Agreement on Anti-Dumping Measures

Anti - Dumping

Importers would like to import goods if available at a price lower than that of the good in the importing country. This happens often and does not constitute “ dumping ”.

When the export price of goods imported into a country, say India, is less than the Normal value of “like goods” sold in the exporter’s domestic market, it is called “dumping”

Normal value is the price of that good in the exporter’s domestic market.

The difference between the normal value and Export price is known as “Margin of dumping”.

Dumping of goods into a country due to unfair pricing adopted by foreign exporters could pose a severe threat to the domestic industries causing material injury in the importing country. The measures adopted by the importing country against such unfair dumping are called anti – dumping measures.

Although WTO stands for free and fair trade among members and imposes obligations through agreements, it does not support anti – dumping and allows members to take necessary measures against anti – dumping through appropriate legal means.

Article VI of the GATT stipulates that “in order to offset or prevent dumping a contracting party may levy on any dumped product an antidumping duty not greater in amount than the margin of dumping in respect of such countries”.

This has enabled WTO member countries to promulgate laws against anti – dumping.

Even countries having no membership in the WTO, for example, Russia, do have anti – dumping laws to protect domestic industries. According to an estimate, “almost 90% of total world imports are now entering countries in which anti – dumping laws are in place”. China, for example, had its anti–dumping legislation before it entered WTO.

Indian Legal Framework

Sections 9A, 9B and 9C of the customs Tariff ACT, 1975 amended in 1995 and Customs Tariff ( Identification, Assessment, Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995) framed there under are the legal bases on which India initiates anti – dumping investigations and for charging anti-dumping duties.

The Indian laws were framed in accordance of with Article VI of GATT, 1994.

Bases for Margin of Dumping

The margin of dumping is arrived at on the bases of the following criteria:

* A 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.

Like Articles

Anti – dumping could be established only when India produces “like articles” similar to those dumped articles in as many aspects as possible.

The normal value is compared with export price on the following criteria:

*At the ex-factory level

*Due allowances should be given for factors affecting comparison

*Weighted average normal price with weighted average export price

* The difference between normal value and export price is considered for every single transaction.

The factors which may affect price comparability of a domestic sale and export value are:

* Physical characteristics

* Levels of trade

* Quantities

* Taxation

* Conditions and terms of sale

Injury to Domestic Industry

Only when the domestic producers could establish “material injury” suffered by them due to dumping a case of anti – dumping could be pursued.

The material injury caused is analysed on two basis:

1) Volume effect

2) Price effect

Volume effect

The extent of volume of the good or article dumped at a certain period of time along with likely future imports either in absolute terms or in relation to production or consumption in India and to what extent it could adversely affect domestic industry are considered as volume effect.

Price effect The dumping of an imported good will certainly

affect price of the same or like good produced and sold by the domestic market. Also, there will be price-undercutting in domestic sales for both goods.

As a result, the likely impact of imported goods in economic and financial terms on the domestic producer is reflected on the following aspects:

* Decline in output

* Loss of sales

* Loss of market share

* reduced profits

* Decline in productivity

* Decline in capacity utilization

* Reduced return on investments

* Price effects

* Adverse effects on cash flow, inventories, employment, wages, growth, investments, ability to raise capital etc.

Casual Link

A valid case of anti- dumping arises only when there is a casual link between the material injury suffered by the domestic producer due to dumping of imported similar or like products.

Besides demonstration of casual link, other factors such as volume and price of other imports, demand contraction, productivity and technology need to be considered to initiate anti – dumping proceedings.

Filing Anti – Dumping Application

As per Indian laws, an application for a case against anti – dumping could be filed in writing by or on behalf of the “domestic industry”.

The application should meet the following conditions so that it can be considered valid for starting legal proceedings:

*The domestic supporters 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

*The domestic produces 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.

The importers and those related to them or exporters are excluded for this purpose.

Relief to the Domestic Industry

The Government of India provides the following relief measures to the domestic Industry who suffered from anti – dumping:

Anti – dumping Duty It is levied on the case-to-case consideration. If may

take the form of either ad valoren basis or specific case basis. When the foreign exporters do not co-operate, they are termed non – cooperative exporters and they will have to pay what is called residuary duty. It is the highest duty paid by the co – operative exporters.

Lesser Duty Rule The GATT regulations stipulated that the duty

imposed against anti – dumping should not exceed the margin of dumping.

It should be lesser and adequate enough to remove the injury suffered by the domestic industry.

The Government of India restricts the anti – dumping duty to the lower of the two; that is, the dumping margins and the injury margins.

Injury Margin It is the difference between the fair selling

price due to the domestic industry and the landed cost of the product under consideration.

The assessable values under the Indian Customs Act and on the basic custom duties constitute the landed cost.

De Minimis Margins

According to Indian law, “any – exporter whose margins 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 casual link are established.”

Further, it is stipulated that,

“investigations against any country are required to be terminated if the volume of dumped imports from that particular source are found to below 3% of the total imports, provided the cumulative imports from all those countries who individually account for less than 3%, are not more than 7%.

Price undertakings

When an exporter considered for anti–dumping case offers to revise the sale price, than, anti – dumping proceedings could be stopped. However, this will be done only after preliminary determination is made in this regard. There are procedures for dealing anti – dumping cases and the competent authority undertakes it comprehensively.

Competent Authority

The Director, Directorate General of Anti – Dumping and Allied Duties, Union Ministry of commerce, Government of India, New Delhi is the competent authority to deal with all issues relating to anti – dumping in India.