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Anti-dumping investigations -- Needed, increased vigilance

K. S. V. Menon

THE Government has done well to appoint a committee under the Chairmanship of Mr L. V. Saptharishi, Additional Secretary and Designated Authority for Anti-Dumping and Allied Duties, Ministry of Commerce and Industry, to facilitate and streamline anti-dum ping investigations.

The Committee is expected to examine the inadequacies in the laws and rules governing anti-dumping procedures; inconsistencies in the statutes vis-a-vis anti-dumping practices and rulings of the Cegat/dispute settlement bodies; availability of legal reco urse when no duties are recommended; and any other issues relevant to the terms of reference.

Dumping of goods broadly means sending goods that are unsaleable because of the high price they command in the home market to a foreign market for sale at low price with the intention of keeping up the price at home and, at the same time, capturing a new market. The most important criteria to determine whether goods are being dumped are:

*High price in the home market, and

*Low price in the foreign market.

Article 2 of the Agreement on Implementation of Article VI of the GATT, 1994 provides that a product is to be considered as being dumped -- that is, introduced into the market of another country at less than its normal value -- if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product for consumption in the exporting country.

The investigating authorities cannot disregard sales below cost unless such sales are made:

*Within an extended period of time;

*In substantial quantities; and

*At prices which do not provide for the recovery of all costs within a reasonable period. This `reasonable period' may be identical or different from the `extended period of time'.

Article VI of GATT/WTO recognises the right to levy anti-dumping duties only as per prescribed procedures. These are laid down in the Anti-Dumping Code established at the end of the 1979 Tokyo Round of GATT -- to which India is a party -- and expanded un der the Uruguay Round agreement.

Under this, dumping means commercial sale of a product in another country at below `normal value', which is its comparable price (adjusted for local taxes) in the exporting country; comparable price in a third country; or the cost of production in the ex porting country plus a reasonable margin, in that order.

The margin of dumping is the difference between the normal value and the import price (i.e. CIF cost plus the normal tariffs). The anti-dumping duty cannot exceed the margin of dumping and can be levied only if there is (i) dumping (resale in the importi ng country below the normal value), (ii) material injury (or its likelihood) to domestic industry and (iii) a causal relationship between dumping and the injury.

From the operational angle, the entry of any product into a country is termed as dumping if;

*It is not less than 3 per cent of the total domestic production of that or similar product in the country.

*At least 50 per cent of the producers are of the view that it is injuring the domestic industry.

*Injury or threat of injury should be causal, and the causal linkage proved.

*The dumping should have taken place over a period of time.

According to the Uruguay Round agreement, anti-dumping investigation must involve a written application by the domestic industry, giving evidence of (a) dumping, (b) injury/threat of injury and (c) a causal link between the two. Domestic industry for thi s purpose must account for more than 50 per cent of the domestic production of a product, if it accounts for less than 25 per cent, the application shall not be entertained.

Once the anti-dumping authority establishes a prima facie case for investigation, all `interested parties' must be given at least 30 days notice for a reply. Completing the investigations, as per the WTO, would take anywhere between 180 and 240 days. A p rovisional anti-dumping duty cannot be levied earlier than 60 days from the date of initiating the investigation.

The Designated Authority dealing with dumping is the Anti-Dumping Cell of the Commerce Ministry. The Authority occupies a pivotal position as a vigilant, protective judicial forum to protect industries which have suffered material injury on account of du mping by the foreign supplier. The duties of the Designated Authority are:

a) To investigate the existence, degree and effect of subsidy on any article,

b) To identify the articles liable for any duty or additional duty,

c) To submit its findings to the Central Government as to the nature and amount of subsidy in relation to such articles.

The Designated Authority can initiate a suo motu investigation if it is satisfied that there is incidence of dumping. It is supposed to give, within a year from the initiation of investigation, a final finding on whether a net subsidy is being granted in respect of the article under investigation and, if so, whether it caused material injury to the affected industry.

If the findings of the authority are in the affirmative, confirming prima facie evidence of dumping, the case is recommended to the Central Government, which determines the amount of duty, which is valid for five years. This is done to enable the domesti c industry to rearrange itself to face competition better.

However, while charges of dumping are looked into by the Commerce Ministry, safeguard and countervailing duties are in the domain of the Finance Ministry. This comes in the way of framing a comprehensive law to tackle the unfair trade practice transparen tly and effectively.

The situation gets complicated because of the problem in defining dumping, in determining injury to local industry and in establishing industry-specific causal links between dumping and injury. Hence, there is need for greater inter-ministerial coordinat ion so that the procedures are laid down in a timely and transparent way.

The time taken by the anti-dumping directorate in recommending a provisional and final measure against dumped imports is too long, leading to grievous injury to the industry in the intervening period. This is in sharp contrast to the average time taken b y countries such as the US, Australia, New Zealand and Chile, which take speedy action for early redressal.

The main stumbling block here is access to adequate and authentic information and data on cost of production, domestic price of the product prevailing in the country of manufacture, and so on, required by the Designated Authority for a decision to initia te investigations. There is, thus, the urgent need to devise a more efficient mechanism for information dissemination which will enable Indian companies to fight their cases on a stronger footing.

Government agencies, particularly Indian diplomatic missions abroad, should help industry get the requisite data/information to reduce the time taken to make the petition to the anti-dumping directorate. Apex industry associations, such as the Confederat ion of Indian Industry, with its overseas offices, can also play a decisive role here.

Under WTO regulations, the authorities can only impose duties on the countries from where actual imports have taken place during the investigation period. But MNCs often have operations in more than one country. To circumvent the anti-dumping duty on imp orts from a particular destination, these companies start exporting from other countries.

Hence, India should represent to the WTO to draw up specific guidelines which restrict an MNC from exporting products from its other plants once anti-dumping investigations are on for its products. Where the petition is filed by the domestic manufacturer , the onus of proving non-dumping should repose on the exporter country/company and not on the Indian industry affected by dumping, as in the US.

A recent study by Rowe & Maw, a London-based international law firm, indicates that of the 251 anti-dumping cases initiated by 21 countries involving 120 products last year, China is the most targeted country, with the European Commission (EC) and its me mber-states coming second.

The US is said to be the most active user of this instrument, with 46 new cases (the same as in 1999), followed by Argentina and India, which took second and third place respectively. Traditional users, such as the US, EC, Canada and Australia, together accounted for 45 per cent of the investigations.

Seventy-seven per cent of Indian anti-dumping investigations involved chemical products, accounting for almost 40 per cent of all cases started against this sector. Similarly, 80 per cent of US anti-dumping cases involved steel products, accounting for n early all such investigations worldwide.

This trend could be more pronounced in the years to come. The latest decision of the Canadian Government to impose protective duty on Indian steel export is indicative of the writing on the wall. All these suggest that we have to build up an efficient, w atchful and decisive market intelligence system, and that the authorities must take timely and judicious decisions to protect the interest of domestic industry within the accepted WTO norms and strengthen our bargaining power.

The free import of virtually all products and services, as envisaged in the Exim Policy 2001, warrants increased vigilance by all concerned for speedy disposal of specific anti-dumping cases by the authority concerned. One hopes the committee will look i nto the whole gamut of issues involved and arrive at practical solutions to seemingly complex problems, particularly in view of the recessionary trends worldwide.

(The author is

a New Delhi-based industrial consultant.)