International Trade 2018 Comparisons

Last Updated May 05, 2017

Law and Practice

Authors



Economic Laws Practice 's international trade and customs practice represents companies with regards to international rules governing their businesses. ELP represented the Government of India in a dispute before the WTO Panel and Appellate Body, and were one of the first firms to be appointed by the government to advise on the WTO compatibility of India's largest export incentive programme. The practice uses the rules of global trade at every level – national, bilateral and multilateral – to solve issues related to market access and expertly resolve complex trade disputes between governments and private industry. Furthermore, the firm's trade litigation practice is involved in a large number of trade remedial litigations in the country at every level from the anti-dumping and safeguard authorities to the Supreme Court of India.

India is one of the very few WTO member countries that follows the “lesser duty rule” when imposing anti-dumping measures. Over the course of an anti-dumping investigation, the Directorate General of Anti-dumping and Allied Duties (‘DGAD’) calculates two margins: the dumping margin and the injury margin. The lesser of the two margins forms the basis for the levy of duties.

The injury margin is calculated by comparing the Landed Price of imports to the Non-Injurious Price (‘NIP’) or Fair Selling Price ('FSP') calculated for the domestic industry. The NIP is determined by taking the cost of production and adding 22% return on capital employed, while the Landed Price is calculated by adding handling charges, basic customs duties and cess to the CIF price of the imported product. 

There is no formal requirement for the DGAD to make a determination on public interest while recommending anti-dumping measures. However, the user industry is invited to attend the public hearing and is given an opportunity to make submissions, thereby becoming involved during the investigation process. The DGAD may take public interest aspects into consideration while coming to its conclusion. 

Further, under the Indian administrative setup, the findings of the DGAD are merely recommendatory in nature, with the actual levy of duty taking place by way of a customs notification issued by the Central Government in line with the DGAD’s recommendation. Crucially, it is not mandatory for the Central Government to accept the DGAD’s recommendation, and there have been a handful of instances in the past where the Central Government has refrained from levying an anti-dumping measure despite a positive recommendation from the DGAD, apparently on grounds of public interest (anti-dumping investigations into imports of Newsprint, Penicillin-G, and Solar Cells and Modules). 

It should be noted that the Central Government does not officially or publicly state its reasons for rejecting or accepting the DGAD’s recommendation.

Under Rule 13 of the Indian Anti-dumping Rules, provisional duties may be imposed at any time after the expiry of 60 days post initiation. Unlike many other jurisdictions, the levy of provisional duties is not the norm in Indian anti-dumping investigations. When the DGAD does decide to impose provisional duties, the levy takes place anywhere between two and six months after initiation. Provisional duties are levied for a period of six months, expandable to a maximum of nine months.

There is no disclosure of essential facts prior to the imposition of provisional measures.

The DGAD has the power to recommend provisional anti-dumping duties retrospectively under Rule 13 of the Indian Anti-dumping Rules, but has not yet recommended a retrospective levy of provisional anti-dumping measures.

India does not follow an APO-style disclosure system like other member countries such as the United States of America. Interested parties (and their representatives) do not get access to confidential information submitted by other interested parties, nor to documents prepared by the investigating authorities (relating to other parties’ information), such as verification reports. Once information or submissions are filed as ‘Confidential’, only the DGAD or the party filing the information may access, view, disclose or refer to it.

As a balance to the absolute confidentiality given to such information, Indian anti-dumping law requires that any confidential submission or filing must be accompanied by a non-confidential (public) version and that, as much as possible, interested parties should summarise confidential information in a non-confidential manner. Furthermore, any claim of confidentiality must be supported by cogent reasons provided in writing as part of the non-confidential version.

If normal value cannot be based on domestic prices, the DGAD may calculate normal value by using prices to third countries or the cost plus reasonable profit. 

In cases where domestic prices are not available or are not found to be in the ordinary course of trade, based on the facts of the case at hand, the DGAD has considered third-country pricing, although there is no formal guidance regarding selection of an appropriate third country provided in the legislation or by practice. In past investigations, parameters such as general economic conditions in the country of imports, the state of product development in the said country and the volume of imports have been considered to select the third country.

If normal value is constructed, the costs recorded in the books should be considered subject to the following conditions:

  • if the records are in accordance with the generally accounted principles of the exporting country; and
  • if the records reasonably reflect the costs associated with the production and sale of the product under consideration.

The DGAD may disregard parts – or the entirety – of the producer/exporter’s cost if the factors of production (such as raw materials, electricity, labour) do not reflect appropriate market value. This is particularly so in cases where the subject country is a non-market economy, or if the cost of certain factors (such as raw materials) is lower on account of being procured from an affiliated supplier. However, adjustments may be made to the costing methodologies, based on the facts of the case, dependent upon the product or process involved. 

Level of trade adjustments are not frequently granted in Indian anti-dumping investigations.

Cost of importation is presumed to refer to the import price compared to the domestic selling price and the cost for price undercutting and other such comparisons. 

Typically, the DGAD does not consider anti-dumping duty paid on imports to be part of the cost of importation, but may occasionally also make a simultaneous comparison regarding alternative costs of importation, ie comparing one cost including anti-dumping duty paid and one without.

NMEs are treated differently from other WTO members in Indian anti-dumping investigations. Paragraphs 8(1) and (2) of Annexure 1 to the Anti-dumping rules define non-market economy countries, and place a rebuttable presumption of non-market conditions in certain countries. Pursuant to the same, producers or exporters from NME countries may also file specific prescribed responses and place evidence on record to rebut the presumption of non-market conditions. 

If the DGAD) chooses to treat a subject country as NME, the DGAD usually disregards prices or costs within the said country and calculates normal value by selecting an analogue country. 

While determining whether there are distortions, out of country benchmarks are only occasionally relied upon by the DGAD. 

There have been oral meetings and discussions regarding the expiry of section 15(a)(ii) of the Protocol of Accession of China in December 2016, but there has been no formal indication from the DGAD or its parent ministry (ie the Ministry of Commerce) on the change affected by it.

There is no maximum period of validity for anti-dumping measures apart from the five-year timeline, which can be extended indefinitely though successive expiry reviews.

Investigations are very rarely, if ever, concluded by the acceptance of price undertakings in India. Over the past few years, there has not been a single case of price undertakings being accepted in India. 

Despite being one of the most frequent users of anti-dumping measures in the world, India is still a relatively new user of anti-subsidy measures, having completed only three anti-subsidy investigations to date, none of which were concurrently conducted with parallel anti-dumping investigations.

Given that the injury-related provisions in the respective legislation for anti-dumping and anti-subsidy are very similar, there may eventually be a combined injury analysis in future investigations – assuming dumping and subsidy investigations are initiated with concurrent or overlapping periods of investigation.

In the investigations conducted thus far, the DGAD has considered subsidy schemes not mentioned in the notice of initiation but discovered in the course of the investigations.

There are two types of benefits available and, accordingly, there are two principals on the basis of which the DGAD could calculate such benefits:

  • Amount received (such as grants): the benefit is calculated based on the amount that was to be paid to the authorities but was forgone. 
  • Amount not paid (such as tax exemption): the benefit is calculated based on the difference between the market price and the price paid by the company, or on the difference between the tax required to be paid in the absence of the programme and the tax actually paid. 

India is the most frequent user of safeguard duties in the world.

For the determination of “unforeseen circumstances”, the Director General (Safeguards) ('DGSG') has found that “unforeseen developments require that the developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers should have been ‘unexpected’” (Safeguard investigation concerning imports of Hot-rolled flat products of non-alloy and other alloy Steel in coils of a width of 600 mm or more into India - Final Findings Notification F. No D-22011/26/2015/Pt-III/ dated 15 March 2016)

The DGSG also held that any unforeseen developments should not have been foreseen or expected when the member incurred that obligation (Safeguard investigation concerning imports of Bare Elastomeric Filament Yarn – Final Findings Notification No G S R D- 22011/23/2013 dated 29 September 2014).

In a few cases, the DGSG interpreted the obligations mentioned in Article XIX:1(a) to be those which, if accepted, resulted in increased imports. The obligation under GATT that was analysed in the cases was tariff concessions. The rationale behind this position is that, as long as India has incurred certain obligations under GATT 1994, including tariff concessions on the product under investigation, it may be presumed that the increase in imports was one of the effects of obligations so undertaken. Thus, it is held that imports increased as a result of unforeseen developments, and because of the effect of obligations incurred by India under GATT 1994.

However, the DGSG itself has at various instances suggested that tariff concessions are not the only form of obligation that is covered under Article XIX:1(a), and could therefore potentially interpret “obligations” to mean preventing the adoption of protective measures. 

Economic Laws Practice

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Law and Practice

Authors



Economic Laws Practice 's international trade and customs practice represents companies with regards to international rules governing their businesses. ELP represented the Government of India in a dispute before the WTO Panel and Appellate Body, and were one of the first firms to be appointed by the government to advise on the WTO compatibility of India's largest export incentive programme. The practice uses the rules of global trade at every level – national, bilateral and multilateral – to solve issues related to market access and expertly resolve complex trade disputes between governments and private industry. Furthermore, the firm's trade litigation practice is involved in a large number of trade remedial litigations in the country at every level from the anti-dumping and safeguard authorities to the Supreme Court of India.

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