic industry.

Constructed Export Price: The export price may be constructed on the basis of the price at

which the imported product is first resold to an independent buyer. If the products are not

resold to an independent buyer or not resold in the condition as imported then the export price

may be constructed on such reasonable basis as the authorities may determine.

Comparison: A comparison between export price and normal value should be a fair

comparison to be made at a same level of trade, normally at the ex-factory level, and in

respect of sales made as normally as possible at the same time. Due allowances need to be

made in each case, on its merits, for differences which affect price comparability, including

difference in condition and terms of sale, taxation, levels of trade, quantifies, physical

characteristics, etc.

Currency Conversion: When the comparison requires a conversion of currency, such

conversion should normally be made using the rate of exchange on the date of sale.

Method of Calculating Dumping Margin: Calculation of dumping margin based on

comparison of normal value with the export price should normally be based upon a

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comparison of the weighted average normal value with a weighted average of price of all

comparable export transaction or by a comparison of normal value and export prices on a

transaction-to-transaction basis.

3.3.2 Procedural Issues in Dumping and Anti-Dumping Measures

The Commerce Ministry of India has laid down detailed guidelines on anti-dumping

complaints. These briefly incorporate the requirements and also explain the broad ideas.

Special emphasis is given on some important issues which are stated below.

Confidential Information: The complaint will normally contain confidential information. It

should be clearly marked CONFIDENTIAL on the cover and on each page of the

submission and on each accompanying attachment. These will be dealt with in accordance

with the provisions on the subject which states that copies of confidential information will not

be provided to other parties. Similarly, non-confidential information should be marked as such

and a non-confidential version of the complaint should be enclosed.

Regarding type of information required, detailed information is necessary in the petition on

imported products, Indian industry in general, evidence of dumping, evidence of injury,

information on the domestic industry, country wise landed value, cost of production, company

wise allocation and apportionment of expenditure by the specific company12. These run into

six pages and it should not be difficult for any industry to provide such information. However,

for the convenience of the industry it may be worthwhile to consider if some information can

be asked for in the preliminary findings and only after a preliminary determination has been

made, further details can be obtained for taking a view on provisional findings. This would be

elaborated in the concluding chapter of report

13

.

While the guidelines are fairly detailed, we need to consider why industry is so tardy about

providing information. Firstly, it is an uphill task to obtain information from foreign sources,

which is not only costly but also often not readily available. Our missions abroad have their

own limitation. Our own system is somewhat new and cannot provide ready guidance to the

complainants. We need to establish the requisite procedure and train adequate number of


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persons. Moreover, it has to be ensured that persons doing antidumping work are not changed

frequently. Links should be developed with anti-dumping authorities in other countries which

will help train Indian investigators, lawyers and accountants so that valuable service can be

provided not only to our industry but also to our exporters subject to investigations in other

countries. This agency could include some aspects of work conducted in institutions like

Industries Commission in Australia or the United States International Trade Commission. For

this it can use trained manpower of Bureau of Industrial Costs and Prices (BICP).

3.3.3 Anti-Dumping Investigation in India

The investigating authorities are obliged to act objectively and rationally in conducting anti-dumping and countervailing investigations. The first stage of the investigations the

examination of the complaint received from domestic industry. Keeping relevant provisions of

the law in mind they should look at status of domestic industry, comparisons of like product

and complete information as per questionnaire in the annexe.

The investigating authorities should give reasonable opportunities to all interested parties, viz,

applicant, importers/users, government of the exporting countries, to acquaint themselves with

all relevant details of the case so as to enable them to fully present their point of view. The

second stage is the initiation of investigation in accordance with the law for determining the

existence of dumping and the indicative margin of dumping on a prima-facie basis. The time

provided is 6 weeks.

The third stage is the determination of material injury keeping in mind trends in profit/loss,

production, consumption, prices for the last 3-5 years and analysis of economic factors as

stated in the previous chapter. In case there is no material injury, they should consider thethreat of material injury or material retardation to the establishment of an industry in India.

Assuming that there is existence of injury of some type in the assessment of the investigating

authorities, the fourth stage will be determination of dumping keeping in mind comparison of

export prices, exact dumping margin to be determined in respect of each exporter and

quantum of dumped exports for each exporter.

The fifth stage is the determination of provisional anti-dumping duties by the investigating

authorities. This has to be completed within 4 months of investigation. They are required to

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notify all interested parties regarding the initiation of investigation and of any provisional or

final determination, and hold a public enquiry.

The sixth stage passes speaking orders with regard to any final protective measure considered

necessary to be imposed on imported goods originating from the specified exporters/foreign

producers. The final determination is to be completed within 5 months of the preliminary

finding. The entire process, as envisaged above, would take 9.5 months even though

international statutes provide for a 12 month period.

3.4 Anti-Dumping and countervailing Duties: Similarities and Differences14

While discussing the Subsidies and Countervailing Measures agreement, one should

distinguish clearly between Antidumping Duties and Countervailing Duties.

Sometimes Antidumping Duties and Countervailing Duties are referred to at the same time.

This is because they share a number of similarities and also many countries handle the two

under a single law, apply a similar process to deal with them and give a single authority

responsibility for investigations.

14 http://www.networkideas.org/eco/may2005/eb03_WTO.htm#4#4.

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However, these are two different trade defense mechanisms available to WTO members and

are addressed by two different WTO Agreements. If a company exports a product at a price

lower than the price it normally charges in its own home market, it is said to be "dumping" the

product. It is therefore a situation of international price discrimination.

The Agreement on Implementation of Article VI of GATT 1994, commonly known as the

Anti-Dumping Agreement, provides elaboration on the basic principles set forth in Article VI

of GATT, to govern the investigation, determination, and application, of anti-dumping duties.

The WTO Agreement on Subsidies and Countervailing Measures on the other hand disciplines

the use of subsidies, and it regulates the actions countries can take to counter the effects of

subsidies. The fundamental difference between the two is while dumping is an action by acompany, for subsidies, it is the government that acts either by granting subsidies directly or

by requiring companies to subsidize certain customers.

Another important feature of Antidumping Duties and Subsidies and Countervailing Measures

is that the GATT agreement allows that the injured domestic industry is permitted to file for

relief under the anti-dumping as well as countervailing duties. However, simultaneous

imposition of both countervailing and anti-dumping duties to compensate for the same

situation of dumping or export subsidization is not allowed. Article VI. of GATT clearly

specifies, "No product of the territory of any contracting party imported into the territory of

any other contracting party shall be subject to both anti-dumping and countervailing duties to

compensate for the same situation of dumping or export subsidization".

3.5 Criticism of Anti-Dumping System:

A large number of legal experts and economists have started questioning the economic

justification for an Anti-Dumping Law. According to them, anti-dumping measures are simply

protectionism in a different garb. Anti-dumping is considered to be an inferior instrument to

address the problem of unfair competition as it does not deal with the source of the problem,

i.e. government policies which artificially create such problems. They point out that this might

encourage cartelization or monopoly tendencies in the domestic market15.



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The critics have made various points16 which are briefly discussed in the following

paragraphs. They contend that anti dumping measures, i.e. the multilaterally-approved

regulations of dumping, has become a preferred tool of regulatory protectionism. The

incidence of this kind of protectionism is spreading because multilaterally-approved rules

have made protectionism too easy.

(a) Article VI of the General Agreement and the Anti-Dumping Code are intended to

constrain the use of anti-dumping measures - the argument points out that it is

necessary to realise that the GATT an agreement on tariffs and on the negotiations of

tariff reduction. The tariff rate for a bound item may not be raised above the level of

binding. An anti-dumping code has to be devised to prevent potential abuse (abuse of

anti-dumping measures). It is not clear that it has been achieved.

(b) International rule making has perversely served to expand the scope for regulatory

protection - a key problem with anti 3houl dumping is the discretion that is often

granted to investigating authorities - or alternatively the guidelines under which such

authorities are forced to operate by law. Moreover, the injury criteria is manipulable

by firms. The assessment of injury depends upon a large number of factors and

procedures where investigating authorities enjoy a great degree of discretionary power

and in these instances even a GATI panel has limited scope for intervention.

(c) Third, anti-dumping, as critics point out, may lead to a cascading of protection

measures. If an upstream industry which produces an input invokes the instrument and

gains protection it may significantly injure a downstream industry which uses the

input. This increases the probability that the downstream firm in turn will seek and

gain protection.

(d) Anti-dumping policies protect the interests of select producers at the expense of other

producers and consumers - anti-dumping measures are designed to protect the interestsof domestic producers of like goods against aggressive import competition. The social

welfare of the intervening country as a whole is never considered when anti-dumping

measures are taken, because the interests of the protected producers are paramount, in

law and in practice.

(e) It is also argued by critics that if one considers the effects on domestic producers and

consumers rather than on the specific industries which may benefit, it may be argued

16International Monetary Reforms Issues Facing Developing Countries 1987.

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that anti- dumping protection is quite similar to other non-traditional forms of

protection.

While all this debate is on, one can say with fair degree of certainty that both dumping and,

therefore, an anti-dumping system is here to stay. There is tremendous political attraction for

anti- dumping measures. One should consider the fact that, major countries, which are

supposed to be proponents of free and fair trade, have made maximum use of anti-dumping

measures. It can be safely said that the pressure of individual sectors from within the domestic

industry will certainly outweigh the loss of consumers, or other groups of industry. However,

what the debate emphasizes is that anti-dumping regulations, if not used with utmost

circumspection, can become counterproductive. The designated authorities should, therefore,

keep these aspects in mind and avoid indiscriminate use of anti-dumping measures17.

CHAPTER IV

Case Analysis on Anti Dumping and Countervailing duties:

Anti-Dumping investigations which India is a recent phenomenon started on 2nd September

1985 as provided in the Customs Tariff Act amendment namely Section 9A and 9W For some

time, there was limited use of Anti-dumping Law but in the recent past a large number of anti-

dumping cases have come up for redressal. Seven anti-dumping cases investigated by the

Designated Authorities in India and two cases against exports from India - one relating to

countervailing measures and the other to anti-dumping measures. The important case details



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are given very briefly. For further records one can refer to the detailed orders which are

published.

1. PVC Resin from Brazil, Mexico, Republic of Korea and USA

The first case relates to Poly Vinyl Chloride Resin (PVC) imported into India from Argentina,

Brazil, Mexico, Republic of Korea and the United States of America and subjected to

provisional anti-dumping duty on 2 February 1993 by the Government of India after a

preliminary affirmative determination of dumping and injury by the Designated Authority

issued on 18 January 1993. The dumping margins are shown in table below:

The Authority found that the imports from Argentina were less than I per cent of domestic

consumption and, therefore, considered to be insignificant. Regarding Brazil, Republic of

Korea, Mexico and the US, the existing capacity wasfound to befar in excess ofthe domestic

demand. The Authority held that there was every likelihood of a substantial increase in the

dumped exports to India in the absence of anti-dumping measures. It was, therefore, satisfied

that there was a threat of material injury from dumped import of PVC Resin from Brazil,

Republic of Korea, Mexico and the US.

The Authority vide Notification No. 14/9/92 - TPD dated 30 July 1993 recommended the levy

of anti-dumping duty as follows:

Rs./MT

Brazil 2630

Rep. of Korea 1200

Mexico 1619

USA 504

2. Bisphenol -A (BPA) from Japan

In another case relating to the import of Bisphenol -A (BPA) from Japan into India, the

Authority notified preliminary findings on 10 August 1993. This was perhaps the first case

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where anti- dumping duty was imposed on grounds of material retardation of domestic

industry.

After making adjustments on account of freight, local cost, insurance, tax and other costs, the

Authority compared the export price and normal value at the same level of trade and

determined the margin of dumping as 23 per cent. Subject to above, the Authority confirmed

vide Notification no. 14/73/92 - TPD dated 18 February 1994 the preliminary findings

regarding dumping margin and injury to the domestic industry in the form of material

retardation caused by dumped imports originating from Japan.

3. Iron Metal Castings from India

The case relates to duties. Iron metal castings exported from India during 1985 were subject to

countervailing investigations by the US Department of Commerce (DOC). Exporters of iron

metal castings from India received certain rebates from the Government of India pursuant to

Indias International Price Reimbursement Scheme (IPRS). The IPRS was introduced in 1981

by the Government of India. Under this scheme, users of domestically produced steel, pig iron

and scrap as raw material, were entitled - upon export of a finished product - to a refund equal

to the difference between the higher cost of the Indian raw material and the cost of the same

raw material, if purchased internationally.

On 10 December 1990, the DOC issued a first determination that the 1985 IPRS rebates were

countervailable in their entirety. The DOC stated that:

We consider a government program that results in the provision of an input to exporters at a

price lower than to producers of domestically-sold products to confer a subsidy within the

meaning of Section 771(5). It is irrelevant whether the IPRS is consistent with Item (d)

because we are not concerned with world prices but with the alternative price of pig iron

commercially available in the domestic market.

Item (d) of the Illustrative List of Export Subsidies annexed to the Agreement on

Interpretation and Application of Articles VI, XVI and XXIII of the GAIT provides the

following definition of a subsidy:

The delivery by government or their agencies of imported or domestic products or services foruse in the production of exported goods, on terms or conditions more favourable than for

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delivery of like or directly competitive products or services for use in the production of goods

for domestic consumption, if (in the case of products) such terms or conditions are more

favourable than those commercially available on world markets to their exporters.

The Court of International Trade (CIT) in a decision dated 31 January 1992, overruled the

DOCs first determination holding that it must examine the IPRS in the light of the exception

to countervailing subsidies provided in Item (d).

On 26 February 1992, the DOC issued a Draft Redetermination on Remand, Final Results of

Countervailing Duty Administrative Review (Draft Remand Determination), which was

released to all parties for giving their comments.

On 16 March 1992, after reviewing the record already established and without requesting anyadditional information from the Government of India or Appellants, the DOG issued a final,

second determination in which it found that the record evidence was ambiguous and

woefully deficient to support any claim that the IPRS programme is consistent with the so-

called world market price exception under Item (d). Consequently, because of this alleged

ambiguity and deficiency ofthe record evidence, tbe DOG ruled that the IPRS rebates made in

1985 were direct export subsidies which were countervailable e in their entirely.

On 28 August 1992, the CIT affirmed the s final remand determination that the 1985 IPRS

rebates were countervaflable in their entirety and dismissed the proceeding.

Against this order of the CIT, on 28 August 1992 MIs. Creswell Trading Company Inc., City

Pipe and Foundry Inc. and others filed an appeal before the United States Court of Appeals for

the Federal Circuit.

The court observed that at the heart of this case lie the intertwining issues of who bears the

ultimate burden of proof of establishing the existence of countervailable subsidy pursuant toItem (d), and what the appropriate procedural burdens of production are during the course of

the DOC s investigation to determine if such acountervailable subsidy exists.

In addition, the court also observed that, in its final remand determination, the DOC did

nothing more than allege that the Indian governments method of establishing international

benchmark prices for calculating the 1985 IPRS rebates was inaccurate. Indeed, the DOC

failed to set forth any evidence at all that these international benchmark prices were, in fact,

inaccurate.

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As IPRS rebates were received for Scrap, as well as for pig iron, and as there was no separate

IPRS programme for scrap, the DOC determined that the IPRS rebates received by Indian

castings producers were excessive. Using the figures for total scrap and pig iron used by each

castings exporter, the DOC calculated the amount of each rebate attributable to pig iron

consumption. For one company which did not provide figures for total scrap and pig iron

usage, the DOC used the weighted average of the publicly available figures provided in other

companies questionnaire responses.

The DOC accordingly recalculated the revised rates taking into account only the IPRS rebates

attributable to the costs of delivering the imported pig iron to India and the scrap.

CHAPTER V

Conclusion and Suggestions

Governments can resort to countervailing duties to offset the benefit provided by subsidies toproducers in the exporting country. Countervailing duties can only be applied when an

imported product benefits from a subsidy and the advantage afforded to imports of that

product by the subsidy can be shown to be causing injury to the domestic industry.

Countervailing duties are intended to counteract the unfair advantage that a subsidy might

provide another countrys industry. However, they do not address the deleterious effect

subsidies can have where one countrys exports to a third market are replaced by those of

other subsidizing countries.

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In order to manage the trade distorting impact of subsidies, WTO Members concluded the

Agreement on Subsidies and Countervailing Measures, which applies to all goods (although

there are additional rules governing agricultural products in the Agreement on Agriculture).

The Agreement establishes a set of disciplines that constrain the use of trade distorting

subsidies, as well as establishing a common set of standards for investigating subsidized

imports and then applying countervailing duties.

When launching the Doha Round in 2001, WTO Ministers mandated negotiations aimed at

clarifying and improving disciplines under the Agreement on Subsidies and Countervailing

Measures (as well as that Antidumping Agreement. In addition), Members were asked to

strengthen disciplines on subsidies in the fisheries sector.

When they met in Hong Kong in December 2005, WTO Ministers took stock of progress in

that negotiation. Under consideration, were a range of proposals for improving the Subsidies

Agreement, including the definition of a subsidy, prohibited subsidies and establishing where

serious prejudice to the interests of another Member exists.

After having debated these core issues since 2001, the Membership is now ready to enter the

final stage of negotiations. This final stage will be on the basis of draft negotiating text

prepared by the Chair of the Rules Negotiating Group.

There are some proposals and recommendations which are given by Indian government for

countervailing duties and subsidies, well I truly agree and support these proposals and

recommendations and also believe that they should be taken into consideration.

Keeping their development needs in mind, countries should concentrate on providing grants to

meet general infrastructural requirements rather than providing subsidies to certain

enterprises.

Under the Agreement on SCM, member-countries are required to notify subsidies

programmes maintained by them. These need to be examined by other Members very

carefully for any adverse effect these may have on their domestic industry.

In the absence of notification to WTO Committee on Subsidies and Countervailing Measures,

a programme which may otherwise be non-actionable, may be countervailed. Obligations to

notify subsidies need, therefore, to be examined very carefully.

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Domestic industry should maintain their own data base to enable them to file complaints

against subsidized imports and to protect their interests.

Domestic industry should file application for investigation on subsidized imports at the

earliest as no countervailing duties can be imposed without initiation of investigation.

In case there is a fear of countervailing duties being imposed on subsidized exports, the

government of exporting country may perhaps consider imposition of export duties as a better

alternative.

Consultation between governments of importing and exporting countries may prove very

helpful in cases of countervailing actions.

Bibliography

Books referred:

1. Gupta, R K, Anti Dumping and Countervailing Measures, 1996, Response Books,

New Delhi.

2. Bagchi, J K, Dumping and Anti Dumping Measures Policy and Practice, 1999,

Research and Information System for the Non Aligned and other Developing

Countries, New Delhi.

3. Aggrawal, Aradhna, The Anti dumping Agreement and Developing Countries An

Introduction, 2007, Oxford University Press, New Delhi.

4. Gupta R K, Safeguards Countervailing and Anti Dumping Measures Against

Imports and Exports, Academy of Business Studies, New Delhi.

Articles referred:

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1. The treatment of Subsidies in Trade Remedy Laws and Trade Agreement: The

Complex Cases of Softwood Lumber b Neil Campbell and Jonathan Hood.

2. The Anti-Dumping Negotiations: Proposals, positions and Antidumping Profiles by

Linda M Young and John Wainio.

Website referred:

1. http://www.marxists.org/history/capitalism/gatt/ch06.htm(GATT ARTICLE VI).

2. http://www.answers.com/topic/countervailing-duties.

3. http://www.eximkey.com/Customs/ANTI-DUMPING.html.

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