What is Anti-Dumping?
In order to understand Anti-Dumping, let’s first get familiar with the term ‘dumping’. In legal parlance, dumping implies exports of goods at lower prices than their normal value by a country to another country. It has a distortive effect on international trade and is widely considered as an unfair trade practice. With an objective to resume the establishment of fair trade and to set right the evident distortive repercussion of dumping, anti-dumping measures are brought into force.
The objective of these Anti-dumping measures is to protect against the situation/incidents occurring out of such unfair trade practices in India. It also equalizes the detrimental effect of international pricing discrimination which can seriously affect the Indian domestic industry.
Parameters to gauge dumping of goods- a quick look
Dumping occurs when export price of the goods is lower than their normal value. Hence, in order to assess dumping margin, one has to analyze two factors i.e. normal value and export price.
Normal Value of goods is the price under which exported goods, under complaint, are sold in the domestic market of the country exporting the goods. Undoubtedly, it is the comparable price.
How to calculate Normal value?
If it can’t be estimated by way of domestic sales, then there are two acceptable methods of determining the normal value:-
- Comparable descriptive export price to an apt third country.
- Cost of production in the origin country with reasonable addition for other miscellaneous costs i.e. administrative, general or selling costs and reasonable profits. The formula is known as constructed normal value method.
CIF value of the goods allegedly dumped into India minus adjustable costs pertaining to oceans freight, insurance, commission etc. This is the price at which the goods are exported in India.
It is the difference between normal value and export price of the goods (under complaint). It is articulated in percentage of the said export price.
Anti-Dumping Laws in India……………….A sneak-peak
In 1985, Anti-Dumping legislation was first introduced by way of Customs Tariff (identification, assessment and collection of duty or additional duty on dumped articles and for determination of injury) Rules. Today we have:-
- Article IV of GATT,1994 (Agreement on Anti-Dumping)
- Section 9A, 9B of Custom Tariff Act, 1975
- Aforementioned Anti-Dumping Rules later amended in 1995
- Investigation & recommendation by Designated authority at Ministry of Commerce
- Imposition and collection procedures framed by Finance Ministry
Process to initiate an Anti-Dumping Investigation to inflict anti-dumping duty
Anti-dumping measures are not a protection but a remedy in the hands of domestic producers of India. In order to initiate the investigation, firstly, they ought to have sufficient evidence of dumping, injury to the domestic producer and there has to be a causal link between the dumping & injury.
Secondly, the producer submitting the application for investigation must be responsible for not less than 25% of the total production of the said goods by the domestic industry in whole OR such application is deemed to have been made or on behalf of the domestic industry where collective output of the producers is more than 50% of the total production of the said goods.
Important thing to understand here is ‘injury to domestic industry’ which can be assessed on the basis of accepted economic indicators that have an effect on the said domestic industry due to the magnitude of dumping i.e. sales decline, profits, market share, production etc.
Anti Dumping Duty:
After investigation, if the designated national authority is satisfied with the produced evidence then under the WTO agreement, the national authorities can inflict anti-dumping duty only up to the dumping margin i.e. the difference between the export price and normal value. This duty shall not exceed the dumping margin.
Exceptions and exemptions from the purview of Anti-Dumping Duty:
- If dumping margin is less than 2% of the export prices, in case of an individual exporter.
- If volume of the dumped imports from a particular country is less than 3% of total imports of the same product/good, in case of any country than further investigation shall be terminated.
Other Remedial measure against dumping
There is one more remedy to the domestic industry other than anti-dumping duty. Under this remedy, the concerned exporter furnishes a price undertaking with the national authority of the affected domestic industry, whereby it undertakes to remove the dumping or the injurious effect of dumping, as applicable on case-to-case basis, then no anti-dumping duty is recommended on such an exporter and investigation shall also be terminated.