In this blog post, Dhiren Sehgal, a recent graduate of Jindal Global Law School and currently a student of the Diploma in Entrepreneurship Administration and Business Laws course by National University of Juridical Sciences (NUJS), Kolkata and iPleaders, analyzes the legal and conceptual aspects of Anti-Dumping Laws with respect to India. 

Introduction

As per the General Agreement on Tariffs and Trade (GATT), a multilateral agreement regulating international trade and commerce, which lays down the guidelines and principles to be followed by the member states to the agreement. In 1995, the World Trade Organization replaced the General Agreement on Tariffs and Trade (GATT) and had about 162 signatories as member nation states as of November 2015.

These principles are to be adhered to when it comes to imposing of anti-dumping duties and safeguard measures. This general agreement on tariffs and trade guidelines and principles have been incorporated into the national legislation of the member countries of the world trade organization.

Now, dumping takes place when a product is sold at a relatively lower price by an exporter when compared to the exporter’s domestic market. However, the practice of dumping isn’t illegal or anti-competitive on the face of it, as the prices set by producers to sell do vary in different markets depending on the situations involving different demand and supply conditions. This sort of practice can be deemed anti-competitive or illegal when the discriminatory pricing leads to causing substantial or material injury or damage to the domestic market where the goods are being imported. In cases where a substantial or a material injury to the domestic market can be foreseen or has in actuality caused the injury then the concerned authority can initiate its investigative procedures and eventually impose anti-dumping duties.

An example of this would be, the Anti-dumping Duty imposed by the Indian government in order to protect the domestic iron and steel industries of India, the government has imposed an Anti-dumping Duty for six months on steel pipes, tubes and other imports from the country. The Anti-dumping Duty is reported to be between $961.33 – $1,610.67.

The application was moved to the directorate general for Anti-dumping and Allied Duties (DGAD) for the imposition by Indian Seamless Metal Tubes Ltd. And Maharashtra Seamless.

Legal Framework (India)  

The established legal framework for dumping activities has been laid down under the Customs Tariff Act, 1975. This act was amended in the year 1995 to incorporate the principles and guidelines established in the GATT, in the local laws of the nation. This amendment led to the inclusion of certain anti-dumping rules involving identifying, assessing and collecting the appropriate anti-dumping duty on dumped articles into the country and also for the determination of the injury caused to the domestic market. The customs tariff rules framed in 1995 form the basis for investigative procedures for anti-dumping activities and for levying anti-dumping duties on dumped articles. These laws have been incorporated in furtherance to Article VI of the GATT, 1994.

Section 9A of the Customs Tariff Act, 1975 amended in 1995 talks about instances in which the central government of India may impose antidumping duty after inquiring and determining the export price and the normal/original value of the article and the margin of dumping on cases to case basis. The central government of India under this section makes rules pertaining to identifying the articles to be held liable for any dumping duty and also shall provide for the manner for determination of the export price, margin if dumping and the normal value of the article in contention.

Section 9b of the Act talks about the Central Government of India levying dumping duty or any additional duty only in cases of a material or substantial damage to the domestic market. Material damage can be analyzed by the concerned authority in two ways by analyzing the effect of the volume of dumped articles imported into the country, which includes analyzing the influx of dumped imports in comparison with the production and consumption in India and how this import is going to affect the domestic market of India. Then comes the analysis of the effect of dumped imports on the prices of ‘like articles’ in the Indian market, this analysis includes analyzing the extent to which dumping is causing a decrease in prices in the Indian market or if in a way is preventing price increase which would’ve been possible otherwise. An example of when a material damage is considered would be China’s dumping of steel products in India as it caused material and substantial retardation of the domestic industry of India. 

Section 9c of the Act revolves around appealing against the order of determination of dumping in relation to import of any article shall be directed to the Customs, Excise and Service Tax Appellate Tribunal constituted under section 129 of the Customs Act, 1962. An appeal shall be accompanied by a fee of fifteen thousand rupees, and an appeal has to be filed within ninety days of the date of the order. An appeal may be entertained after the expiry of the 90-day period if it can be proved that the appellant was obstructed by sufficient cause from filing the appeal in time.

The Ministry of Commerce is the deemed authority for investigations and recommendations, and the imposition and collection of the amount of duty to be paid will be headed by the Ministry of Finance respectively.

How do You Determine Dumping?

It occurs when the export price of any article which is being imported to India is less than the normal/original value of the article in the exporting nation.

What is Normal Value?

It is the price at which any article or good are sold, under ordinary trade circumstances, in the domestic market of the exporter’s territory or country. The act provides us with two methods for determining the normal value of any product, which are –

• By comparing the export price to some other appropriate country. In this case, an appropriate country could be any country the goods are being exported to simultaneously by the exporter. For example, in the dumping case of China, China was exporting/dumping steel products in India and to the United Kingdom simultaneously. In this case, the United Kingdom would be the other appropriate country to tally the export prices with.
• By taking the production cost in the country of origin and adding adequate costs of selling for profit purposes.

What Is an Export Price and How Do You Construct One in the Absence of an Export Price?

The price of the goods being imported into India paid for the articles imported by the first buyer in India is the export price of the article.

In cases where the export price is impossible to determine or isn’t reliable because of some agreement between the exporter and the importer, then in this scenario, the export price is evaluated on the basis of the price at which the imported article is resold to a buyer. In cases where the article isn’t resold in a similar condition as it was imported in, then the export price will be determined on a reasonable and logical basis.

What is Margin of Dumping?

It refers to the difference between the normal value of the product in the country it is being exported from and the export price of the product. This margin of dumping is normally calculated on the basis of comparing the average normal value with the average of prices of export transactions; another way is comparing the normal value and the export price on a transaction to transaction basis.

There are multiple factors affecting this comparison of the normal value and the export price, the prices of export value and the normal value of the goods have to be put on the same pedestal and then compared which is normally at the ex-factory stage. Factors such as the physical aspects, levels of trade, the quantity being traded, taxation regimes and the terms of sale, in way that affects price comparison of the normal value and the export price.

The cause of action when it comes to anti-dumping can only arise if there’s a market for the articles being dumped into India, there has to be an Indian industry producing ‘like article’ when being put into comparison with the article being dumped.

Material Injury to the Domestic Industry

To have a cause of action against the alleged dumping of articles into India, one of the key requisites that need to be established is ‘material industry to the domestic industry.’ The injury can’t be based or anticipated on threats, statements, and allegations. There has to be concrete evidence supporting and proving material or substantial injury. This material injury can be analyzed by the concerned authority in two ways by analyzing the effect of the volume of dumped articles imported into the country, which includes analyzing the influx of dumped imports in comparison with the production and consumption in India and how this import is going to affect the domestic market of India.

Then comes the analysis of the effect of dumped imports on the prices of ‘like articles’ in the Indian market, this analysis includes analyzing the extent to which dumping is causing a decrease in prices in the Indian market or if in a way is preventing price increase which would’ve been possible otherwise.

Competency to File an Application

On receiving a written application from the domestic industry players, a dumping investigation can be initiated. However, a valid application has two prerequisite conditions which are to be fulfilled-

• The domestic market producers filing the application should be holding at least 25% of the total production of the said article in the Indian domestic industry.
• The domestic producers in express support of the application must account for more than 50% of the total production capacity of the said product by those supporting and those opposing the application for investigation.

What Constitutes a Domestic Industry?

Includes the totality of Indian producers of the ‘like article’ in question, or it can be deemed as those producers who are collectively producing a major chunk of the total output being produced in India. Importers of the like articles or those in relation to the exporters and importers of the like article are not deemed a part of the domestic industry.

Relief Recourses for the Aggrieved Industry

• Anti-dumping Duties: it is a protectionist measure in the form of duty or tariff that is imposed by the domestic governments on foreign imports, to protect the domestic industry in question. This can be imposed on ad valorem basis which basically means ‘to the value.’
• Lesser Duty: according to the GATT guidelines, duties more than the margin of dumping can’t be imposed. According to the Indian laws, the designated authority has to restrict the duty to the lower out of the dumping margin and the injury margin. The injury margin is basically the difference between the fair selling price of the domestic industry and the landed cost of the product in contention.

In cases where any exporter’s margin of dumping is below 2% of the export price, will be excluded from the anti-dumping duties, even when the injury and the causal link has been known. Also, the investigations against the exporter country shall be terminated in cases where the dumped imports are less than 3% of the total imports, provided that the sum of imports from all those countries, who are individually accountable for less than 3% of the total imports, should not be more than 7% cumulatively. This is known as the De Minimis margins.