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WTO Agreement on Anti-Dumping

Written by: Muskan Aggarwal, student, Faculty of Law, University of Delhi

INTRODUCTION AND HISTORICAL DEVELOPMENT

If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping”. The legal definitions are more precise, but broadly speaking the WTO agreement allows governments to act against dumping where there is a genuine material injury to the competing domestic market. In order to do that the government has to show that:

1. That dumping is taking place;

2. Calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price); and

3. Show that the dumping is causing injury or threatening to do so.

Dumping in general can be termed 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.

 Price of imported good < Home market price in exporting market

GATT and WTO rules do not prohibit “dumping”. Rather, they set forth the rules that members must respect when acting against “like” dumped imports.

Dumping is defined in both Article VI of the GATT 1994, and in the Anti-Dumping Agreement, as the sale of an imported product in the importing market at less than its “normal value”.


Under the Article VI of GATT 1947, certain disciplines were established for situations where dumping was causing injury to a domestic industry in the importing market. Article VI allowed an “anti-dumping duty” to be imposed at the border upon importation to offset or prevent the dumping.

Article VI required a determination of injury caused by dumping, but does not contain any guidance as to how that determination is to be made. It addresses the methodology for establishing the existence of dumping, but only in general terms.

Consequently after this, the Contracting Parties to GATT, 1947 negotiated, the Agreement of Anti-Dumping Practices, entered into force 1967 as a result of the Kennedy Round, but which was not signed by the United States, which resulted in a little practical significance.

The anti-dumping agreement that resulted from the Tokyo Round negotiations, which entered into force in 1980, represented a quantum leap forward, providing more guidance about the determination of dumping and of injury than Article VI, but it was also marked by ambiguities on numerous controversies points, and was limited by the fact that only the 27 Parties to the Code were bound by its requirement.

In light of this, negotiations were undertaken in the Uruguay Round which led to a revised agreement and more detailed rules.

WTO AGREEMENT ON ANTI-DUMPING

The Anti-Dumping Agreement clarifies and expands the Article VI, and the two operate together.

Article VI of GATT and the AD Agreement explicitly authorize a member to impose specific anti-dumping measures on imports from a particular source, in addition to ordinary customs tariffs, when the importing Member demonstrates through a properly-conducted investigation that dumping is causing or threatening to cause material injury to a domestic industry or would materially retard the establishment of a domestic industry.

The initiation of an investigation into possible instances of dumping arises as a result of an application in writing from a company or group of companies in the importing country, which has been set out in Article 5, which requires that the application shows evidence of:

1) Dumping;

2) Injury; and

3) Causal link between dumped imports and alleged injury.

Article 2 of the Agreement defines what is regarded as dumping. Under Article 3, the determination of material injury requires positive evidence[1] and objective examination of both:

1) The volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like products, and

2) The consequent impact of these imports on domestic producers of such products[2].

The whole procedure is overseen by the WTO Committee on Anti-Dumping Practices, which meets two or three times a year to review the position on all anti-dumping measures. The legal basis for the committee is found in Article 16 to the Agreement. Under Article 16.5, each member is required to notify the Committee of:

a) Which of its authorities are competent to initiate and conduct investigation referred to in Article 5;

b) Its domestic procedures governing the initiation and conduct of such investigations.

Finally, the Article 17, engages the Dispute Settlement mechanism for resolving disagreements between the contracting parties.

LEGAL FRAMEWORK FOR ANTI-DUMPING IN INDIA

  • Section 9A, 9B and 9C of the Customs Tariff Act, 1975 as amended in 1995 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 framed there under form the legal basis for anti-dumping investigations and for the levy of anti-dumping duties in India.

  • Anti-dumping (along with anti-subsidies & safeguard measures) in India are administered by the Directorate General of Trade Remedies (DGTR), formerly referred as DGAD.

  • DGTR is headed by the “Designated Authority” whose function, however, is only to conduct the trade remedial investigations and make recommendations to the Government for imposition of trade remedial duties. Such duty s finally imposed/ levied by a Notification of the Ministry of Finance.

ANTI- DUMPING INVESTIGATION - STAGES OF INVESTIGATION


Any anti-dumping measure, either in the form of anti-dumping duty or price undertaking, can only be imposed after an investigation consistent with the AD Agreement has been conducted.

This entails a number of distinct steps or stages, the first of which is that an investigation be initiated.

This starts the process of gathering the information to be used in the investigation. The examination, verification and analysis of this information will form the heart of the investigation. Relevant information that is found to be complete and accurate will be considered in the preliminary and/or final determinations, which are the next steps in the investigation process.

The entire process of investigation, from initiation to final determinations of dumping, normally lasts for at least 12 months, but in no case more than, 18 months following initiation.

SIGNIFICANT CASE LAW

  • US - ANTI-DUMPING & COUNTER VAILING MEASURES ON A STEEL PLATES FROM INDIA (“U.S.A. STEEL PLATES CASE”)[3]

In this case, USA has imposed countervailing duties on the imported carbon steel plates from India. This product was imported by SAIL, one of the PSU of India. It was alleged by the US Department of Commerce, that SAIL has not cooperated in the investigation fact finding of the dumping price.

It was contended by INDIA that in spite of the cooperation by SAIL, USA had not considered calculation of dumping margin, therefore USA had imposed the countervailing duty on the basis of improper calculation & comparison.

This is complete violation of AD Agreement in particular Article 6.8 para 3 of Annex-II of agreement to use the US Sale Price Information reported by SAIL.

It was concluded by the Panel that USA had acted inconsistently with the Article 6.8 para 3 of the Annex – II of the AD Agreement in refusing to consider the sales price information submitted by SAIL, without any legal justification.

  • US - CONTINUED DUMPING AND SUBSIDY OFFSET ACT, OF 2000 CASE, COMPLAIN BY INDIA, AUSTRIA, BRAZIL AND OTHERS.[4]

In this case USA had made the law named “Continued Dumping and Subsidy Offset Act of 2000” (CDSOA), which was a measure against dumping of exports and of subsidies on imported goods from other nations into USA, the purpose of this Act was also to give subsidies to affected domestic industries of USA, because of the dumping products.

Many nations challenged this Act, stating that it is violative of Article – 16(4), Art- 18(1) of Anti-Dumping Agreement, and Article 32(1) of Agreement on Subsidies and Counter vailing Measures (ASCM). It was a basic contention of nations that through this Act affected domestic industries would get financial subsidy from the US Government, because of the dumping of imported goods. Then it must be difficult for exporters to secure the undertaking with the competent authority, since affected domestic producers will have vested interest in opposing such undertaking.

Under Article 16 (4), a country can give subsidy in importing its product for specific purpose for example; least developed and developing countries can give subsidies for importing their products.

The panel and appellate body held that CDSOA is not consistent with the norms of GATT Article 16 (4).

INJURY (ARTICLE 3)

A determination of injury of dumping shall be based on positive evidence and involves an objective examination of both:

a) The volume of the dumped imports and the effect of the dumped imports on process in the domestic market for like products, and

b) The consequent impact of these imports on the domestic producers of such products.

AD Agreement does not define the term ‘injury’, although it does specify that three types of injury may be found in an anti-dumping investigation:

a) Material injury to a domestic industry;

b) Threat of material injury to a domestic industry; or

c) Material retardation of the establishment of a domestic industry, but is silent on the evaluation of material retardation of the establishment of a domestic industry.

DOMESTIC INDUSTRY

  • Domestic producers are those who are as a whole engaged in the manufacture of the like article or those whose collective output of the said article constitutes a major proportion of the domestic production of that article.

  • The domestic producers consistently supporting the anti-dumping application must account for not less than 25% of the total production of the like article by the domestic industry.

CAN THE DESIGNATED AUTHORITY INITIATE ANTI-DUMPING INVESTIGATION SUO MOTO WITHOUT A PETITION BEING FILED BY THE DOMESTIC INDUSTRY?

Rule 5(4) of the Anti-Dumping Rules provides for Suo Moto initiation by the Designated Authority on the basis of information received from the Commissioner of Customs or from any other source.

IMPOSITION OF PROVISIONAL ANTI-DUMPING DUTY

The provisional anti-dumping duty is recommended by the Authority in its preliminary findings and the same is levied by the Ministry of Finance, Department of Revenue. This serves as an immediate relief to the Domestic industry against the injury caused to it by the dumping of goods.

It cannot be levied earlier than 60 days from the date of initiation of proceedings.

DISPUTE SETTLEMENT (ARTICLE 17)

Disputes in the anti-dumping area are subject to binding dispute settlement before the Dispute Settlement Body of the WTO, in accordance with the provisions of the Dispute Settlement Understanding (DSU). In the disputes under the Anti-Dumping Agreement, a special standard of review is applicable to a panel’s review of the determination of the national authorities imposing the measure.


CONCLUSION

With this blog on WTO AGREEMENT OF ANTI-DUMPING, I attempt to throw light on some basic yet complex concepts under the AD Agreement.

The decision of the Ministerial Conference of the WTO at Doha emphasizes on the preservation of the basic concepts, principles and effectiveness of this agreement, its instruments and its objectives. Perhaps the only hope that consumer welfare advocates can find in this state of affairs is in including a public interest clause in the Agreement. It is administratively workable and will prove to be highly effective in balancing the interests of the domestic producers and the interests of consumers.


References

[1] Information Technology Act 2000, India, available at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds184_e.htm (Visited on July 22, 2020) [2] Agreement on implementation of Article VI Art.3.1. [3] Information Technology Act 2000, India, available at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds184_e.htm (Visited on July 22, 2020) [4]Information Technology Act 2000, India, available at: https://www.asil.org/insights/volume/8/issue/4/world-trade-organization-ruling-us-continued-dumping-and-offset-act-2000 (Visited on July 22, 2020)

Opinions expressed in the blogs are the sole responsibility of the author(s) and do not necessarily reflect the views of The L Word Blog.

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