INTRODUCTION TO TRADE PROTECTION MEASURES OF ANTI-DUMPING, SAFEGUARDS & COUNTERVAILING MEASURES UNDER WTO IN THE INDIAN CONTEXT.


KnG11101501 Dated 15th October 2011

IMPORTANCE thereof……

The purpose of levying anti-dumping duty has been enunciated  by the Hon. Supreme Court of India in the case of Reliance Industries Vs the Designated Authority cited in (2006) 202 ELT 23(SC) in the following words:

The Anti-dumping Law is, therefore, a salutary measure which prevents destruction of our industries which were built up after independence under the guidance of our patriotic, modern minded leaders at that time and it is the task of everyone today to see to it that there is further rapid industrialization in our country, to make India a modern, powerful, highly industrialized nation”.

The above mentioned significance of ADD is equally applicable insofar as other trade protection instruments under WTO viz., safeguard and countervailing measures are concerned.

DEFINITIONS:

1.         ANTI-DUMPING DUTY:

Dumping is said to have taken place when an exporter sells a product at a price less than the price prevailing in its domestic market. However, the phenomenon of dumping is per se not illegal as it is recognized that producers sell their goods at different prices to different market. It is also not unusual for prices to vary from time to time in the light of supply and demand conditions. However, where dumping causes or threatens to cause material injury to the domestic industry, necessary action for investigations and subsequent imposition of anti-dumping duties is initiated.

2.         SAFEGUARD DUTY:

A safeguard duty is a form of temporary relief. They are used when imports of a particular product, as a result of tariff concessions or other WTO obligations undertaken by the importing country, increase unexpectedly to a point that they cause or threaten to cause serious injury to domestic producers of “like or directly competitive products”. Safeguards give domestic producers a period of grace to become more competitive vis-à-vis imports.

            Upto  2007 safeguards investigation were initiated in only 18 cases however, with the severity of economic recession there has been a sharp rise in the number of safeguards investigations in recent times around  from the second half of 2008 onwards 16 safeguard investigation have been initiated in diverse commodities such as Phthalic Anhydride, Linear Alkyl Benzene, Oxo Alcohols (Acylic Alcohols), Soda Ash, Dimethoate Technical, Aluminium Products/Foils, Front Axle Beam, Steering Knuckle & Crankshaft, Acrylic Fibre, Hot Rolled Coils/Sheets/Strips, Coated Paper, Uncoated Paper, Particle Board, etc.

3.         COUNTERVAILING DUTY

        WTO Agreement on Subsidies and Countervailing Measures stipulates that no member should cause, through the use of subsidies, adverse effects to the interests of other signatories.  Countervailing measure is in the form of countervailing duty which is to be imposed only after the determination that:

(a)        the subsidy is specific subsidy;

(b)        the subsidy relates to export performance;

(c)        the subsidy relates to the use of domestic goods over imported goods in the export article; or

(d)       the subsidy has been conferred on a limited number of persons engaged in manufacturing, producing or exporting the article.

LEGAL FRAMEWORK:

ANTI-DUMPING DUTY:

  • Based on Article VI of GATT, 1994
  • Customs Tariff Act, 1975- Sec 9A, 9AA, 9B
  • Anti-Dumping [Customs Tariff (Identification, Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995]
  • Investigations and Recommendations by Designated Authority, Ministry of Commerce

SAFEGUARDS:

COUNTERVAILING DUTY:

  • Based on WTO Agreement on Subsidies and Countervailing Measures
  • Customs Tariff Act, 1975- Sec 9
  • Customs Tariff (Identification, Assessment & Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995.
  • Investigations and Recommendations by Designated Authority, Ministry of Commerce

KEY ISSUES IN ANTI-DUMPING MEASURES:

-           IMPORTS FROM NON-MARKET ECONOMIES:

Countries which are not operating on market principles of cost or pricing structures are known as non-market countries. India considers Albania, Armenia, Azerbaijan, Belarus, Peoples Republic of China, Georgia, Kazakhstan, North Korea, Kyrgyzstan, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Vietnam as non-market economy countries.(Ref: Anti-Dumping Determination of  Rules, 1995).  Since the pricing in these countries is influenced by the State, it is always a matter of doubt whether the export price is the normal price or not. The Challenge before Customs is to develop a comprehensive data base of supplier’s from non-market economy which should include their product and pricing profile.

-           CIRCUMVENTION:

DEFINITION:

Attempt to avoid imposition of Anti-Dumping Duty by various ingenious methods

 –          USUAL METHODS OF CIRCUMVENTION:

(i)         Exporters try to avoid anti-dumping duty in the importing country by producing falsified Customs declarations concerning origin, tariff classification and description

(ii)        Importers/Exporters try to import/export the parts of products which are subjected to anti-dumping duty to the importing country and then after receiving all the parts, assemble the entire unit.

-           COUNTRY OF ORIGIN CERTIFICATE:

The most fundamental factor to ascertain the imposition of anti-dumping duty is the country of origin of the goods. The COO certificate has enhanced relevance in anti-dumping measures as ADD is usually country specific. Country of origin certificate is equally vital in determining tariff treatment to goods imported from countries/region with which India has FTA/PTA/CECA. There should be a definite mechanism at the field level to administer COO issues in a coherent and systematic manner in order to ensure that fraudulent practices are not entrenched and it does not impair trade facilitation.

KEY ISSUES IN SAFEGUARD MEASURES:

When a safeguard duty is imposed it takes the form of duties higher than the bound rate or standard rates or quantitative restrictions on imports and is applicable on a universal basis i.e. it is not essentially source/country specific, however, certain relief is provided to developing countries.  When this happens the government of the importing country is essentially suspending the concession or obligation envisaged under the WTO Agreement which every member country is entitled to. The country imposing safeguard measures under certain circumstances is expected to provide compensation to the affected exporting nations; otherwise, the affected WTO members can retaliate by withdrawing equivalent concessions. Hence, very careful due diligence is required in safeguard investigations.

SOURCE: GOVT. OF INDIA, MINISTRY OF FINANCE

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