Anti-Dumping Law and Practice in India – A Critical Study
Dumping is defined as a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. As international trade started to flourish, several anti-dumping agreements such as the Kennedy Round Code and the Tokyo Round Code did try to tackle the issue but fell short on certain key points.
GATT thus came up with the anti-dumping agreement to implement Article VI of GATT 1994 which defined and gave authority to member states for the imposition of additional anti-dumping duty on certain importers when dumping occurs. There is an injury to the domestic markets (General Agreement on Trade and Tariff (GATT) existed before the UN set up the World Trade Organisation (WTO) as a regulatory authority for international trade and commerce). Anti-dumping laws are vital for the growing global market to avoid the exploitation of domestic products in the importing country and to ensure that they have equal chances of survival as the importer’s products have.
Following the enforcement of Article VI of GATT 1994, India introduced Section 9A, 9B, and 9C to the Customs Tariff Act, 1975 outlining when the anti-dumping duty will be levied on the importer and the magnitude of the duty. Additionally, Customs Tariff (Identification, Assessment And Collection Of Countervailing Duty On Subsidized Articles And For Determination Of Injury) Rules, 1995 was also enforced which states the duties and working of the investigating authority and the procedure followed to levy duty on the party indulging in dumping.
Since 1992 India has started almost 700 initiations and imposed duty in almost 500 instances, making India one of the highest users of trade remedies. The Modi Government introduced the “Make in India” initiative on 25 September 2014 to increase the growth of the manufacturing sector in the country as a result of which there might be an increase in the exports of the country. Dumping can decrease the usage of locally available raw materials as the manufacturers can choose a cheaper substitute for the same. This might invariably injure the domestic markets of raw material provision which makes the regulation of dumping an essential provision. This article will try to analyze the anti-dumping provisions in India.
Anti-dumping duty refers to a tariff imposed against foreign imports by the domestic government if the products are imported at a price lower than the prevailing market value. The duty was imposed as a protective or remedial measure to undo the injury that the domestic markets face due to dumping and not as a measure to protect the domestic markets from international competition caused due to foreign imports. Unlike the customs duty which is collected by the Customs Authorities as a government revenue meant to help in the overall development of the economy, anti-dumping duties arise as a charge additional to customs duties as a measure against unfair trade practices. The Indian law which governs dumping and creates a provision for anti-dumping duties are, as mentioned earlier, the Customs Tariff Act, 1975 and Customs Tariff (Identification, Assessment And Collection Of Countervailing Duty On Subsidized Articles And For Determination Of Injury) Rules, 1995. The Directorate General of Anti-dumping and Allied Duties (DGAD) is the investigating authority for all anti-dumping cases which may arise.
The dumping margin is recognized and the duty is imposed therein accordingly by the Ministry of Finance which has the ultimate authority to impose the anti-dumping duty and determine the amount for the same. When an instance of dumping is detected the DGAD starts an investigation on the same. DGAD falls under the operational management of the Ministry of Commerce and acts as the authority which determines whether the dumping of the goods has occurred and how much of the anti-dumping duty can be imposed in the particular case. It first finds out whether dumping has occurred. The standard way to measure it is using the dumping margin.
The dumping margin is the difference between the normal value and the exported value of the good under investigation. Normal value refers to the value the good would be sold in the domestic markets of the exporting country. While the exported value is the value at which the good is exported to India. The dumping margin is generally expressed in terms of percentages. Though DGAD has the investigating authority, its findings are only a recommendation to the Ministry of Finance which has the ultimate authority to decide whether the duty must be imposed or not. While it can completely discard the duty imposition, it can also increase or decrease the amount of the duty charged. However, the duty decided should not be lesser than the dumping margin and if the Ministry believes that the lowered amount of duty sufficiently covers the injury caused to the domestic market.
Sections and Rules
Section 9 of the Customs Tariff Act, 1975 talks about countervailing duties that the country can impose on goods that are exported to India at a subsidized value. Under this section, sub-section 9A talks about the imposition of anti-dumping duty when three of the following conditions are fulfilled:
- There must be an instance of dumping which is estimated using the margin of the dumping index i.e., the difference between the normal value and the export price of the good.
- The trade must be in the ordinary course of trade which means that there should not exist any special relations between the buyer and the seller. Price in such a case should be the sole deciding factor of the trade.
- In cases where there may exist a “like article” which is a product in close resemblance to the one under consideration must not injure the domestic market due to the product’s low price.
9AA talks about the refund of the imposed duty in certain cases. Most of the anti-dumping duties imposed have an expiry period of five years unless revoked earlier. Section 9B provides certain scenarios where there may be a refund of the countervailing or anti-dumping duty imposed or no such duty may be imposed at all. Section 9C of the same Act states the statutory right of the parties to file an appeal against the dumping order issued. This must be done within 90 days of the issuance of the order to the Customs, Excise, and Gold (Control) Appellate Tribunal.
The Customs Tariff (Identification, Assessment And Collection Of Countervailing Duty On Subsidized Articles And For Determination Of Injury) Rules, 1995 includes a set of 24 rules which consists of the appointment of the designated authority, their duties, initiation of the investigation procedures, levy and refund of taxes and review among others. Rule 6 states that except under Rule 4, all investigations related to the existence of a subsidy and an alleged case of dumping shall be initiated upon receiving a written application from or on behalf of the domestic industry.
However, within the same rule, the supporting parties of the application must constitute at least 25 percent of the production of the like products. After the determination of injury as per Rule 13, the DGAD submits all preliminary findings mentioned in Rule 14 to the Central Government who then shall decide whether a provisional duty under sub-section (2) of Section 9 of the Customs Tariff Act, 1975 is to be imposed. This provisional duty, however, will be effective only for four months from the date of imposition. As per Rule 20, the levy of duty will depend on the final findings mentioned under Rule 19. If there is a finding of dumping then the Central Government shall impose the duty within three months of its publication, while in the case of a negative report the Government shall withdraw any provisional duty imposed within forty-five days of its publication. Lastly, Rule 24 states that the designated authority is to review the duty imposed from time to time to assess whether there is a need to impose the duty in continuance of the previously levied duty, although if there is no justification for further imposition, it shall recommend the withdrawal of the duty to the Central Government.
The provisions, however, fail to address the time within which the duty imposed will be reviewed to assess its continuance or withdrawal. Further, the ease in raising an issue by writing an application to initiate investigations against an importer for the alleged dumping may cause abuse of the law. Laws related to the process of initiating the investigation must be made stricter to ensure that domestic producers do not overuse the law for protecting them from the competition. In 2018 alone India initiated almost 214 investigations against several Chinese products and imposed anti-dumping duties on 99 products by Jan 2019. The usage of anti-dumping laws by India has raised concerns regarding the practice of fair trade by several countries.
A monetary check by the WTO on countries especially developing countries that tend to use anti-dumping laws extensively must be mandatory to ensure that the imposition of the duty is justified and there is an actual injury due to low prices in the domestic industry. However, the Ministry of Finance has recently rejected the imposition of anti-dumping duty on certain steel goods imported from China, Japan, and Korea, there are several other products from various countries that are highly scrutinized and investigated by the DGAD. Ongoing investigations against products originating from countries UAE, Russia, Bahrain, Egypt, Nepal, and so on are just a few examples. Thus, creating more stringent laws around the initiation of an investigation can serve as a time-saving measure for the designated investigation authorities.
Dumping is a serious issue in the world of trade as it undermines the capacity of the domestic markets of the country the products are exported. India has two provisions in place that are in line with Article VI of GATT 1994 for combating dumping. Anti-dumping duty is one of the only ways that countries around the world are relying on to reduce the impact of dumping on the domestic markets. Thus, there are only protective measures in place and no preventive measures as such. India has been a country using excessive anti-dumping laws to protect its domestic industry, however, this has caused issues of questioning India’s fair trade practices by many countries. The current laws can further be amended to leave no room for loopholes and help in the protection of the domestic markets.