- What is Dumping and anti-dumping duty?
Dumping is a trade practice where goods are exported to another country, at a price lower than their normal value—typically the price at which these goods are sold in the exporter’s own domestic market or in comparable markets. This pricing strategy often aims to gain market share by undercutting local prices, which can harm domestic industries by creating unfair competition.
Anti-dumping duty is a protectionist tariff imposed by a government on foreign imports that are priced below normal value. In India, this duty is levied when an investigation finds that a foreign exporter is “dumping” goods into the country—that is, selling products at a price lower than their normal value in the exporter’s home market. The purpose of anti-dumping duty is to protect domestic industries from unfair competition, prevent injury to local producers, and create a level playing field. The duty amount is generally equal to the dumping margin, or the difference between the product’s normal value and its export price, which helps offset the injury caused by the underpriced imports.
- What are the important statues and rules governing anti-dumping investigation in India?
Anti-dumping investigations in India are governed by the Customs Tariff Act, 1975 (hereinafter referred to as ‘The Act’) and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995(hereinafter referred to as ‘The Rules’). These legal frameworks provide the guidelines for identifying instances of dumping, assessing the extent of dumping and injury, and collecting anti-dumping duties.
- How can an Anti-Dumping investigation be initiated?
According to Rule 5(1) of the Anti-Dumping Rules, 1995, an anti-dumping investigation can be initiated only when a formal application is submitted by the ‘domestic industry’ or by a representative acting on its behalf. This application must contain sufficient evidence of dumping, injury, and a causal link between them, as outlined by the Rules.
However, Rule 5(4) provides an exception to this requirement. Under this rule, the ‘designated authority’ has the power to initiate an investigation Suo motu i.e. on its own accord, if it receives credible information suggesting evidence of dumping. This information may come from the Commissioner of Customs, as appointed under the Customs Act, 1962, or from any other reliable source. In such cases, if the authority is convinced that sufficient evidence of dumping exists, it may begin an investigation without a formal application from the domestic industry.
- Who can file an application to initiate an Anti-Dumping investigation?
An application to initiate an anti-dumping investigation can be filed by or on behalf of the ‘domestic industry’ that produces like products, as specified in Rule 5(1) of the Anti-Dumping Rules, 1995. As per rule 2 (b), domestic industry means “the domestic producers as a whole engaged in the manufacture of the like article and any activity connected therewith or those whose collective output of the said article constitutes a major proportion of the total domestic production of that article except when such producers are related to the exporters or importers of the alleged dumped article or are themselves importers thereof in which case [such producers may be deemed] not to form part of domestic industry”
This means that domestic producers of goods similar or directly competitive with the alleged dumped imports can submit the application. Additionally, representatives or entities acting on behalf of the domestic industry, such as industry associations, are also permitted to file the application.
- What are some key terms to understand in an Anti-Dumping investigation?
- Like Article
The term “like article” refers to a product that is identical or very similar in all respects to the article being investigated for dumping. If an identical article does not exist, a “like article” can also refer to a different product that, while not exactly the same, shares closely resembling characteristics with the article under investigation.
- Normal value
Section 9A of the Act outlines the determination of “normal value” in two ways. First, it defines normal value as the comparable representative price of the like article in the exporting country’s domestic market.
In cases where there are no sales of the like article in the ordinary course of trade within the exporting country—often due to a particular market situation or low sales volume—the normal value can be determined in one of two alternative ways. It may be based on the price in an appropriate third country or calculated based on the cost of production in the country of origin. This cost calculation must include reasonable additions for administrative, selling, and general costs, along with a profit margin.
- Export Price
The export price of goods allegedly dumped into India refers to the price at which those goods are exported to the Indian market. This price is typically represented as the Cost, Insurance, and Freight (CIF) value, which includes all costs associated with transporting the goods to the destination port. To arrive at the ex-factory value, adjustments are made to the CIF value by deducting various costs such as ocean freight, insurance, commission, and any other expenses incurred prior to the goods reaching the point of sale in India.
- Interested party
As per rule 2(c), an “interested party” in an anti-dumping investigation includes exporters, foreign producers and importers of the article under investigation as well as traders or business associations with a majority of members involved in producing or trading that article. It also encompasses the government of the exporting country and domestic producers of similar articles in India, along with relevant trade associations.
- Margin of dumping
The term margin of dumping, in relation to an article, refers to the difference between its export price and its normal value.
- What are some essential requisites to initiate an anti-dumping investigation?
According to Rule 5 of the Anti-Dumping Rules, an application for initiating an anti-dumping investigation must be supported by sufficient evidence demonstrating three critical elements: (1) that dumping is occurring; (2) that the domestic industry is experiencing injury due to this dumping and (3) that there is a causal link between the dumped imports and the injury.
- Factors and data material that will be considered during the course of investigation?
This examination focuses on two primary aspects: (1) Volume of the dumped imports and their effect on prices in the domestic market for the like article, which involves analysing how these imports influence domestic pricing strategies and overall market price levels. (2) the investigation evaluates the consequent impact on domestic producers, examining various economic factors and indices that reflect the industry’s condition. Relevant considerations include the actual and potential decline in sales, profits, output, and market share, as well as changes in productivity and return on investments. Additionally, factors affecting domestic prices, the magnitude of the margin of dumping, and negative effects on cash flow, inventories, employment, wages, and growth potential are assessed. By thoroughly analysing these factors, the designated authority gains a clearer understanding of the overall impact of dumped imports on the domestic industry, which is essential for making informed decisions regarding anti-dumping measures.
- Who all can participate in the investigation process?
In an anti-dumping investigation, various parties can participate, classified as “interested parties.” This includes exporters, foreign producers, importers of the article under investigation, and traders or business associations where a majority of the members are involved in producing, exporting, or importing the concerned article. Additionally, the government of the exporting country and domestic producers of the like article in India, along with relevant trade and business associations, are also considered interested parties. Upon deciding to initiate an investigation, the designated authority issues a public notice containing essential information, such as the name of the exporting country, the article involved, the date of initiation, the basis for the dumping allegation, and a summary of the injury factors. This notice is shared with interested parties. The designated authority also provides copies of the application. Opportunities are given to industrial users and representative consumer organizations to provide relevant information. The designated authority is required to share evidence presented by one interested party with others involved in the investigation. If any interested party fails to cooperate or provide necessary information, the designated authority can base its findings on the available facts and make recommendations to the Central Government as deemed appropriate. This structured participation ensures a comprehensive examination of the circumstances surrounding the alleged dumping, allowing for a fair investigation process.
- Can a party challenge the initiation of the investigation?
The rules and the Act do not explicitly address whether a party can challenge the initiation of an anti-dumping investigation. However, affected parties have the option to challenge the initiation through a writ petition under Articles 226 and 227 of the Indian Constitution if the issue pertaining to lack of jurisdiction of designated authority is raised or if the issue of violation of principles of natural justice is raised as per the ratio of the judgment of Supreme Court in the case of Godrej Sara Lee v. Excise & Taxation Officer (2023 SCC OnLine SC 95)
- What remedies are available in case Anti-dumping duty is imposed on an article?
If an anti-dumping duty is imposed on an article, affected party could file an appeal to Customs, Excise and Service Tax Appellate Tribunal (CESTAT). This appeal can be filed against orders regarding the existence, degree, and effect of dumping or any related subsidies affecting imports into India.
To file an appeal, it must be submitted within ninety days of the contested order, although the Tribunal may accept late appeals if sufficient cause is shown. The appeal requires a fee of fifteen thousand rupees, while additional applications, such as requests for stays or rectifications, incur a fee of five hundred rupees.
Upon receiving the appeal, the Appellate Tribunal will provide all parties an opportunity to present their cases. The Tribunal can then confirm, modify, or annul the contested order.
- What are the interim relief available to the domestic industry?
Yes, the Designated Authority recommends interim relief for the affected domestic industry in the form of provisional anti-dumping duty pending the finalization of investigation proceedings. This provisional anti-dumping duty is suggested by the Authority in its preliminary findings and is subsequently levied by the Ministry of Finance, Department of Revenue.
This measure provides immediate relief to the domestic industry against the injury caused by the dumping of goods. Statutorily, the provisional anti-dumping duty cannot be imposed earlier than 60 days from the date of initiation of proceedings. The Designated Authority aims to recommend provisional duty immediately after the mandatory 60-day period has lapsed. In normal circumstances, this means that the provisional anti-dumping duty is typically recommended within 60 to 70 days and levied approximately three months from the initiation of the proceedings.
- Who imposes the anti-dumping duty, provisional or final?
While the Designated Authority (in the Department of Commerce) recommends both provisional and final anti-dumping duties, it is the Ministry of Finance, Department of Revenue that acts upon such recommendations. The Ministry imposes or levies the anti-dumping duty within three months of receiving the recommendation from the Designated Authority.
Author: Ruchika Sharma, Partner, R&D Law Chambers LLP.
Email : info@rdlawchambers.com
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