WHAT IS ANTI DUMPING?
The term “dumping” in the general parlance of economics refers to any kind of predatory pricing. Basically, the predatory parlance is the practice where the product is sold at the low price intending to create the obstacles for the potential competition to enter into the market.
The consequence for adopting such strategy is to restrict the potential competitors to choose not to enter the business. However, now a days, the term is generally used in the areas of international trade laws where the dumping means as the act of a manufacturer in one country exporting the products into the other country at the price which is less than the price at which it is charged in the domestic market or below the cost of production.
International laws: such as Article 6 of GATT (General Agreement on Tariffs and Trade), It lays down certain principles to be followed by member countries for imposition of reliefs such as anti-dumping duties and certain other safeguards.
Local laws: Such as Section 9A and 9B of Customs and Tariffs Act, 1975 (Amended 1995) and The Anti-dumping rules such as (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules of 1995, Section 9A of customs and tariffs Act 1975 states:
If any article is exported from any country or territory to India at less than its normal value, then, upon the importation of such article into India, the central government may by notification in the official gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article.
Importance of Anti Dumping
A-dumping measures have assumed much more importance today than any time in the past, with the advent of globalisation and Liberalization. Foreign trade has been growing exponentially. Every day new players are entering new markets of the world it thus becomes necessary for every nation to protect its domestic players from unfair practices. A majority of the countries today make effective use of Anti-dumping measures. Dumping is a menace to the domestic market and to the economy as a whole for any country.
SOME OF THE GRAVE CONSEQUENCES IF DUMPING GOES ON UNCHECKED ARE :
- Decline in the output of domestic players due to losses faced by the arrival of cheap products in the market. Another consequence being a decline in productivity.
- Loss of Market Share for indigenous Products, which in turn hampers the secondary sector of the economy. Our country suffers worse from this sort of dumping.
- Increasingly reduced returns on investments due to losses in the market.
- Reduced wages for the workers on account of decrease in the overall prices of the goods (Price effect comes into play)
- Adverse effects on cash flow are also observed due to dumping. Further due to the losses faced by domestic producers a market’s ability to raise capital gets severely hampered. In toto, we can say the citizens loose the incentive to enter the market which is detrimental to any economy.
IMPLEMENTATION AND RELIEF UNDER INDIAN LAW
For a domestic player to get relief under the current Anti-dumping laws, it must show material injury caused by dumping. The material injury cannot be based on future threats or conjectures. Material injury can be established by when the following gets established :
Step 1 Volume Effect: The authorities examine the increase in the import of dumped materials either in absolute terms or in relation to production or consumption in India and its effect on the domestic players. If the volume is high in either terms than the next step is reached.
Step 2 Price Effect: The vast inflow of material goods in the market leads to decrease in the prices of overall goods (By the law of demand and supply) and further thwart the domestic players from making profits. Once this is established the final stage is of establishing a causal link.
Step 3 Casual Link: A causal link must be there between the material injury suffered and the dumped goods. This step also takes into regard other factors such as general productivity of the domestic player, if the general productivity is itself low then the causal link cannot be said to exist.
When all the three conditions are met, it is ascertained that the domestic industry has faced material injury on account of dumping and is accordingly provided relief.
Imposition of Anti-dumping Duties: Anti-dumping duties are the most common form of remedy provided against dumping. These duties are imposed in non-cooperative exporters and are usually at very high rates as being a form of penalty.
Lesser Duty under GATT provisions: By GATT, members cannot impose higher duties than the margin of dumping, some most of the nations impose duties proportion to the injury suffered. The rate is determined at which is adequate to mitigate or remove the injury to the domestic industry.
Injury Margin: Injury margin is the difference between the fair selling price due to the domestic industry and landed cost of the product accused of being dumped. Governments can adopt different courses of relief going by the magnitude of injury margin.
De Minimis Margins: These margins are adopted keeping in regard the notions of fair competition and providing adequate opportunities to world players to tap the domestic market keeping aligned with the ethos of globalisation. Under the principle any exporter accused of dumping, if the margin of dumping is less than 2% of the export price of the product in question is immune from Anti-dumping laws even if all the three steps are satisfied.
PROCEDURE FOR INITIATING ANTI DUMPING CASES IN INDIA
Initiation of Investigation
The government under provision of the said Rules has to appoint a Designated Authority which is generally a person of the rank of a Joint Secretary to the Government of India. This Authority on receiving a written application along with supportive evidences of Dumping by or on behalf of domestic industry may at its discretionary satisfaction initiate investigation. Domestic Industry implies to be domestic producer having majority share in total domestic production of that article through their collective output. To be specific their share in total domestic production shall account for at least twenty five per cent of the total production of the said article.
The said application of the domestic industry submitted to the Authority has to be supported by evidences establishing dumping and injury from such dumping. The Authority under Sub-Rule 4 of the said Rule 5 can also initiate an investigation suo moto on its satisfaction based on information received from the Commissioner of Customs appointed under the Customs Act, 1962.
The Authority after being convinced with the evidences attached with the written application and at its discretionary satisfaction of there being a prima facie case of dumping and thereby initiation of investigation to determine the existence, degree and effect of any alleged Dumping of any article and issue a public notice notifying its decision. Such notice should mandatorily consist name of the exporting country or countries and the article involved, date of initiation of the investigation, basis on which dumping is alleged in the application, summary of the factors on which the allegation of injury is based, address to which representations by interested parties should be directed and the time-limits allowed to interested parties for making their views known.
The Authority has to also forward a copy of such public notice to the known exporters of the article alleged to have been dumped, the Governments of the exporting countries concerned and other interested parties.
The expression interested parties is termed as an inclusive of an exporter or a foreign producer or the importer of such article under investigation, business association a majority of the members of which are producers, exporters or importers of such an article, the government of the exporting country and trade and business association a majority of the members of which produce the like article in India.
In order to maintain the integrity of the investigation, the Authority is also conferred with power to issue notice to the exporters, foreign producers and other interested parties calling for any information and such information shall be furnished by such persons in writing within thirty days from the date of receipt of the notice.
Further to curtail down any scope of arbitrariness, the designated authority is also mandatorily required to provide opportunity to the industrial users of the article under investigation and to representative consumer organizations in cases where the article is commonly sold at the retail level, to furnish information regarding dumping, injury where applicable, and causality which is relevant to the investigation in order to do complete justice by taking all aspects of cases in consideration while arriving at conclusion.
Preliminary Investigation and Measures Findings
The Authority has to record a preliminary finding containing the determined export price, normal value, margin of dumping, injury to the Domestic Industry, the names of the suppliers, the supplying countries involved, description of the article, margins of dumping established and a full explanation of the reasons for the methodology used in the establishment and comparison of the export price and the normal value, relevant consideration relied on to determine the injury and reasons leading to the determination.
The Authority is required to issue a public notice of its recording of its preliminary recording.
On the basis of Preliminary Findings, the central government of the Act may impose provisional duty up to amount of margin of dumping. Such imposition should be made within sixty days from the date of issuance of public notice of these findings and should remain in force only for a period six to nine months.
Final Submission and Measures Findings
The Authority has to complete the investigation within one year from the date of its initiation. Upon completion of such investigation, the Authority has to submit a Final Finding to Central Government determining as to establishment of the fact of Dumping of the article in Question by the exporter and the recommendation as to the amount of Duty to be levied in order to remove the injury caused to Domestic Injury by such Dumping.
The Final Finding submitted by the Authority should consist of determined export price, normal value, margin of dumping, injury to the Domestic Industry, the names of the suppliers, the supplying countries involved, description of the article, margins of dumping established and a full explanation of the reasons for the methodology used in the establishment and comparison of the export price and the normal value, relevant consideration relied on to determine the injury and reasons leading to the determination.Further, the Authority is required to issue a public notice of its recording of its preliminary recording.
On the basis of Final Findings the central government may impose anti-dumping duty up to amount of margin of dumping. Such imposition should be made within three months from the
date of issuance of public notice of these findings should remain in force only for a period five years such as recently, India has imposed the anti dumping duty on the steep products importing from the China and also initiated 159 cases of anti dumping against China.